Personal Finance

Helping to put your house in order

Meera Siva | Updated on April 01, 2018 Published on April 01, 2018

Outsourced service providers can help you manage your property properly

Lousee is a property owner whose cup of woes is never ending. Not just that, he is surrounded by friends and relatives who are full of anecdotes of property-related issues. He often drowns his sorrow on Rosy, who may well be the person seen smiling in the property advertisements and has found a dream home at unbelievable prices.

On a Wednesday, they are on their morning commute in the metro and Rosy finds that Lousee is in a particularly bad mood. So, she decides to avoid local topics and decides to talk US politics. “Did you hear the latest from the White House”, she asks. “Why? Do they have plumbing issues?”, retorts Lousee.

“Today at 6 am, I am smelling my coffee and waiting to sip it when my tenant calls to complain about clogged drain in his kitchen. He demands a plumber, pronto. Can he not find one in that area? What magic can I do, sitting 400 km away?”, he fumes.

Looking after services

“You must try property management services”, says Rosy. “For a fee, they help ensure that the property is safe, cared-for and gives you return. Services offered include paying property and water taxes, doing routine maintenance and attending to emergency calls from tenants. They visit the premises — house or land — to ensure everything is in order. They also keep track of annual maintenance contracts for the amenities in the property and maintain proper paper work for tax purposes”, Rosie adds.

Going on, she says, “They also help when a tenant vacates. They ensure that the handover happens smoothly, get the home ready to be rented out, find a new tenant, do the required diligence and paperwork.”

“What they bring to the table is local expertise — a local team and network who can find the right help, guide you in fixing rent, get a good tenant and do upgrades or repairs”, she explains. They can also help in selling or joint development of the property. You can think of them as brokers plus facility managers.

What it costs

Lousee wanted to know the cost involved. Rosy explained that there are two types of fees. Ongoing maintenance is an annual fee and may be 4-12 per cent of the income from property. Some providers may charge a fixed amount of, say, ₹12,000 per year or based on the square feet, if the property is not rented out. For land, the amount is typically lower, below ₹5,000.

Charges are extra for finding a tenant, which may be a fixed amount (when the rent is low) or the typical one month rent. Some may charge only half a month’s rent. “You can negotiate a lower fee if you use the company’s service for multiple properties”, Rosy said. Lousee added that the actual cost of repair and routine maintenance work, such as painting, wood-work, electrical or plumbing would be on the owner. Rosie explained that the company would, typically, give you a quotation from two or more vendors, take your approval before starting the work and submit the bills.

How to choose

Lousee is worried about all the things that can go wrong with such a service. “Maybe the service provider does not have local experience, but just a fancy website. So, when a tenant calls, he may not respond on time or do a thorough job of fixing the issue”, he says. It is also possible that they are good in managing high-end homes but not a simple 2 BHK flat. Their skill may be in finding tenants and doing paper work — which many brokers offer as a value-add — but may drop the ball on getting a good painter. So, you must evaluate these and do reference checks.

It is also likely that you may be hit with extra charges for items not covered in the contract. You may also forfeit your payment if the contract is terminated ahead of the term. So be sure to read the agreement for what is covered, costs involved and the recourse if the service is not satisfactory.

There are also cases where the property management firm takes the property on rent from you and looks after letting it out and managing. But this model has issues, Lousee cautioned Rosy.

“For example, subletting is not allowed in many States and any issues with the sub-let tenant may hit legal complications”, he warned. Also, the premise may be given to singles or for commercial operations and maintenance may suffer. You may not have a say in the choice of tenant and, hence, it is advisable to opt for paid service providers.

Published on April 01, 2018

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