How firm is winning over landlords in niche property management

BY VICTOR ADAR

Across the country, the demand for housing is on an upward trajectory. Today, available data shows that Kenya’s housing deficit stands at 2 million units and is rising steadily – at the rate of about 200,000 units a year, in fact. Scores of real estate developers trying to fill the gap cannot seem to catch up, in the wake of tough economic times.

It is why, perhaps, players in the sector have increasingly found themselves having to find or create niches to either remain competitive, or draw consumers, or both. Whether one wants to put up residential apartments or a mall, there is no substitution for strategy.

Meeting market expectations is never an easy venture; it is a tedious journey, full of uncertainties. And even where expectations are met, for landlords, trying to get tenants to honour payment commitments in terms of value and time is never hassle free. This is where agencies and property managers come in.

Rishad Ahmed, the managing director of Richland Properties Limited, pioneered the idea of advancing rent to landlords. Dubbed “hassle free life”, the four-year old concept has proven extremely popular with property owners, who particularly cherish the idea of not having to haggle with clients who sometimes out-negotiate them!

“I believe paying landlords in advance is sufficient,” says Ahmed. “If tenants know that you do collections on your own, they take advantage. So we came up with the idea of paying landlords upfront; whether tenants pay in time or not, the landlord is covered. It is a risky venture, but we have specialists in it, and so we manage.”

Ahmed offers that the majority of those who borrow to invest in real estate often have to contend with non-occupancy once their projects are complete.

For this reason, apart from managing property – which is what most property managers offer – a landlord’s most immediate challenge is rent collection. While there are those who manage on their own, most would rather outsource that service.

“If Richland is given that job, we make sure what we submit has got no arrears; whether the figure is Sh200,000 or Sh100 million, the investor will get it in one tranche. This is our guarantee, and our niche,” Ahmed says.

The property firm provides in-house caretaker (for a mall this post is filled with a manager), cleaners and security services, boreholes and lift maintenance, free landscaping and beautification on the premises, as well as storm and drainage maintenance.

“Our clients’ needs are key,” Ahmed continues. On security for example, landlords are usually spoilt for choice because the firms are just so many with more or less the same training. For other services, Richland takes a particularly active role owing to its emphasis on quality.

“After we collect service charge, we settle all associated costs (cleaning, electricity, etc.) and deposit the balance to the clients’ account.”

Richland remits payment to landlords in four different dates – on the 3rd, 7th, 11th and 15th – which attract different commissions. Early payment, on the 3rd, attracts a higher commission while late payment (mid-month) means lower commissions. Landlords select those that suit them.

The company engages the services of a network of brokers, who are also tasked with looking for tenants. These charge a commission of 50% on the first month’s rent.

A market phenomenon that is often ignored and the need to come up with a creative way to outsmart the competitors is what fuelled Ahmed’s passion. He is running a business that was founded in 2009.

For the first six years, until 2015 to be precise, Richland Properties traded as United Care. Once the business had taken off and established itself, it rebranded. He, however, retained the first name.

“We adopted Richland Properties, with a focus on rent collection, management and development. United Care is itself an investment company that deals with buying and selling of property, and which works closely with developers,” he explains.

In its decade of doing business, Richland has grown impressively. The firm employs more than 100 people, with branches in Nairobi (Chiromo Court, along Waiyaki Way), Mombasa (Sea View plaza, Mama Ngina drive) and Lamu (Richland House). Ahmed projects that the Malindi, Nakuru, Eldoret and Kisumu branches will be operational by end of year.

“We have in our client list more than a hundred landlords, and close to 6,000 tenants.”

So how do they deal with difficult clients?

“Penalties, that is our safety net. We do not like to do it, but it is a necessary measure to create order and motivate tenants to pay on time, particularly in light of an appreciably high default rate,” Ahmed explains.

Penalties begin from 5% – a rate which applies after more than three days of late payment; another 10% is added when a tenant is late by a month to make a total of 15%. The three-day leeway is to cater for such eventualities as sickness or any other event that might occasion the delay.

“Further, before someone takes occupancy of a unit, we thoroughly vet them so that we ‘know who you are.’ This is important because if you decide to vacate quietly without paying, then we have a place to start in finding you,” he offers. “This could be by way of serving one with court papers or breaking in to confiscate items that can stand for accruing arrears.”

Partnership

“Of course,” Ahmed offers, “whenever there are cases of default that extend beyond a month, we try to speak with the tenant to understand what the problem could be, and come to an agreement to clear the arrears without imposing an extra burden.”

Richland’s unique services have caught the eye of the Gulf African Bank, and is working on a partnership to collect mortgage payments on its behalf. The firm will handle rent collection and mortgage repayments for both locally-stationed and overseas clients. The overriding motivation for this arrangement is tied to Richland’s unique model: the Bank would like to outsource monthly collections to avoid having to deal with late and defaulted payments, a task the firm is happy to undertake.

“We are happy to do on behalf of our clients the tasks they would rather not undertake.”

While property management, including rent collection, has matured in the Kenyan market, a few challenges still abound but Richland prides itself in finding new innovative ways every day to offer solutions.

“You have to give your all in what you set out to do,” Ahmed concludes. “In business today, it is either you do or you don’t; there is no in-between. We pride ourselves in doing.”