Corporate Mistakes That Lead To Failure in Real Estate Investment

Hong Kong - real estate success

Whether you are looking forward to buying your dream home, or you are getting started in property investment in Hong Kong, you need to have a detailed plan on how you are going to become successful. It is important for you to ensure that your investment promises to yield better returns in the long-run. A sound investment plan is critical in ensuring that all activities related to the investment are handled with diligence and all your investment plans are successful.

Investing in the right real estate project will yield the attractive returns on investment. It is, therefore, critical to find a reputable and professional real estate company to help you in acquiring the right property that is worth the investment. Seasoned investors have been known to rely on property management companies that offer sound advice on portfolio management and asset investment decisions. It is critical for you to be able to establish a reputable real estate company that will handle all your investment transactions

However, there are real estate management companies that are bogus and may dupe you into acquiring a property that is not worth your investment. Additionally, you stand to incur losses if your portfolio assets are being managed by an ineffective company. Therefore, it is important for you to do your homework and approach a trustworthy company that will handle all your transactions with honesty and transparency until you acquire property.  You need to be choosy. You need to establish whether or not a company is capacitated enough to provide sound advice and management of your investment. You will need to evaluate the success rate of the company that you will approach to help you in acquiring your assets as well as in managing them. You will also have to analyze the staff working with the company that will be handling your transactions to ensure that they are fully committed to providing professional services. Establishing the background of the professionals involved is also a sure way that will enable you to determine the quality of service and dedication that you anticipate from the company.

After making contact with a company that you have pre-selected, you must question the services that the company has listed in their catalog. You need to be able to verify if the company has skilled professionals who are expert in providing the various services that you are looking forward to and the manner in which the services are delivered. It is also important to consider knowing who is accountable to whom and what approach you should undertake when airing your grievances pertaining to the services delivered to you. Additionally, you must have a clear set of standards and objectives that should be met. The objectives should have a clear timeline and you should be ready to make reviews and follow-ups of the progress of the transactions involved to ensure that you are not getting a raw deal.

Below are some telltale signs that you are dealing with an unscrupulous real estate company. If you spot any other these traits, you need to take necessary action immediately before damage is done.

Management Is Clueless In Managing Property

Any sound property management company must be endowed with different professionals who offer specific skilled services to the client. The professionals involved must be licensed to provide the services. This means that you expect them to provide meaningful services that will help you advance your needs for investment in a timely manner while incurring minimal expenses.

However, there are some instances when you may note the disparity in the services provided contrary to your expectation, or to the expectations of the general public- your opinions could be wrong, but in most cases, the opinions of the general public cannot go wrong. There are signs that will clearly tell you that the people providing the services are either incompetent or have no clue whatsoever in whatever they are doing. Mind you, there is a fine line between laxity and incompetence. Laxity will involve situations where a competent professional is overly slow in providing the services. Such professional will use tricks and excuses to dilly-dally the completion of projects or in providing services to clients. On the other hand, an inexperienced person can be easily noted by the virtue of lacking the required skills to provide the said services. No matter how hard and an incompetent person may try to exhibit excellence, one cannot conceal the effort that was taken into trying to provide the ‘excellent work’. Incompetent people will try to use every means to try to prove that they have the capacity of delivering services, yet you can clearly discern that they don't.

In instances where the management is having difficulties in delivering property reports on time; there is poor communication between you and the management  or when you discover that your property is attracting higher expenses which seem uncontrollable, then these are clear indications that the company managing your property is simply ineffective. Sticking by such a company may result in heavy losses in future. Higher-than-normal expenses from such a company can be attributed to the staff who may try to use all avenues to ensure that the deliver their mandate. By the virtue that they lack the competencies required, the staff will try to outsource the skills or they may not have experience in deploying effective working strategies that enable reduced overheads through specialization and economies of scale. Moreover, communication will always be hard because every staff member may try to lay blame on the other. The whole organization is in disarray because of the staff have no required experiences which would see them being allocated specialized duties.

Therefore, you should severe the relationship and look for a better company to manage your property.

The Management is Ripping you Off

A property management company has the fiduciary responsibility of providing complete and accurate accounting records, financial documents and all financial dispositions arrived to in the course of representing their clients. If you or your accountant realizes some discrepancies in the financial documents/ records, you need to establish whether the company managing your assets may be fleecing you your money.

There are many instances when the management may try to rip you off by inflating expenses and adding other unnecessary costs that could be avoided. You need to be able to verify all the financial information provided by the company. You need to establish whether or not the inflated expenses are true and determine if the evidence that supports them is valid. Remember that even receipts can be faked in order to fleece you. Moreover, you need to question why the company was not able to avoid expenses that increased the liabilities of your investment portfolio when they could be avoided. Remember that it is in your interests that the company should be working on and the company is liable in to use prudence and rationality in making reasonable decisions that work to your advantage.

If you find out that you are being lied to or some financial information cannot be transparently disclosed, then it's time that you took actions against the company.
You need to all the finances from the property audited at least once every year. It is also prudent to verify every cash flow pertaining to expenses that result from repair and upgrades as well as incomes from all rented spaces.

Employees are not Held Accountable for the Actions

In every reputable company or business set up which has employed several employees, there is always a clear command structure as well as disciplinary policies and procedures. There must be a guideline that indicates who reports to whom as well as a set of disciplinary measures and actions that should be undertaken when employees act contrary to their set mandate.

