The Property Management Show

Your team represents your property management business, and today we’re talking about the importance of building and keeping a great property management team with Melissa Prandi, of Prandi Property Management. Many of her employees have been with her for 10 years or longer, and she’s quick to tell us that having the best team she’s ever had provides confidence and opportunities for growth. Where We Are Now: Prandi Property Management Melissa owns Prandi Property Management in San Rafael, California, which is right between the Golden Gate Bridge and Napa Valley. She’s been in the business for 37 years, and started working for her property management company as a receptionist at the age of 19. When she bought the company, it was small. There was a bookkeeper and a full time property manager and Melissa. Now, she has a staff of 15 and three virtual assistants. It takes some work to bring all those personalities together, but when it works – it really works. All you have to do is check out Prandi’s reviews. Customers benefit from a strong and thriving property management team. Building and maintaining a great property management team may seem basic. But, if you don’t take care of basics, you cannot grow and scale as a business. Your team is your foundation, and that’s why we’re talking about this today. Where do You Start? Making the First Hire and Adding to Your Team If you’re just one person or you have a small two-person property management team, your first hire needs to be someone who complements you. Look at your own strengths and weaknesses as an owner or a key manager. Then, hire someone who has a different set of skills and strengths. Melissa is a visionary. She describes herself as a people-person, and someone who loves to share. Her logical first-hire was Christine, who has been with Prandi for 18 years. Christine fills in the gaps while Melissa is busy rushing from A to Z. She is practical, detail-oriented, and really good at implementing. Find someone to complement your personality, especially if you have a small staff. Hire for attitude. The first team members you bring on don’t have to have property management experience. Christine didn’t even know what property management was when Melissa hired her. Now, she has all of her designations, including Residential Management Professional (RPM) and Master Property Manager (MPM). Melissa’s son is the Business Development Manager at Prandi. People love that he’s the owner’s son, and they like being drawn into a family-oriented business. Prandi Property Management markets themselves as being Family-owned and Community-focused. That’s powerful. Matt started working as a property manager; he got his real estate license at the age of 19, and then got his broker’s license. Most people don’t start out as property managers – Melissa didn’t start out as a property manager. The front desk role used to be where new employees learned about the company and the industry. Now, there are virtual assistants answering phones at Prandi. However, Melissa says her best people have typically come in as assistants and learned the ropes. Good property management team members learn by doing everything. Keeping Team Members Happy and Motivated Christine has been with Prandi for 18 years and Melissa’s bookkeeper has been in place for 13 or 14 years. Why do people stay so long? Respect. Melissa says she respects them and knows what it’s like to be an employee. It starts with respect and inspiring a culture of respect in the office. There’s also a great benefits package including a 401k plan with a four percent match. She keeps her team happy by encouraging them to grow with her. You don’t ever want your staff to feel like they can’t learn more. Another important tip to keeping your team members happy is this: ask what they want. The retirement plan came about during a staff meeting when they were discussing what they really wanted and valued. Medical is provided after 90 days and dental is provided after a year. The staff wanted a retirement program and because Melissa is committed to listening, respecting, and keeping her valued team members happy – she investigated how to provide a 401k. NARPM members were, of course, an extremely helpful resource. Conferences are another benefit. Last year, there were eight team members from Prandi at CALNARPM. Bringing team members to an educational conference shows that you’re interested in investing in them. It also demonstrates teamwork and positivity. It gives your employees a chance to step out of the day-to-day duties of putting out fires and it builds a passion for property management. They also get to meet vendors and colleagues. The expense of including team members in these conferences is worth it. How to Hire: Be Direct and Involve Others Before you can retain, support, and train a team, you have to build a team. Melissa does a few specific things when she’s looking for a new hire: Request a cover letter, resume, and a simple typing

Chrysztyna Rowek is the owner of Lighthouse Cove Property Management in Washington State and an active member of NARPM. She has gone from cleaning houses to buying/acquiring property management companies, and she joined us on The Property Management Show to share her experiences and the lessons she has learned along the way. Background: Buying Lighthouse Cove Property Management Chrysztyna likes to tell clients that she’s supposed to teach their kids how to speak Spanish. That’s what she went to school for, and it was her planned career when she moved from Canada to Greece to the U.S. But, her Canadian degree wasn’t enough to get the job she wanted, and instead of spending more money in pursuit of a master’s degree as an international graduate student, she got married, had a child, and began cleaning houses for extra money. Soon, a property management company hired her to clean their rental properties. Then, she started working in the office, and then she got her real estate license in 2007. Then, she bought the company. Chrysztyna admits she had no idea how to buy a company or how to run one. But, she dove right in. After considering a loan from the Small Business Administration, she borrowed the money from her father instead and bought Lighthouse Cove Property Management. On July 17, 2007, after having a license for two months, she owned the company. It had 190 doors which were mostly single-family homes and multi-plexes. When Sellers are Difficult Perhaps the seller didn’t think Chrysztyna would actually buy. Perhaps she had second thoughts about selling. Whatever the issues, there were difficulties almost immediately. She wasn’t much help, even though Chrysztyna was very new to this. There was no advice on how to run the business or how to run this particular business. There was a lot of pushback, and two days after the non-compete agreement expired, the seller opened up a new property management company in the same market and went after many of Lighthouse Cove’s clients. It was disappointing. The Importance of Transition Plans The plan was for the seller to stay on as managing broker at least until Chrysztyna earned her managing broker’s license. In Washington, a broker has to be licensed for two years before taking