RMK 353

Property Management

Property Management Mindset &

Property Market

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Content

Tasks for Property Manager

• Property Analysis & Inspection
• Property Market Analysis
• Lease management & Tenant’s file activitysheet
• Maintenance
• Increasing the intangible image(goodwill) ofthe property
Main Responsibility
• To prolong building (physical, functional and economic) lifevia
effective management and maintenance
Tasks for Property Manager
To conduct property operations in compliance with the property
manager standard of duty, a property manager considers the
following factors:
• legal interests vested in the property which include existing 1. Property
liens on theproperty Analysis &
Inspection
• current physical condition of theproperty
• the type of the property and its niche in the market;
• the socioeconomic demographics of the area surrounding the 2. Property
property’s location; and Market Analysis

• the competition currently existing in the local market;

• 3. Lease management
• 4. Maintenance
• 5. Increase the goodwill of the property
Management Tasks
1a. Title profile analysis (identifying property’s legal interest)
A title check, commonly called a property profile will confirm:
✓ how ownership isvested
✓ who has authority to employ management;
✓ the liens on the property and their foreclosure status;
✓ any use restrictions affecting tenants;and
✓ comparable sales information for thearea.
Management Tasks

1b. Analysing the existing liens on the property

• Liens or mortgage on the owner/landlord’s
property will add a burden to the owner/
landlord’s cash flow
• owner/landlord’s mortgage payments must be
consistent with the property’s capacity to
generate sufficient rents.
*mortgage payment < Rent
 Management Tasks
1c. Property Analysis & Inspection is to understand the
physical condition of theproperty
✓ Identify the current physicalcondition
✓Analyze the repairs, maintenance, landscapingand
improvements
✓ Determine the amount of cost involved for any upgrade
✓Decided the amount of rent increase if
upgrades/renovate/refurbish the property isneeded.
2. Property Market Analysis
 What is aMarket?

A place where forces of demand and supply operate, and

where buyers and sellers interact to trade goods, services,
or contracts or instruments, for money or barter.
Markets include mechanisms or means for
(1) determining price of the tradeditem,
(2) communicating the price information,
(3) facilitating deals and transactions, and
(4) effecting distribution.
What is aMarket?

• "market" originally meanta

physical place where an
exchange occurs
• At the beginning of human
history, the market was always
situated in the middle of a
community, on a central streetor
square
Characteristics of Property Market

1. No central property market

2. Imperfect market structure

3. Data inefficiency
Characteristics of Property
Market
1. No centralMarket
• There is no physical definedmarket
• The market is segmented according to:
‐ type of real estate (housingmarket,
commercial market, land market)
‐ Location (Georgetown, Ipoh, Sungai
Petani, Parit Buntar, Shanghai, Beijing,
Sanaa, Aden etc)
‐ Most properties are availablethrough
adverts
 Characteristics of Property Market
2. Imperfect market Structure

• The price of property is high and

there is element ofmonopoly

• Transaction in property isless

frequent
Characteristics of Property Market
3. Data inefficiency
‐ Dueto differences in reporting format

‐ Property information is not for public viewing

The Supply in PropertyMarket
Source of SUPPLY in Property Sector

• New housing/ property is formed by developers through property

development which involved many players such as contractors, architects,
engineers, surveyors etc
• Second‐hand housing comes from owners of land or building who decide to
sell or dispose theirreal estate

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 Short Run & Long Run Supply Curves

At the moment
Price Supply Curve
or Rent

Short Run Supply

Curve is inelastic
Short Run
Supply Curve Long Run Supply
Curve is more
Elastic

Long Run Supply Curve

Quantity
or Space

“Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner
Factors Affecting the SUPPLY of Real Estate

• The supply of new building is dependent on the cost of building

production:
i. Land factor
ii. Capital factor
iii. Labour factor
iv. Entrepreneurial factor (the developer)

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The Demand inProperty
Concept of DEMAND in Property

Demand for property space can be defined as

the quantity of space or number of units
demanded at various prices.