The employees of the company that you have contracted to work for you should be liable to ensure that they provide efficient advice and work effectively towards the management of your investment. You shouldn't expect anything short of that. In the event that their actions or decisions result to liabilities on your investment which could have been avoided, then you will need to have them held accountable for the negligence in executing their mandate.

Property managers should be held accountable for their insensitive decisions or actions that result to high expenses or losses when managing your property. You need to seek answers for any decisions or actions made by the management on behalf of your property. This ensures that the management does not make deliberate decisions that could result in losses when managing your real estate investment.

An even employee who may have part-ownership in the company, or has a special relationship with the management, or has a senior position in the management has to be held liable for any deliberate or negligent actions that resulted in liabilities or losses on your investment.

The company's management has the duty to take actions against the said employees as well as provide you with compensation for the losses incurred as well as any interests that may have accrued. Disciplinary actions usually help in curtailing inappropriate behaviors on the part of employees. It is critical for you to ensure that the company is keen on addressing your compensation needs as well as any discrepancies that may have affected your portfolio.

In any event, when an appropriate disciplinary action is taken against the employees who mismanaged your assets, then it is a clear indication that you need to move the management of your real estate investment to another company. Failure to do that could lead to future frustrations because of mismanagement of your investment.   

Company is Involved in Several Lawsuits

A reputable company will usually try to avoid any litigation that may be involved in their activities by providing legit services only as well as by ensuring that they exercise due diligence before committing themselves in any business transactions. Every business person knows the potential damage that a company faces as a result of being involved in lawsuits as a result of business malpractices. Therefore such businesses will always try to ensure that they operate within the precincts of the laws. However, litigations usually happen and it is the mandate of the court of law to determine whether or not a business acted inappropriately. Therefore, you should not judge a business negatively because of a pending courts case.

In any instance where you realize that a company has been in several litigations over a short period, this could be an indication that the company may be fraudulent in nature. It is imperative that you do some study to understand the litigation at hand and understand whether the company could be on the verge of frustrating it clients with business or ethical malpractices.

Complaints of Dissatisfaction from Clients

Today, the internet has provided people with a platform that enables them to air their grievances, share their personal experiences and dissatisfactions that they receive from their previous or current corporate relationships that they are established with companies. It is typical for people to share their personal experiences in social media, consumer websites and other digital platforms.

These are powerful resources that you should look out for to prevent you from being caught off guard. You need to join these online group and discussion forums where other investors or homebuyers meet to interact. Joining a local group in any of the towns in Hong Kong can help you in getting fresh information about what is happening in the industry. The information that you get should be used to benefit your investment positively.

However, you should also be keen to look out for complaints from dissatisfied clients who detail their bad experiences with the companies that they have contracted to manage their investment. Of course, you must expect some degree of propaganda, and that is why you need to authenticate any information that you hear. You need to ascertain that the information is not baseless. This will guide you making a decision about the future company that you may wish to contract to manage your property as well as take action against the company that is currently managing your property. If for instance, you discover that the company currently managing your property has been marred with various cases of mismanagement of clients’ investments, you need to take appropriate cautions hastily before you also become a victim.

Your Property is Managing You

Your real estate investment is supposed to be profitable by providing you with better returns while the value of the equity rises over time. The investment itself should be able to generate sound income that is enough to take care of the expenses incurred, repay mortgage dues and yet still retain some savings.

However, oft a time, it could be the property that is managing you instead of you being able to manage the property.  These situations normally arise due to underlying problems with the property that need extra attention and also utilize more costs. You need to scrutinize and create a report that will enable you to analyze what could be the underlying problem and how it could be solved. You need to be able to determine if the property is worth retaining or you need to flip it For instance if you are managing rental flats that result to losses each month, you could carry out an analysis to determine why the losses are increasing. Maybe you could realize that your property is undesirable, hence there are fewer tenants and thus the low occupancy rate cannot be able to generate enough income to offset expenses incurred in the management of the property. You need to come up with better ways of making the property attractive through proper renovations. You also need to establish if there are any unnecessary expenses that you could cut without affecting the operations of the investment.

Moreover, if you find out that your personal life is affected by the management of the property, each by having to spend time and resources on the property, there is also a potential danger that the property is managing you. You need to set clear business plans that guide you in the management of the operation involved in your investment. A business plan helps in setting the right objectives and strategies to meet the objectives. It also helps to set up a benchmark (s) which ensures that your property yields into good returns. It will also help you to be able to determine if there is any positive progress in the management of your investment. In case of any inconsistencies, it can be easy for you to analyze and report the cause of the inconsistencies which eventually will help you to make the necessary amendments on time.

If the situation does not improve positively, you may need to consider listing the property for sale because it does not yield the expected returns but instead it is managing you.

Conclusion

It is important for you to determine the ability of a company to manage your investment assets optimally. You need to ensure that the company that you contract has the needed capacity to ensure that your investment is profitable in the long run. Do your homework and research on a reputable company that will certainly help you to grow your investment considerably as well as helps you secure more lucrative investments which will help you multiply your portfolio in the long run.

Engel & Völkers

Hong Kong, Real Estate Agency
Shop A, Ground Floor, 95 Caine Road, Mid Levels
- Hong Kong
Company License: C-035745
Phone
+852 2561 3616

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