the managing broker exam. The seller was unresponsive and unavailable, so Chrysztyna had to find another managing broker and completely cut all ties with the seller. In an ideal situation, the buyer will have access to the seller for at least 90 days. That’s a minimum – 120 days would be better. Put that paperwork in place when you buy or sell. Then, build relationships with the clients right away. The clients you’re buying trust the person who is selling. So, the seller has to help ease the transition so that the clients trust you too. If the seller trusts the buyer, the clients will trust the buyer. People are loyal, and it’s a shock when companies are sold. Make sure that as a buyer you have access to your seller for at least three months. Building and Preserving a Team When Chrysztyna bought Lighthouse Cove, there were only three employees; the owner, the accounting manager, and another staff member who did everything involved in property management. She kept the staff on and then eventually moved to a new office and hired some new people. During this time, Chrysztyna also kept cleaning. But she learned she had to take better care of herself and be more protective of her time. If you’re leading a company, you have to take care of yourself. If you’re not feeling 100 percent, how can you give top-notice service and provide high quality work to your clients? Losing Properties and Acquiring another Company When Lighthouse Cove’s seller opened up a new company, she took a chunk of Chrysztyna’s clients, but the company was growing. She added 50 new doors, and then she bought another property management company. It was a book of business that she bought from a local real estate office in 2009. So, by growing Lighthouse Cove and taking on the new company, she grew to over 500 properties. While Chrysztyna had learned a lot during her first acquisition, there were still mistakes to be made with her second one. The big mistake she said she made with this purchase was that she didn’t adequately check out the properties that were coming with the business. It’s hard to drive by all the properties you’re taking on when you buy a property management company, but it’s a good rule to look at a third of them. Just drive by the outside and see what they look like. You’ll probably know if there’s any deferred maintenance. If they need new paint, or they have failing roofs, be wary of that trend. You may be picking up owners who don’t want to invest in work on their properties. Chrysztyna always says she will pick up C class properties if they have A class owners. What you want to avoid is C class properties with C class owners. So how do you distinguish A owners with C properties from C owners with C proper

As the owner of a property management company, have you thought of your own exit strategy yet? Whether you’ve already chosen your path, or you’re still unsure about the best option, it’s worth listening to how Stephanie Gordon did it. If you don’t know Stephanie Gordon yet, you should. She is the founder and CEO of Gordon Property Management in San Francisco, and she has been a successful business owner and thought leader in the property management industry for decades. In July of 2018, she sold a large part of her company to a trusted team member. Stephanie joined us on The Property Management Show to talk about how she came to that decision, what the deal looks like, and why she didn’t pick a different exit strategy. A Different Property Management Exit Strategy The decision to do this began taking form a few years ago, when Stephanie started to feel burned out. Her company has grown a lot over the years and she knew it was time to start thinking about an exit strategy when she noticed a shift in her attitude. She had always cared about her customers and their properties, but suddenly she didn’t feel excited about adding new doors to her book of business. Things felt different, and she knew something had to change. After 32 years of operating a property management business, her burnout is understandable. As a starting point, Stephanie sat down with all of her financials and analyzed the value of her company. She realized she could squeeze through an early retirement if she really wanted to, but she didn’t want to give up the lifestyle that she loved. So, she reluctantly decided to keep running the company and managed to get out of the funk she was in. Months later, as Stephanie was taking a walk near her Sonoma home, she had a bit of an “aha” moment where she realized the perfect solution: sell part of the business rather than the whole business! It was a simple exit strategy that would allow her to continue earning income while easing into a better retirement. So, she spoke to a trusted team member if she was interested in buying half of the company. This person’s name was Meghan. Meghan Guerin has been working with Stephanie for more than 15 years. She knows the company, she knows the business, and she is great leader in the organization. Stephanie always told her in passing that she’d sell her the company when she was ready. This worked for everyone because it kept Meghan at Gordon Property Management and gave her a pretty substantial goal to work towards. It also provided Stephanie with an alternative exit strategy if her children didn’t want to over the business. Selling Gordon Property Management to a stranger was completely out of the question for her. The opportunity to buy half of the company was great news to Meghan because she would continue to have Stephanie’s support as they transitioned into co-owners and partners. So, last summer the deal was closed: Stephanie owns 51 percent of Gordon Property Management, and Megan owns 49 percent of Gordon Property Management. What That One Percent Means: Owning 51 Percent versus 50 Percent of a Company Every expert Stephanie talked to advised against a straight 50/50 split. If there’s a disagreement, Stephanie has the final say and the majority control. That’s important to her since she’s not ready to give up the business entirely. No one anticipates a situation where Stephanie has to outvote Megan, but if the unthinkable happens – she is prepared and protected. Getting to the Deal: The People and Concepts that Helped When Stephanie met Greg Crabtree, the author of Simple Numbers, a few years ago at a retreat hosted by PM Grow in Puerta Vallarta, she began to understand her financial position and her company’s numbers a little better. Greg helped her analyze her income and expenses and reach a better understanding of her bottom line and where the money was really being made at Gordon Property Management. She learned how to see patterns in her financials and what that meant for her company’s value and her financial potential. She could take a clearer look at how her maintenance revenue impacted her income and what she was spending on maintenance staff. It gave her a clear picture and a detailed report. She consulted with Greg for six months and worked with Danny Craig and Jordan Muela at Profit Coach so she could put together reports and data that reflected everything she needed to know about her company and its financials. Stephanie said this was fascinating information. Once she had all the data, she shared it with Meghan. They began to discuss conceptually how the deal would work. They each had a number in mind about what half the company would be worth, and those numbers were pretty close. This tells you how well Megan knows the business. How to Fund the Deal and Cover “The Four Ds” Stephanie loaned Meghan the money to buy her share of the company. It was a 15-year loan that can be paid off in 10 years,

