At 2 a.m., I was awakened by a sudden phone call. Landlord, water is leaking from the floor above us, and it's falling from the ceiling like rain!"
From this moment on, the long nightmare for owners who manage their own rental properties begins. Contacting the tenants on the upper floors, checking the site in the middle of the night, providing first aid, arranging for a repairman, assessing the damage, communicating with the insurance company, confirming where the liability lies.... What is most troubling is the reality of having to deal with all of this on one's own, without any specialized knowledge.
How should self-managed owners respond when faced with such a situation? And how would the same situation be different if they outsourced to a management company?
In this issue, we will consider the limitations of self-management and the advantages of outsourcing to a management company, using a leaky upper-floor leak age problem as an example.
Mr. A owned a 15-year-old 4-story condominium (12 units) and managed it as a rental property. He continued to manage the building on his own to save on management costs, but one winter late at night, he received an emergency call from a tenant on the third floor saying that water was leaking from the ceiling.
Result: The restoration work took 5 days and cost approximately 500,000 yen, plus 200,000 yen in compensation to the tenants, and above all, a huge price to pay in terms of precious time and emotional stress.
In the case of Mr. B's property, where a similar situation occurred, the management company took the following actions
Result: Mr. B was able to minimize his mental burden, as he only had to observe the series of responses for the most part.
As seen in the case of the water leak problem, self-management has many risks and limitations. The main ones are summarized below.
| Risk items | Specific examples | Probability of occurrence | Degree of impact |
|---|---|---|---|
| Errors in legal judgment | Compensation problems due to misjudgment of responsibility | High | Large |
| Technical judgment error | Failure to take countermeasures due to misdiagnosis of the cause of leakage | Medium | Large |
| Lack of knowledge of insurance coverage | Underutilization of applicable insurance | High | Medium |
| Mistake in selection of repair method | Recurrence due to improper repair | Medium | Large |
| Constraint items | In case of self-management | In case of outsourcing to a management company |
|---|---|---|
| Emergency response time | Travel time to property + response time | Immediate ~ 30 minute response by a specialist |
| Late night/holiday response | Response at the expense of personal life | 24 hours a day, 365 days a year response system |
| Multi-location property management | Physically impossible to respond at the same time | Can be handled by management personnel at each location |
| Contractor network | Limited personal contacts | Extensive network of subcontractors |
Owners who continue to manage their own properties tend to overlook the psychological burden and lost opportunities that 24-hour rental management can have on their own quality of life, including time for their day job, family, and hobbies. In particular, urgent issues such as water leakage problems can cause a great deal of psychological stress and affect other jobs and activities.
If the time spent on self-management can be used for your core business or new investment opportunities, you may be able to achieve a greater return on your investment. Considering these lost opportunities, the fee for outsourcing to a management company is an investment that can pay for itself well.
Rental management companies are professionals with many years of experience and expertise. In particular, they have the following expertise in dealing with water leaks
The major advantage of outsourcing to a management company is not only trouble-shooting but also preventive management.
| Preventive management items | Specific details | Difficulty to achieve with self-management |
|---|---|---|
| Periodic facility inspections | Periodic inspection of water supply and drainage pipes, electrical equipment, etc. | Difficult to achieve |
| Aging prediction | Prediction of equipment life expectancy based on data | Very difficult |
| Preventive repair planning | Prevention of sudden breakdowns through planned repairs | Difficult |
| Guidance for tenants | Guidance on appropriate equipment use | Moderate |
| Sharing of similar cases | Preventive measures based on examples of other properties | Impossible |
Management Company The peace of mind provided by a 24-hour response system is a major advantage that cannot be obtained through self-management.
The response to an emergency situation such as a water leak can greatly affect tenant satisfaction and the reputation of the property. Outsourcing to a property management company allows for professional troubleshooting, which can be expected to have the following effects
Selecting the right management company is crucial to maximizing the effectiveness of outsourcing. The following points will help you find a reliable partner.
Specific checkpoints for evaluating the ability to respond to problems.
| Check items | Check method | Examples of good responses |
|---|---|---|
| Emergency response system | Question about the specific flow of 24-hour response | Within 30 minutes after the call center receives the call, a person in charge responds to the call, and depending on the situation, on-site staff is dispatched within 60 minutes." |
| Network of subcontractors | Ask about late-night plumbing repair availability. | We have tie-ups with plumbing companies that can respond 24 hours a day, so even in an emergency, we can be onsite within 2 hours in principle. |
| Past Response Cases | Ask about specific examples of water leakage response. | We can explain in detail about specific cases of problems and the process to solve them. |
| Insurance support | Ask about insurance application support | We provide comprehensive support, from negotiating with insurance companies on behalf of our clients, to assisting in the preparation of necessary documents, to attending assessments. |
| Measures to prevent recurrence | Ask about measures to prevent similar problems. | Submission of reports analyzing the causes of problems after they occur and specific proposals for preventive measures |
Management outsourcing costs should be considered an "investment" rather than a mere "cost. Evaluate cost-effectiveness by comprehensively considering the following factors.
Direct cost reduction effect
Indirect value
Impact on long-term asset value
Emergency situations such as water leakage from the floor above are an unavoidable risk in rental management. Considering the burden of self-management, outsourcing to a management company is not just a cost, but a wise investment to protect the owner's time, mental health, and property value.
The advantages of outsourcing rental property management are many and varied, but the following three points are particularly important.
Outsourcing to a management company can make all the difference in the world, even when dealing with a single water leak. The benefits are even greater when other aspects such as disaster prevention, crime prevention, and compliance with revised laws are taken into consideration. We encourage you to consider outsourcing to a management company to stabilize your rental business over the long term.
A: In general, the typical outsourced rental management fee is 3-5% of the rental income. Although it varies depending on the scope of management services, a standard plan that includes basic tenant management and building management generally costs about 5% of the rent, while a plan that only requires collection on behalf of the tenant generally costs about 3%. However, additional services such as 24-hour emergency response service and rent guarantees may incur additional fees.
A: It is well worth outsourcing the management of even small properties. In fact, for smaller properties, it is more important to maintain tenant satisfaction and to respond quickly to problems, as a single vacancy can have a significant impact on revenue. An increasing number of management companies are offering flexible plans for small-scale properties, so we recommend that you choose a management company that is appropriate for the size of your property.
A: No, you do not have to do anything at all. Periodic income and expense reports and involvement in important decisions, such as major repairs, are necessary. However, you can leave almost everything to the management company, including handling day-to-day tenant relations, emergency troubleshooting, and periodic inspections. This creates an environment in which you can concentrate on major policy decisions while maintaining good communication with the management company.
A: When switching, it is important to accurately transfer current property conditions and tenant information. In particular, provide detailed information on past trouble history, repair history, and special arrangements with tenants. It is also advisable to obtain quotes from several management companies and compare the balance of services and costs. The ideal timing for switching is during periods of low occupancy or preventive timing before major problems occur.
A: Yes, it is possible. The management contract usually has a set term and termination terms, so it is possible to change according to those terms. However, it is important to allow enough time for the transfer to take place in order to avoid confusion for the tenants. When considering a change of management company, clarify your current dissatisfactions and areas for improvement, and confirm in detail whether the new management company will be able to resolve them.
If you have any concerns about your rental property management, especially in situations that require emergency response such as water leakage problems, please contact us for a free consultation. We will propose the best management plan to maximize the value of your property.