I had a very funny conversation with a PM, he had his first OZ clients and was really frustrated… So in that conversation It became crystal clear to me that the realities of the US rental market and the expectations of anyone who has rented a property in OZ are so far apart as to be very Humorous.
PM: I keep getting e mails and skypes from these OZ clients about this property I am managing they e mail and call every day or other day.
ME: Oh really what for
PM: its the 5th of the month and they want to know why the rent is not in their account. ( well US PM's usually pay one month in a rears by law they have to let checks clear their trust account and it can take 2 weeks to figure out if a check bounce. that is for the minority of there renters that actually have a checking account.
ME: Makes sense thats what my PM's do and I do personally..
PM: my OZ client instructed me to have their renter set up a direct deposit into my trust account so they could have their money the next day. I told them that would be great and I would do that but most renters in the US do not have a checking account, and will not set up auto drafts for anyone. OZ client further bewildered and upset. Then OZ client says well if they do not pay by the 3rd then take a late fee out of their account.
ME: Well how did you handle it, its obvious things are done completely different here in the US and our tenant base really lives month to month and week to week.
PM: yes, most tenants will pay close to on time but only maybe 3 or 4 out of ten will the rest will have some lates pay a portion bring the rest in a week later etc etc.. And these OZ clients are all over me on this and are really not very nice about it and have gotten pretty hostile on the e mail and skype. not to mention I do not accept personal cheuqes. I only take money orders and cashiers cheques.. Might let them start with a bank check first bounced one and its cashiers checks only from then on.
ME: what are you going to do..
PM: Well since I am the third manager they have had and I did not sell them the house ( tons of maintenance issues and really a poor part of town) I am getting the brunt of their frustrations and their lack of knowledge of how collecting rents from the working class in the US happens.
ME: Well taking abuse from an owner is not worth making 70 bucks a month for sure what are you going to do.
PM: I fired them and they are on to their 4th manager and their expectations of PM performance are not realistic, they must actually collect rent on time in OZ this is just standard for us.
So there you go,, my buddy never talked to an OZ client before, and got very frustrated very quick with the demands and the unreasonable expectations. The OZ owner was sold High gross and net returns got a not so great house in a tough rental area and then was brutal to the manager.. So they are on to their 4th manager and I doubt this house will ever perform.
And my buddy will shy away from OZ owners.. I am sure its an anomaly not all OZ owners are obviously this rough on the PM.. However the difference in PM between the two countries is really night and day.
Of course in Oz your renting 300 to 500k houses… In the US if you were renting 300 to 500k houses you would have the same success rate.. The renters would have checking account would be able to auto draft. and would not be nearly the problems.. YOu take 20 to 100k houses in the US and this is standard Operating procedure from Life long renters..
Ya kind of had to be there , with this guys thick southern Accent and sweet demeanor he had just never experienced this in the way of an owner most of his owners love him since he works in these areas and does a pretty decent job for them.nyc88Participant@nyc88Join Date: 2011Post Count: 29
Jay, great post….love it.
So only the minority of renters in the US living in homes (under $100,000 market value) own bank accounts….say around 20% of renters, if one is to generalise?
The check thing cracks me up. You guys are so last century.
I couldn't tell you the last time I saw a check. Be over 15 years now.
You couldn't rent a place in Oz if you didn't direct credit your payments regardless of who you are. Even welfare recipients here can't function without a bank account.
Yes I am taking some liberty,
In the states if you bounce checks too often your put in the nationwide system and you CANNOT get a checking account.
In each state we are different.. But by and large we do not accept checks for rent.. Money order or cashiers checks or cash.
I don't recommend cash as its easy to go missing and you get in the he said she said mode.
Welfare here pays electronically, but then the renter has to bring in the difference,, YOu have some 100% subsidized housing but most have to pay some amount..
So my point is if all you know is OZ and how money is transferred and your expecting the same thing in the states it will be a wake up call. And no PM can change the renting publics habits or force them to have a checking account when the bank will not give them one.kylermriceParticipant@kylermriceJoin Date: 2011Post Count: 314
The check thing cracks me up. You guys are so last century.
Lot's of people still like to do business that way. You can do all your business from your phone, tablet, computer… Can deposit checks with pictures from my phone. Just need a quality bank, problem is that the banks here are just big business and you need to go small and local. Or a more exclusive bank, like USAA.
Easy to boast your all electronic and you guys are ahead when your almost half the population of California.
OZ GDP 1.37
Cali GDP 1.7
Anybody can get a prepaid card and load it with cash, money orders, cash…
checks are still a good system for businesses and honest people that don't need there money right away. Our corrupt banking system is the real problem.kylermrice wrote:Our corrupt banking system is the real problem.
Our guys aren't that far behind your guys. Don't worry Oz has a long way to go yet. Trying to do anything across State borders can do your head in. That's hard on a Kiwi guy whose been brought up in one synchronous system. Coming to Oz was traumatic to my sense of logic. Needless to say my relationship with bureaucrats can be turbulent at times.aussieguy2000Participant@aussieguy2000Join Date: 2010Post Count: 81
It's funny that he states that we are so different over here, there is one reason for that, in a suburb in OZ we might have 50 houses up for rent in a month and 200 people who want to rent them, if you don't pay on time your out the door (obviously this has to be more than once or twice). Agents are able to chase a late payment as one maybe two rents may do it… occasionally.