If The Property Management Show looks and sounds a bit different this time around, it’s because the podcast has new hosts. Marie Liamzon is the Director of Product Development at Fourandhalf and Brittany Stephens is the Director of Client Success at Fourandhalf. They got together with Sandy Highland of Sacramento Delta Property Management just after PM Grow to talk about the overarching theme of the conference and the current buzz in the industry: customer experience and customer relationship. Sandy does a particularly good job of making people feel important, which is a critical component in improving your customers’ experiences. Sandy Highland’s Story: A Brief Background Sandy has been the Business Development Manager (BDM) at Sacramento Delta since 2015, and she started with the company in 2007. The VP who hired her was a mentor and a true professional who was willing to teach Sandy everything she needed to know about property management, which was a new industry for her. After Sandy became the VP’s assistant, her mentor became ill and passed away. One of the last things she said to Sandy was get your license, so she did. She finished her licensing courses and convinced her broker she was ready to jump into the management process. “She’s with me every day,” Sandy said. “Sometimes I feel her words coming right out of my mouth.” Sacramento Delta manages between 1,700 and 2,000 doors depending on the season. It’s a large company that maintains the feel of a small family business. Talking to Customers about Pain and Fear If you could listen to Sandy’s sales calls, you’d find it interesting how naturally she gets people to open up to her. It’s because she’s willing to let them talk about their fears. Everyone who calls your property management company is afraid of something. Maybe it’s an investor with a large portfolio who is coming off a bad experience with another property manager, and they fear that every management company is the same. Maybe it’s someone who has been self-managing and is afraid and overwhelmed. Sometimes, callers can’t articulate what exactly they’re afraid of and they don’t know what to ask. It’s your job to talk them through it and figure out how to fix it. Finding out where your prospect’s paint point is and what they’re afraid of will help you close more business and develop a better customer relationship. This is the same strategy you use with content marketing. People go online to ask questions and if you can offer solutions and answers in public and in real time, they’ll feel more comfortable. When someone is worried that a tenant will trash the house, you know that this is a personal investment as well as a financial investment for that owner. When someone calls to share their fear of having to evict tenants, you need to really listen and ask questions and do everything you can to alleviate the fear. Asking Questions and Establishing Personal Connections Start with the basic questions. What’s the status of the property? Is there a tenant in there now? Even when a property is occupied by a great tenant and things are going well, managing that home is time consuming and exhausting. That’s how many of your self-managing landlords will feel when they call you. If your caller is currently with another property management company and unhappy, find out why. This is important because if they’re angry about something that’s pretty standard in the industry, you can find yourself the next target of their frustration. For example, fences are notorious for taking time because there has to be due diligence and neighboring properties have to be on board with the fence. So if an owner wants to leave his property manager because the fence he approved a month ago still hasn’t shown up at the property, you’ll want to be sympathetic but also temper his expectations. Make sure that you aren’t going to provide the same pain points. From Selling to Delivering Services To effectively sell your services, you have to have a strong faith in your property management team. Have a system in place that ensures the services you’re providing are as outstanding as the services you’re selling. It’s the only way to win and retain customers. You also don’t want to promise what you cannot deliver. This isn’t fair to your property managers. You don’t want them to be thrown into a situation they can’t handle. Be direct about what you can do and what you will do. Point out what differentiates you from the competition. Then, deliver. Adapting to the Style of Your Prospect When you’re developing a meaningful relationship with prospects, make sure you’re flexible enough to adapt to their style of communication. Some people want to talk about everything on the phone. Others would rather have it all in front of them in writing. Some prospects will just want your rates and some rental values. You should be confident that you’ll measure up in any way that you communicate your services and your value. That confidence comes from

Small property management businesses have a lot of opportunities, even as they’re competing with larger companies. As a small business in the property management space, you have a lot of unique abilities, such as your talent for providing local service. The local knowledge you possess is irreplaceable, and it takes those big businesses some time to understand the local dynamics in your city and the different microeconomic environments. You also have the benefit of being able to move quickly. When you’re small, you’re nimble. You can maneuver and get more business when you use that to your advantage. Another way to get more business is by doing what the big companies do to optimize their services. One of the most important things they do is automate. If you can embrace automation, you can grow faster and smarter. Today on The Property Management Show, Alex is joined by John Bykowski, Fourandhalf’s COO, to talk about automation with Inaas Arabi, the new vice president and general manager at Propertyware who is in charge of single-family homes. Introduction to Inaas Arabi Inaas’s career has a lot of depth. He started his property management game in 2005, when he was the regional property manager and real estate broker at HelpUSell. Within 18 months they became the seventh largest company for volume sales within their state. They were working to get investors reasonably priced rental homes that brought in high returns. Then, he became the regional director of operations at American Homes 4 Rent in 2012. Today, that company is the second largest owner/operator of single-family rentals in the U.S. They own 62,000 units. The business model is to buy a lot of properties at good prices, remodel them, and rent them out. Inaas understands timing, and it has helped him build an impressive career with a lot to be proud of. His instinct for switching gears and