Attrition vs Retention - Strategies to Minimise & Maximise
Many agents ask me, what is the average retention or attrition you see with rent roll sales?
My answer is a question quite simple, do you mean attrition of the rent roll or retention of the rent roll? A lot of principals believe they are one of the same, however I strongly believe they are quite different.
If an owner is going to leave the vendor's agency, it is normally at the time of communicating to the owner of the news of change of ownership, merge or partnership. It is only those owners that will not come across that either are going to move back in to the property, therefore you as a vendor were most likely to lose the property anyway, the property is outside of area significantly and now is the opportunity to put it with a local agent or the vendor has not looked after the owner over time with poor service, and it's the straw that breaks the camel's back. Let me explain.
What is attrition? - attrition is properties or owners that do not come across before completion. Once the vendor exchanges and communicates to the owner of the new ownership, merge or partnership, and the owner makes a decision not to sign a new managing agency agreement.
What is retention? - retention is the money put aside at completion that protects the sale for the purchaser. A good contract will clearly define what constitutes a lost management and why the purchaser should get a refund on that property or management. I honestly believe and see hardly any properties that leave after completion during the retention period. An owner won't just decide to leave and take their management elsewhere during a short period of time if they've committed to signing a new managing agency agreement with the purchaser.
Below are some strategies to minimise attrition before completion and maximise retention after completion;
1. Keep MAA the same - It is imperative and a good contract should state that the new MAA is exactly the same as the old MAA with the owner. Now is not the time for a purchaser to insist on a new admin or sundry fee, or even increase the management fee. If a purchaser is not happy with these fees then they should've done better due diligence prior to exchange. Alternatively, you're building an asset for the future, implement these new fees at a much later date when things have settled down and the owner is very content with the purchaser's level of service.
2. Marketing collateral - A great idea is the purchaser to provide collateral material about their property management goals & values, strengths and point of difference, or even a group photo of all of the team together, vendor and purchaser. Eliminate doubt in the owner’s minds.
3. Purchaser Principal to visit Owners - A good idea if it's practical is for the purchaser or Principal to visit some of the key owners between exchange and completion, especially the multiple property owners. This again is something that will eliminate doubt in the owner's mind and ensure their signature.
1. Good contract - A good contract will define exactly what a lost management is. It should cater for properties listed for sale by another agency, an owner moving back in or an owner taking their management/property to another agency, to name the main ones. The vendor should know about an owner moving back in or an owner taking their management/property to another agency all before completion. There should be no surprises after completion during the retention period.
2. Staff the same - A purchaser should not change or reorganise any of the staff, especially property managers that are crucial to the relationship with the owners. A purchaser should re-employ property managers with the vendor in order to assist with retention and the transition but also it protects the purchaser and vendor if the property manager decides to leave and go work for a direct competitor.
3. Call or visit owners - During the retention period get to know the owners and call as many as possible. It also always you to understand or learn of any issues there maybe with the property that you're not familiar with. It's during the retention period a purchaser should try and schedule as many inspections of the new rent roll.
For more information on rent roll sales, please call Matt Ciallella on 0414 668 972 or email him at firstname.lastname@example.org