Sources of DEMAND in Property

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Elasticity of DEMAND in Property

a) Inelastic Demand - if a large change in price does not give rise to any
significant change in the quantity/space demanded (high end houses)
b)Elastic Demand - if a slight change in price gives a rise to a large
change in the quantity/space demanded (e.g. low-cost houses, medium
cost houses)

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 Concept of DEMAND in Property

Effective Demand – demand

that is back up by ability to
pay (purchasing power)

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Factors Affecting the DEMAND of Property

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 Factors Affecting the DEMAND of Real Estate

1. Demographic factor i.e Population

characteristics ‐ determines the choice ofreal
estate for use on behalf of
owners/leaseholders

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Factors Affecting the DEMAND of Real Estate
2. Sociological and cultural factors i.epreferences
and needs – quality, features, size, type and
location of the building

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 Factors Affecting the DEMAND of Real Estate

3. Technological factor has direct

consequences onDemand for real estate:

‐ The availability of new construction

techniques or new functions that
increases quality, reduce energy,more
comfort
‐ The improvement of transport systems
that offer alternatives in location eg
faster to work placesetc

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 Factors Affecting the DEMAND of Real Estate

3. Technological factor has indirectconsequences

on Demand for realestate:
‐development in medicine, agriculture,industry
and communications will indirectly effect the
demand for quality, functionality and
appearance of the individualbuildings

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 Factors Affecting the DEMAND of Real Estate

4. Government
‐ Can promote demand ‐ for
example tax exemption can
encourage demand forself‐use
and investment purposes of
certain type of realestate

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Factors Affecting the DEMAND of Real Estate

5. Economic factor
‐inflation, interest rates, monetary
policy

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What is a property market analysis ?
A study that focus on the current property market situation
and trend
• Study of the fundamental determinants of the demand and supply for
all property in themarket
• Study of the demand for a particular property type
• Study of a Site in search of its Best Use
• Study of a Use in Search of a Site
Relationship between Property Market Research Areas

Entire real
estate
Real estate sub‐ market
sub‐markets, e.g.
high‐rise
residential, low‐rise
residential)

Real estate sub‐

markets, e.g.
commercial,
residential, industrial
Purposes of Conducting Property Market
Analysis
Why Property Market analysis is important for Property Managers
Purpose of conducting property market
analysis ?
1) to understand the market conditions of a property
• Analysis of the capacity of property to support economic
activities, supply services, and provide amenities to meet human
needs.
• Reasons for analysis:
* heterogeneous nature of individualproperties
* potential of a site for more than one use
• Outcome: marketability of aproperty
Purpose of conducting property market analysis ?

2) Analysis of Conduct and

Performance of a PropertyMarket
(trend analysis)
• how the property marketbehaves
and how well itperforms
Identifying current and futuremarket
condition & performance
• Helps property manager to locate tenants willing and able to pay the
rent rate sought by thelandlord/owner
• strategies when DD > SS: increase the rent and still maintain
occupancy levels.
• Strategies when SS > DD: Special programs to retain tenants and
attract new, long‐term ones may benecessary
 Purpose of conducting property market
analysis ?

3) Forecasting
• Oriented toward future
developments
• Property value istied to the
services the property
provides.
Purpose of conducting property market
analysis ?
3) Forecasting (continued)
• keeping abreast of market changes
when negotiating leases and rental
agreements.
• avoid vacancy and provide protection to
landlord’s investment against loss of
potential income.
 Management Tasks
3. Lease management & Tenant’s fileactivity
sheet
✓Documenting property manager efforts to locate tenants,
anchor tenants
✓Leasing strategy, periodic review of the leases ‐ re‐evaluation
of rents includes the consideration of the following factors :
• market changes
• the physical condition and appearance of the property;
• the property’s location
Management Tasks
4. Maintenance and repairs (will be discussed in detail by Sr
Nuzihan)
 Management Tasks

5. increasing the intangibleimage

(goodwill) of theproperty
Goodwill is maintainedwhen theproperty
manager:
✓cares for the appearance ofthe
property;
✓ maintains an appropriate tenantmix
✓gives effective and timely attentionto
the tenants’ concerns.
 Decision to
Rent/Lease

Physical/financial Leasing & Property’s

Aspect Property Mgmt Reputational
Aspects Aspect
Conclusion
• Good practice in property management will make a significant
contribution to a property’s performance on behalf of the owner,
tenants and users
• Commitment of property management starts with proper Property
Market & Property Analysis in order to fully appreciate the
obligations, the routine management and gaining ‘best value for
money’.