taking advantage of the right opportunities has helped him compete as a small business owner and grow companies into larger businesses. Now, he’s working his magic at Propertyware, and his experience in property management is bringing companies better products and better results. Investing in Operators to Develop Programs Propertyware serves a unique market, where it’s important to choose an operator rather than a technologist to run programs. Technologists are great at what they do and they come up with outstanding products. But, if you’ve never been in a property manager’s shoes, it’s hard to understand the reality of the job and the pain points. You can talk to property managers about what they need, but to provide an effective product, you have to understand where they are and where they want to go. Propertyware has a competitive advantage in bringing on a property management operator at this level to help bridge the service gap with industry knowledge and unique systems. Property Management Growth: How to Help Growing a property management business is done in one of three ways. You can add units, produce more revenue per door, or cut your expenses through customization and automation. Propertyware doesn’t see itself as a marketing company, but they want to help businesses grow by adding doors. So, they’ve decided to partner with companies that are great at marketing (like Fourandhalf), thus giving them a product that will help property management companies grow. It bridges a gap. This is how an operator thinks. First, partner with a company that helps clients get more doors. Then, the business owner can provide more value and more money per door. Then, the business owner can reduce business expenses with automation. While a technologist can build a tremendous platform, it will come with a lot of tools and widgets that an owner/operator doesn’t necessarily need. And, those tools and widgets are expensive, so the costs go up for everyone. An operator can look at building a system that focuses on what’s really necessary. Providing Value: The Listing Widget Inaas provided an example on how to offer additional value. Propertyware has a fantastic listing widget. Property managers can take all their vacant property listings and plug them into one place, then they’re syndicated to 256 different rental sites. No one has to re-enter any of that information, so the experience is standardized. This solves the problem of finding tenants for your vacant properties. Why not try to bring in more owners this way, too? The added value was for Inaas is this: On the last two lines of the listing, describe your property management services and include a link to your website or a landing page that allows people to learn more about you and maybe leave you their contact information. Think about the listings on Zillow and other sites. Tenants are going there to find a home, but owners are going there, too. Landlords and asset managers are going on those sites to look for price comps. If they see your description of management services, they might click on that and then get to know you

Scott Fritz believes that if you are a property management business owner and you stay in that business, your company will be worth less than it would be if you train your company to work without you. He joins Alex on The Property Management Show this week to discuss the different between an entrepreneur and a business owner, and what you can do to work less but produce more. Scott Fritz: Angel Investor | CEO | Business Coach Scott has been an active angel investor since 2001, and before that he founded Human Capital, a PEO company that handled outsourcing for all human resources work like insurance, legal, and payroll. Once that company grew to a revenue of $170 million, he sold it. Then, he wrote a book called The 40 Hour Work Year. He’s also the founder of GrowthConnect.com. So, there are plenty of ways to reach Scott. At PM Grow, he’s teaching a workshop and delivering a keynote. We wanted to know what he means by his belief that “if the owner stays in the business, the company is actually worth less.” The Ownership Paradox The dangers of working in the business instead of working on the business are well known, especially if you’ve read Michael Gerber’s e-Myth. The danger for owners is that when you are ready to sell your company, you’ll get an offer. If you’re working in the business, all of the compensation you’ve been taking to run the business will not be added back into the bottom line with the sale. Someone will have to replace you and the work you do. That’s going to be a cost for your buyer, so you’ll lose money. Even with property management acquisitions done on the topline, there’s still a line item for owner’s wages. If you own a property management company, you may have the mindset that you’re selling a book of clients. That’s a mindset you need to change. A property management company has more than a book of clients or a collection of doors. It also has intellectual property, brand value, etc. If you’re just selling book of clients, you’re getting a low multiple. If a buyer wants to acquire your company, but they know that you as the owner have to stay in place to run it, you’re going to get an offer that’s lower than the offer you would get if the company was running itself. In his book Simple Numbers, Straight Talk, Big Profits, Greg Crabtree says that you have to eliminate gamesmanship. True up your salary based on what you do in the business. He says not to pay yourself $30,000 and then take $200,000 in distributions. The IRS will notice. And, don’t pay yourself $200,000 if your job is only worth $100,000. Pay yourself whatever it would cost you to hire someone else to do what you do. Don’t chase pennies instead of dollars. Human Capital: When Outsourcing Makes Sense Managing human resources gets expensive and complicated for growing businesses really quickly. Scott’s clients were diverse in size and scope when he ran Human Capital, and he says that there isn’t a magic revenue number at which a company should consider outsourcing HR functions. It’s more about headcount and complexity of the business. Scott had clients with only one employee and they outsourced HR for insurance reasons. Other clients had more than 500 employees before they began to outsource. It’s not necessarily where you are that drives your need for this resource; it’s where you want to be. If you have 10 employees doing work in-house, but you want to expand into four other states, you’ll need a PEO. Maybe your headquarters are in Michigan but you have offices elsewhere. Every state is different, so outsourcing this function can make a big difference and protect you from liability and lawsuits. One of Scott’s Human Capital clients had come to his company because he was sued for providing financial advice at a Christmas party. Consider shopping for a PEO when you’re ready to outsource your HR functions. It’s a good investment, and this advice comes from a guest who no longer has a stake in it and a host who is grateful to be using a PEO at his own company. The 40-Hour Work Year: Growth, Structure, Sales Scott’s book is about growing a business, structuring that growth, and moving the owner into a passive role so that the business can be profitably sold. There’s a lot to gain from the book even if you’re not ready to exit your company. It’s about setting up your business so you can exit at any time with the maximum multiple you want to receive. Here’s an analogy. When you want to sell a house, you don’t wait until it’s run down and the weeds have grown high enough to cover the windows to sell. You fix it up first and then you sell. We want you to fix up your business – not necessarily to sell it right now, but to be ready to sell. What if you’re an entrepreneur who enjoys running the company? If you’re doing what you love and creating a legacy business, don’t feel bad about staying there. Create the business you want and create the life you want. You don’t want to own a job – you want to own a business. Make sure

