Introduction to Property Management Lecture 1 by Abdul Jalil Omar Department of Real Estate Management Faculty of Technology Management and Business

Lecture outlines History of property management Property management today Where property managers work Different property management jobs Property management as a career Property management fees

History of property management In its earliest day, the property manager had only one job, TO COLLECT THE RENT In the 1930s, economic depressions, where people out of job, the stock market crash, mortgage default that end up with the banks kept a lot of properties. But bankers have no knowledge to manage property. Thus the property manager was born.

Property management today For the last 25 years, most people became property managers by unintentionly. In the 21st century, the growth of real estate investment by the investors and companies that manage large properties, demand for property management is indeed a full-time career.

Who are the property managers?

Who are the property managers? “Property manager” means a person, a firm or a company who, on behalf of the owner of any land, building and any interest therein, manages and controls such land, building and interest to maintain or increase the investment in, or physical worth of such property.

Property Management Property management means the management and control of any land, building and any interest therein, excluding the management of property-based businesses, on behalf of the owner for a fee...

Who are the property managers? Board of valuers, appraisers, estate agents (BOVAEA) Role of property managers can be found in http://www.lppeh.gov.my/role.php Currently only a registered valuer can practice as a Property Manager. The property manager ensures that the owner gets the best returns of his property investment. He also ensures that the building is well maintained, the building services well looked after and all expenses paid. He is able to optimise usage and enhance the investment in property. He advises on lease renewals, selection of quality tenants and the appropriate tenant mix. To ensure the best return from property investment

Where property managers work? Third-party managers Work for the property owners of the property they manage Real estate investment trusts (REITs) Employee of the company Institutional owners Work for group of building owners: banks, large limited partnerships, foreign investors, etc. Corporate real estate management Work for corporations to manage their income producing real estate

Different property management jobs On-site manager Day to day operation: collecting rent, preparing reports, supervising maintenance, cleaning works Leasing agents Leasing broker: locating & signing new tenants to occupy space in building Tenant representative Mostly for commercial property: assisting tenants in locating space and negotiating lease

Different property management jobs Property manager Responsible for the operation of several properties, overseeing on-site manager, involve in planning and budget for property management activities, and usually report to asset manager Portfolio (asset) manager Executive responsible for large no of properties, evaluate the properties performance, act as a substitute to owner, approve policies and financial, act as advisor to owner.

Property management as a career Source: http://www.lppeh.gov.my/role.php

Board of valuers, appraisers, estate agents (BOVAEA) The Board was set up in 1981 under the purview of the Ministry of Finance, Malaysia. The setup and operation of this Board is governed by the provision of Valuers, Appraisers and Estate Agents Act 1981. Its primary function is to regulate the Valuers, Appraisers and Estate Agents practising in Malaysia Not including the property managers

Board of valuers, appraisers, estate agents (BOVAEA)

Board of valuers, appraisers, estate agents (BOVAEA) (cont.) The Functions of The Board are To keep and maintain the Register of Valuers, Appraisers and Estate Agents, Probationary Valuers and Probationary Estate Agents and firms of Valuers, Appraisers and Estate Agents. To approve and reject applications for registration. To hold disciplinary proceedings. To conduct examinations. To prescribe Scale of Fees. To regulate the professional Conduct/Ethics of Valuers, Appraisers and Estate Agents. To award scholarships

Role of Property Manager Currently only a registered valuer can practice as a Property Manager. The property manager ensures that the owner gets the best returns of his property investment. He also ensures that the building is well maintained, the building services well looked after and all expenses paid. He is able to optimise usage and enhance the investment in property. He advises on lease renewals, selection of quality tenants and the appropriate tenant mix.

Fee Scale for PM PROPERTY MANAGEMENT An annual fee based on— 5.0% of the gross annual rent on the first RM30,000 3.0% of the gross annual rent on the residue up to RM 100,000 2.0% of the gross annual rent on the residue over RM 100,000 The fee is applicable to each holding. The expression "holding" as used here has the same meaning as defined in section 2 of the Local Government Act 1976. The expression "gross annual rent" means the rents reserved or deemed to be reserved by the lease or lettings plus any incidental receipts collected or accounted for or both in the course of management. Minimum fee: As above, subject to a minimum fee of RM50 per month. ADDITIONAL CLAIMS In addition to the above, claims may be made for— the cost of printing, plans, copies of documents, lithography, travelling and other expenses actually incurred; a fee of RM150 per hour or RM800 per working day of 8 hours for negotiations, attendance at meetings with solicitors, consultants or authorities. a fee of RM200 per hour or RM 1,000 per working day of 8 hours for giving evidence before judicial bodies. Note: The fees stated in items (b) and (c) are chargeable for actual appearance at meetings or before judicial bodies. In the case of postponements, adjournments, etc. (where less than 24 hours notice is given), a minimum fee of RM400 is chargeable if the meeting or judicial appearance is in the same town/city as the location of the practice and a minimum fee of RM800 is chargeable if the meeting or judicial appearance is outside the location of the practice.

Let calculate! How much is the property management fees for a rental condominium of 20 floors with: Floor 2 to 20 with 4 units for each floors with the rental RM 1,500 per unit/month. Ground floor has 8 unit of shops with rental RM3,000 per unit/month. 80 parking spaces with rental RM100 per unit/month.

Answer: Gross rent: 5%@RM30,000 = RM 1,500 3%@RM100,000 = RM 3,000 19 floors X 4 units X RM1500 X 12 =RM1,368,000 8 units X RM3000 X 12 =RM 288,000 80 units X RM100 X 12 = RM 96,000 Gross Rent = RM 1,752,000 Fees: 5%@RM30,000 = RM 1,500 3%@RM100,000 = RM 3,000 2%@RM1,622,000 = RM32,440 TOTAL FEES = RM36,940

Summary Role of property manager is to ensures that the owner gets the best returns of his property investment. There are still a lot of prospect within property management in Malaysia. The fees for property management is quite substantial.