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Sunday, July 2, 2017

Invest in the future




IT has always interested me to see how the different selection of words sent varied messages to readers and listeners.

Of late, I’m intrigued with the use of oxymorons, a combination of words that have opposite meanings and which usually produces an incongruous, seemingly self-contradictory effect.

Some daily expressions such as “open secret”, “seriously funny”, “deafening silence” and “pretty ugly”, are good examples on how the completely opposite meanings of words create dramatic effect.

Among other oxymorons come an expression often heard among condominium owners to their management corporations (MCs) and management offices: “We want you to lower costs and improve quality.”

Just like any other oxymoron phrases, the statement above makes me puzzle and ponder. It is prudent to manage costs, but unrealistic cost cutting over the long run will lead to decline in the quality of facilities and services.

Based on my experience, quality always comes with cost especially in property management. It is impossible to achieve higher quality standards by reducing expenditure.

I have heard of occasions where homeowners’ representatives in MC set high benchmark for the property management team, but expect them to cut down on the number of workers and cleaners in order to reduce spending. Needless to say, we can imagine what the outcome would be without looking at the property itself.

In reality, MC and homeowners must invest, not spend less for better quality. While developers and property managers play the important role of ensuring the upkeep of properties, the property owners themselves are the main stakeholders in deciding the fate of their properties. They are the party who can approve the budget and usage of their service charge and sinking funds.

In my previous article, I mentioned it is important for homeowners to participate in property management, such as attending AGMs and EGMs to exercise their right to raise concerns and approve the budget during such meetings.

In addition, homeowners and MCs must be bold in making decisions to invest in their properties with the reserved funds they have in their account.

Hence, while it is important to manage cost, it is also important to spend wisely for the future. Inflation is a fact of life, so MCs and homeowners should factor the inflation rate into their service charges, and use the real inflation rate, typically higher than the officially sanctioned rate anywhere in the world.

Typically, service charge is used for the general maintenance of the building. Sinking fund, on the other hand, can be used for the painting and the repainting of the common property, acquisition of movable property, the replacement of any fixture or fitting, the upgrading and refurbishment of the common property, and any other capital expenditure deemed necessary.

Managing a strata property is like maintaining a car. We must service our car regularly and replace its parts when they are due for change according to mileage. If a car is serviced less often, it gets more expensive to fix later when the equipment falls apart, and sometimes it may be too late to change.

Hence, when we reduce spending on maintaining a property, the decline of quality may be slow but sure. It takes time and additional cost when homeowners want to re-invest to restore the property later.

Invest in the future is just like doing exercise. It is hard to do, but if done regularly it will build health, strength and happiness.

To invest in a strata property means to increase, not cut down services such as cleaning, maintenance, security and landscaping. It also means to spend the sinking fund regularly not just on replacements, but also on upgrades, as the world doesn’t stand still. New projects would make existing projects old and even obsolete if we don’t manage our property well.

Investor’s nightmare

How well a property is managed can make or break the value of the property. A quality property management will allow the value to increase; while poor management could translate into an investor’s nightmare.

Active management and upgrading of properties is an important approach to protect our homes and investments. As such, whenever homeowners or property management companies tell me they are able to increase quality and cut cost at the same time, I would wonder whether, “Is this a short-term gain at the detriment of long-term benefits?”

By Alan Tong

Datuk Alan Tong was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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