Futurescaping and tracking where the property management industry is going has been interesting over the last few years. A lot of things are coming to a head, and on The Property Management Show podcast, we think it’s important to invite guests who are running big businesses. When our small business partners engage with our big business partners, we can all learn a lot and figure out where our industry is going. It helps us to plan strategically for the future. Today’s guest is one of those big business guys. He’s Chris Lister, who is currently the CEO of Buildium, and previously worked with Constant Contact. That company recently sold for a mere billion dollars. Chris knows how to grow a company, and he’s joining us to talk about the future of the property management industry, and how personal relationships and technology are learning to play nice with one another. What We Know About Chris Lister For 10 years, Chris helped grow Constant Contact from $25 million in revenue to about $450 million in revenue as the Chief Revenue Officer. After those 10 years, he took some time off to be with his family, and then joined Buildium as their Chief Customer Officer. In case you don’t know, Buildium is a property management platform for small businesses who are managing between 10 and 5,000 units. The platform helps with property management accounting and provides other tools to help with leases, tenants, and units. The company has 16,000 customers and they’ve been around for 14 years. After managing the sales, marketing, and customer success departments, Chris transitioned into the CEO role about six months ago. To successfully run a big business, it’s critical to understand your market. At Buildium, Chris and his team know they have a market to reach, and they know they have a product that’s moving from good to great. They’re helping their customers get closer to their goals. Self-Management and Industry Disruptions Why are more than half of the landlords and property owners still self-managing? Chris believes it’s because property management is often something that happens to people accidentally. They might inherit a property or move out of the home they’ve lived in for years. Or, perhaps they’re in the military and always moving. Whatever the reason, they’re called accidental landlords. That constituency is a third of the market. They fell into the management of a rental property, and they’re still trying to understand what’s happening. Sometimes, these accidental landlords will realize that they like the rental income that’s coming in, and they’ll start investing in additional properties. Usually, though, they’re not thinking of professional management as a necessity until they get to 10 or 20 properties. That’s when they need to think about efficiencies and systems. Lately, a lot of property management companies have been arriving in competitive markets with a lot of venture capital and private equity money. These are shops financed by tier-one Silicon Valley venture capitalists. There are probably more than a dozen of these companies around the country, and more are coming. Property technology is hot right now. According to Chris, this should not surprise anyone. More money is coming into this space because it’s an industry that has not been quick to adopt technology. So, they see an opportunity. What has not been established is whether they can create a repeatable model that brings value to the customers. If they understand the face that relationships are essential in this business space, they might have a shot at succeeding. The companies who win, however, aren’t necessarily the ones with all the money behind them. The companies that win understand that the property management business is relationship-driven. It requires empathy and customer engagement. If you have a fat check but you aren’t genuine in how you’re delivering services, you’re not going to do well. Relationships can be the way you differentiate yourself from other companies. If you’re looking for a competitive advantage, it’s not going to be that you do all the things that other property managers do. But, it could be that you treat your customers brilliantly and you know how to effectively manage relationships with your clients. Customer Service: More than a Department The customer experience is critical to successful growth in property management. Customer support, customer service, and customer success needs to be the responsibility of every single team member. That’s the theory at Buildium, and you can adopt the same commitment to customer experience at your management company. You need to meet the expectations your customers have. Customers can walk at any minute. Each day, it’s important to renew your commitment to them. Make sure every single one of your customers understand how they can be successful by working with you. Customer service isn’t simply a department, and it’s not corporate-speak. It needs to be part of your culture. One rec

How can you grow your property management business by opening new locations? A lot of listeners have called and written with this question, wanting to know how to be successful in a new market without having to acquire another property management company. Jason Rose was highly recommended when I asked for help with this topic. He’s from Brisbane, Australia, and he’s joining us today to talk about what your company needs in order to succeed and grow in a new location. Jason Rose and How to Grow Jason has been in the property management industry for 32 years. His career began as an auctioneer, and as he became more experienced with real estate auctions, he learned a lot about the industry. Eventually, he left the auction house and joined a real estate company. He did traditional real estate sales for more than 12 years, and then became a property manager. One investor wanted the company to manage an investment property, and that part of the business grew. In 2004, they began using business development managers (BDMs) to grow, and in 2006, the sales part of the business was sold. Rental Express was born, and property management was the company’s focus. Rental Express began with 350 doors in 2004, and Jason exited the business in 2015 with 5,102 doors. During his last year, the company brought on 945 new doors thanks to the work of six BDMs. When Jason and his partners were ready to exit, they were able to get a premium price for the