In the US they more likely have 200 houses for rent with 50 people wanting to rent them.
It is a bit silly that they would ring constantly and try to get the money paid immediately, it is a different country and things work differently… not a hard concept, as long as the rent is being paid each month then that is really all that matters… Really a case of doing your due diligence before just making a purchase, these people probably jsut up and bought the property on a whim from a company that specialises in this type of thing and just picked a place that looked nice from a web site.Scott No MatesParticipant@scott-no-matesJoin Date: 2005Post Count: 3,856
You have got to remember that the US is the country that brought us CMBS (and the GFC) ie create a debt product backed by really dodgy loans call it an engineered financial product and sell it overseas to super funds and councils seeking higher rates of returns without explaining the risk behind the product – that is why our banking system didn't need a major bail out (and they call us backwards). Oz has probably one of the most robust banking systems in the world, we are amongst the fastest adopters of new technology etc and have cutting edge laws (even though we may think they are archaic).Jacqui MiddletonParticipant@jacmJoin Date: 2009Post Count: 2,539Ziv Nakajima-MagenParticipant@zmagenJoin Date: 2012Post Count: 523
Awesome story, Jay, thanks. Really hit the spot ) listen to the property managers, if they're local and experienced and good at what they do, even if its not how it's done where you're from. you're an international investor now, it's a new country.
lost a tenant on my first batch buy (good reliable one too) when I moved in all guns blazing and raised the rent on the smallest earner in my portfolio at lease end, against the PM's advice. Then had a unit empty for a while because I refused tenants with no security bonds. Both fairly standard practice in Aus, maybe US too, not the case in the profile of units I'd just purchased in Kita Kyushu, unofficial blue collar capital of south western Japan.
then I shut up and took the PM's advice. It was tenanted again in 2 weeks, late once or twice, but no significant issues. Shut up, foreigner, and let me work. Gotcha.worldinvestorParticipant@worldinvestorJoin Date: 2011Post Count: 297
No surprises here, I imagine there are many o/seas investors who will go through many property managers only to find that they are chasing their tail.
We say cheque, you say check, similar to property management, its like chalk and cheese.
Not sure if any of you saw the movie WITNESS with Harrison Ford. But it reminds me of a scene in that movie.
Harrison Ford has gone to hide out with the Amish (Pennsylvania Dutch county).. And the Bad guys are trying to find him and call the local sheriff.
Bad Guys ask the local Sheriff to just call the house were they think he is hiding out.. Local sheriff said that would be a good Idea but the AMISH have NO PHONES,
Same with our tenants by and large.. No checking accounts cash their pay checks at pay day places. deal in cash onlyjayhinrichs wrote:No checking accounts cash their pay checks at pay day places. deal in cash only
Yep. I can't quite see the local dealer standing on a street corner with his wireless CC terminal. You also having tipping which I suppose necessitates the need to always have cash.CheevesFinancialParticipant@cheevesfinancialJoin Date: 2010Post Count: 201
I have about a dozen OZ clients and I have a good relationship with them and in part I think it has to do with my brutal transparency. I show them my own owner reports. My property manager sits literally 20 feet from me. In my 10-plex property, my rent comes in throughout the month, but I have faith in the tenants my PM puts in and I know I get paid. It has been a proven trust my PM has earned on my own properties. I tell my OZ investors that it won't get much better then this and even with me sitting 20 feet away from my PM, my rents are not collected on the 1st of the month and paid to me by the 5th. Just doesn't happen. Most OZ investors have understood. SOme, I never heard from again, maybe because they expect better? They will just run into a "yes sir" PM and learn the hard way.
Truth is, OZ investors have a not-so-positive reputation with the PM's I have spoken to locally and throughout the country while attending seminars. I see where it stems and it comes down to who is most transparent and which US resource is willing to walk away from a deal if the investor is going to be a pain in the butt anyway.
I know a very big PM out of Phoenix / Scottsdale Arizona. Said out of all of the groups he has worked with, ie..German, Israel, Brazilian, UK, and OZ, the OZ investor has been the biggest problems. Just saying what I hear.
tipping is necessary in the US.. I bought a house up in British columbia,, and when I tipped 20% for my evening meal the waiter would follow me to the car thanking me and inviting me back
Its just what we do here.
In many states waiters only make 2 to 5 dollars an hour.. If they did not get healthy tips how are they going to pay for the rentals we own????
Its an issue, and all about setting expectations up front.
It was one reason I thought my TWH model would be a hit in OZ .. Payment of the exact amount on the exact same day transferred into their account monthly.
TWH has caught on now in the US.. And I have a back log of probably 30 to 40 US clients plus about 10 OZ…..
Its a problem we get a property and its gone in 2 hours…
I guess good problem to have…
JLHTexas Cash Cow Investments AustraliaParticipant@texas-cash-cow-investments-australiaJoin Date: 2011Post Count: 71
Agree 100%. It's all about what expectations they have been sold from the beginning. Investors do need to appreciate that there are some major difference between property management in the US & Australia. It is unrealistic and naive of these investors you mentioned to expect otherwise.
My guess is that they know they have been sold a lemon and are anxious each month that at least rent is being paid to make them feel better.
In my experience most tenants do & will pay their rent on time but there are always going to be a few that are late. My latest property that I purchased late last year…the tenants hadn't missed a beat but then the head of the household lost his job in August and rent was half paid for that month. Fortunately this month he is back on track.