company. Why? The business had been expertly developed. It was a lot more than a rent roll transition. Why You Should Expand Into a New Location – and Why You Shouldn’t Sometimes, business owners are driven by ego. That’s not a good reason to expand your business into a new location. The bragging rights that come with having multiple sites and locations may be attractive, but it’s not enough to sustain you and help you succeed. Think instead about the why – the real why. Do you want to earn high six figures? That’s a why. Do you want to start saying yes to clients who ask you to manage properties that are 100 miles away? That’s another why. Before you look at multiple locations, ask yourself these difficult questions: Are you a good business leader? Is your team prepared? Can you hand off some of your management duties? When you have multiple locations, you need high quality people running the business. So, if you’re struggling to share management and leadership with other people in your company, don’t think about a new location just yet. Your success depends on the quality of the people around you. There are only so many hours in a day, and you wear a lot of hats in your growth phase, but you cannot run all your company’s locations by yourself. You have to lead. Hand the management responsibilities off to other people so you have the capacity to go and look for other locations. And, don’t open up in a new market unless it fits into where you want to go. After people, you need systems. Good systems drive good people. Before your conversation about opening a new location even starts, make sure you have those two things in place. If your business is somewhat profitable but you’re still figuring things out systems-wise, opening a new location isn’t going to bring you the discipline you need. It’s going to bring disaster. Get your own house right first. Make sure your processes are scalable and reproducible. There’s nothing wrong with focusing on just one location. If you have market capacity and there’s still more growth to be found in the market where you currently are, stick to that one location and make it profitable. Financial Investments Required for a New Location Jason suggests having $200,000 to put aside for the opening of a new location. Look at your fixed costs, your budget, your cash flow, and your forecasting. Think about how you’ll survive if you open up a new shop and don’t bring in any new doors for six months. You need cash in the bank or access to capital. Gather the extra resources you’ll need to start again in a new place. Think about this benchmark. You cannot buy a profitable property management company for $200,000. You could buy an agent’s portfolio, maybe. But, this investment in a new market can help you grow your company for a lot less money than it would cost to acquire a new company and give yourself a presence. Here are some additional metrics Jason suggested: In year one, you’ll want to pick up at least 150 doors. By the end of year two, you’ll want to be at around 370 doors. In year three, get yourself to 500 units. This is what the successful opening of a second location looks like. Two Reasons a New Location Might Fail Mistakes will be made, but what are the two major reasons that you could run into trouble? First, not doing enough market research. You need to know the capacity of a new location. If it’s an area where most of the properties are owner-occupied, how will you find new business? Make sure the market is open to landlords and investors. Jus

Over the last eight years, we’ve helped more than 500 property management companies grow their business by helping them develop a sound and effective marketing strategy. We’ve also been busy growing Fourandhalf. Once we hit around $2 million in revenue, the systems we had in place ceased to meet the demands of our clients and our business. Our initial instinct was to throw people at problems. Things began to spiral, and we realized we needed to do something that would protect what we had worked so hard to grow and to help us scale for the future. We got lucky and found EOS, which stands for Entrepreneurial Operating System. This was popularized by a book written by Gino Wickman called Traction. After implementing EOS, we have a quality control and a scalability we only dreamt of a year ago. Today’s guest on The Property Management Show podcast is an EOS implementer. He’s also a successful property manager and is the CEO of Gulf Coast Property Management. Andy Moore is here to help us define EOS and talk about what it solves. Hitting the Ceiling – Solving Growing Pains with EOS Growing companies will eventually hit a wall (or a ceiling, as EOS calls it). The systems you create in the beginning don’t necessary translate as your business scales. When you hit a wall, you tend to do what Fourandhalf did. You throw people or you throw money at the problem, and you expect immediate solutions. That’s easy for companies to do. The EOS system can provide clarity and a roadmap for implementation. Instead of looking for a quick fix, you get an idea of where you are and where you’re going. And, your entire team is on the same page. Whether you hire an implementer like Andy or you decide to self-implement, the EOS can help you organize and systemize your company for the future. Andy works with companies to deploy this system and provide support as changes are made. He wants the companies he works with to become self-sufficient as soon as possible. It’s not meant to be a lifetime commitment. Some companies self-implement if they have the right structure and the ideal personalities in place. Others have a lot of help. It can work either way, and if you want to fulfill the vision of your company with the help of EOS, have someone take a look at your organization and help you establish whether you’re capable of taking this on. This is a necessity for property management companies in particular. Why? Because not all property management businesses realize that they’re a business. This is a huge mind shift for a lot of property management company owners. Work Chart Definitions: Visionaries and Integrators Andy and Alex are both filling the visionary role in their respective organizations. That’s not as lofty as it sounds, according to Andy, It’s more an admission that he doesn’t follow through with everything. He likes ideas. He likes coming up with new ideas, but then he gets bored with the implementation process, and he starts looking for newer ideas. Does that sound like you? Companies need a ying and a yang. They need one strong leader to bring the ideas, and they need one strong leader to be a perfect integrator of those ideas. Your integrator is process-driven and thinks in black and white terms. If you are the person bringing in new ideas, you also need someone who can take those ideas and put them into place while keeping all the other trains running. That’s the main difference between a visionary and an integrator. Identifying the integrator should be easy. In Andy’s case, he began working with Jodi about 10 years ago and because they were a small business, she got to sit in a lot of seats. She understands the business from the ground up, and she has an attention to detail that would drive a visionary like Andy insane. She loves data and she loves processes. A person who values the workflow and the detail of every system would make a perfect integrator. Building and Managing for Visionaries and Integrators Your property management business has two distinct cycles. There’s building and managing. Building looks like market research, idea validation, team building, beta sales, developing a sales process, and launching some marketing. Managing looks like operations. There’s the optimization of product delivery, HR strategy, finance, and a lot of product management. Visionaries may not embrace systems the way integrators do, but they are responsible for the direction of the organization. Decide which one you are and which one your property management company needs. The visionary has big ideas and wants to drive the culture and direction of the company. Visionaries are typically the owners. Your integrator helps you support that culture and direction. Consider reading Rocket Fuel because it’s part of this process. The story is a fable about an integrator and a visionary. There, you can see the dynamic between the two. You can see the distinct differences. Think about your leadership meetings. Are they on track or can they im

Scott Brady, owner of Progressive Property Management, had 52 doors in 2013. Now, his company manages about 1,052 doors, and he plans to grow to 3,100 units by 2020. We think he’ll do it. Today, he’s joining us on The Property Management Show podcast to talk about executing the kind of growth that most property management companies only dream about. Growing with Good Systems Scott says that while some companies choose to grow, he has to grow. His business model has evolved to the point that he has 20 branch managers who are counting on him to deliver doors for management. That’s forced him outside of his comfort zone a little bit, but he’s committed to those branch managers, so innovating his marketing and distribution channels has become critical. Good systems, he’s discovered, are essential. You cannot manage 200 doors without good systems. You cannot manage 400 doors with systems that are designed for 40 doors. And, the bigger you get, the bigger of a target you become for the Real Estate Board and competitors. A dedicated staff is needed to help you make sure every process is documented. Many successful property management companies have a target market. For Scott and his company, the target is self-managing owners. That’s the biggest market available in southern California. We know that 70 percent of rental properties are self-managed. In Los Angeles, that translates to over a million self-managing property owners. By focusing on the emotional and financial pain points of that segment, Scott was able to come up with some compelling products. His question, while building his company, was pretty simple: Why aren’t these owners hiring property management companies? Reaching the 70 Percent: Providing Better Service The entire property management industry has tried to tackle the astounding 70 percent statistic. A shift has begun, but that large percentage of the market still does not trust a professional property manager. Several things feed that distrust. The reputation persists that property managers: Are untrustworthy Are overpriced Provide terrible customer service Nickel and dime owners at every turn It takes more than one person to correct that reputation. But, property managers can turn things around individually and collectively. The keys to changing the current reputation are: Transparency Value propositions Customer service Pricing is pricing, but if you can offset an owner’s pain point around pricing by demonstrating your amazing value, it’s easier to make some progress. This takes the owner from fear of being screwed to trust. Trust is earned, and it resonates with owners. Slowly bring people to your website and use your programs and your value propositions to earn their trust. Transparency: Websites and Pricing Transparency is the first filter for many property owners. If they don’t feel like you’re being transparent, they aren’t going to be interested in hiring you. So, why are companies afraid of putting their pricing on their websites? It could be that they feel as though they’re at a competitive disadvantage. They worry that owners will seek out their lower-priced competitors. It’s a better to put your price up there, and also to put up your value around that price. If property managers position themselves as people who collect rent, owners will likely look at price first. But, if you do more for your owners, price becomes less important and your value propositions take center stage. With more and more companies being transparent with their pricing, you’re going to look more suspicious every day that you don’t put your prices out there. Controlling the Whole Customer Experience To position your company for growth, you need to target multiple segments of the market, and you need multiple marketing channels, and you have to create multiple revenue streams. This will insulate you against what may or may not happen in your market and the industry. Scott has found himself wanting to control the whole customer experience. He doesn’t want his owners going to another real estate company when they want to buy or sell. He doesn’t want them going to another plumbing company or home warranty company when they have repairs. Scott would rather keep the owners inside a world that he can control. When he has more products and services to offer, he controls the customer experience and earns multiple revenue streams. By controlling the whole customer experience, Scott can provide better service and create raving fans. He can be the one-stop shop for all the owners he works with and their friends. They don’t need to call other companies when they want to sell a property or make an upgrade. You can protect the relationship you have with your owners, and not let anyone else get into that relationship. Take his lesson. Continue to innovate if you want to grow. The pocket listing is a good example of holding onto and expanding the relationship you have with your current clients. For Scott in southern California,

On our first episode of the year, The Property Management Show wants to start by identifying what’s happening in the property management industry. This industry has accelerated at an extreme rate. We’ve talked about it multiple times, and new things continue to happen. For example, not only are private equity backers getting into the property management business, we’re also seeing Tier One Venture Capitalists in Silicon Valley putting money into property management. That has never happened before, and we’re expecting this trend to open some floodgates. If you’re a property manager or you own a management company, you’re in the right spot at the right time. This means that investing in and operationalizing your sales and marketing procedures is no longer a privilege. It’s a requirement. You have to do it to survive, grow, and thrive. We’re all about innovation on The Property Management Show, and our guest today is in charge of the largest single-family focused property management company in the U.S. He’s Kevin Ortner, the CEO of Renters Warehouse, and we want to know how he handles his tremendous responsibilities and what he’s planning for 2019. You Have to Love the Grind Don’t forget the basics. That’s Kevin’s approach to running a large company that just keeps getting bigger. Take great care of clients and employees. That sounds cliché and you always hear about it, but it’s true. You cannot just be about the next client, the next acquisition, the next deal. What are you doing to fundamentally shore up your foundation? That’s what Renters Warehouse wants to focus on – being the best they can be for their clients and employees. This takes time and resources as you’re growing. But, good leaders will execute a great strategy and try to stay in front of that growth. You need to make sure you are performing those basic things well, and then you also need a great vision of where you’re going and how you’ll stay in the lead. That’s what it’s about. Looking down the road, forming the right strategy, and executing the pieces of the puzzle. You have to love the grind. If you’re running a property management company, you’re part of changing an industry. You’re helping to make it more sophisticated and you’re delivering great value to your customers. You should be excited about that. Renters Warehouse Acquires Own America Renters Warehouse recently acquired Own America. This is a major shift in the industry and a vision move. It’s something you need to pay attention to. Own America allows owners of single-family rental properties to sell those properties with tenants in place through an online marketplace to new investors. This reduces a lot of friction and costs for both buyers and sellers, and the tenants are not disrupted. When you sell your investment property with a traditional real estate agent who has no experience with rental properties, that agent usually wants you to move the tenants out of the home before it’s listed. They’re thinking of owner-occupant buyers, not investors. Own America changed that – and allows buyers to buy with tenants in place. Kevin acquired the company because it fits well with what they do, and they have set up the Renters Warehouse Investors Marketplace. Clients can buy and sell single-family homes online with tenants in place. The tenants don’t move out, and both buyers and sellers are paying less commissions than with a traditional broker. And, Renters Warehouse continues to manage those homes. The benefits to this acquisition are numerous. Buyers can shop in markets they are not currently in. Buyers can use the online search function to explore properties in any market, whether it’s Alabama or Texas or a city on one of the coasts. Buyers get to acquire an investment with cash flow already in place. Search functions include photos, tenant history, maintenance history, and other analytics. Sellers have access to an engaged market of interested buyers. Tenants stay in place, and you don’t have to disrupt a family of good tenants who are paying rent and taking care of the property. Renters Warehouse doesn’t lose business when a property they manage is sold. Renters Warehouse is the largest single-family property management company, and now they can facilitate these sales. It’s a new way to service current and future investors. Build It or Buy It: How to Gather the Right Tools Here’s an interesting statistic from the National Association of Realtors. There are over 1 million single family homes sold every year as investment properties. That’s 20 percent of all single family homes bought and sold. So, investors are buying a lot of properties. There’s a market for you if you want to focus on those transactions. You can take a piece of that market, and you don’t necessarily have to do it at the scale that Kevin is currently operating. Maybe you want to build your own business without buying a company like Own America. Do you have the tools you need to pick up maybe 10 to 15 listings per

We’ve made it to the end of 2018, and on this year’s final episode of The Property Management Show, we’re setting you up to take full advantage of the opportunities available in 2019. Think about the journey we’ve traveled over the last few years. In 2017, we focused property managers on the idea of sales and marketing and how it can impact and grow a property management business. In 2018, we told you it’s time to think bigger. We started talking about revenue per customer and profitability. What’s next for 2019? You’re about to find out. Today, we are joined by Jordan Muela, who is going to help Alex interview our guest, Joey Coleman. Joey holds the title of Chief Experience Composer. He’s also written an incredible book called Never Lose a Customer Again. Introducing Joey Coleman Joey has an eclectic background. He’s a recovering criminal defense lawyer, he’s worked in the intelligence community with the Secret Service, the CIA and the White House. He ran an ad agency for 15 years and he taught at a post-graduate level. The single thing that connects all these pursuits is that he’s a student of the human condition. He has sought to understand why humans do the things that they do, and he’s uncovered how we can persuade them to do the things we want them to do. Currently, he’s helping companies keep their customers. He works as a consultant, workshop leader, and a keynote speaker. He encourages business owners to talk about what happens after the sale. A lot of companies focus on marketing and sales. They fill that funnel and they work hard to get owners and keep tenants, but they don’t spend a lot of time thinking about what happens after the sale. How can you create an experience that keeps your customer coming back year after year? That thinking process led to Joey’s First 100 Days methodology. You should also know that Joey will deliver the keynote at the 2019 PM Grow Summit in April. The Importance of Self-Assessment One of the things that you’ll notice about Joey’s book is that at the end of every chapter, there’s a period to assess. You may breeze through the reading and quickly absorb the content, but you’ll need to stop and focus on some thought-provoking questions at the end of each chapter. Here’s a self-assessment question that’s particularly appealing: Do prospects receive a detailed and accurate preview of what the experience will be like after becoming a customer? Stop and think about that. This book of Joey’s is not short, and it’s meant to give you a unique perspective for approaching your customer experience. The questions allow you to process the chapter. Those speed bumps will intentionally slow you down and get you to think about how you’re applying what’s discussed to your own business. The book shouldn’t only be something you read; it should be something you use. Customer Retention and the First 100 Days Why do 20–70 percent of most customers stop doing business with a company within 100 days? Retention is an issue for every business. Mentally, your customer will make the decision to check in or out of your relationship in those first 100 days. That’s the most important part of lifecycle. If you want someone to stay with you, how they feel on day 101 is more important than any other day in the process. The customer journey includes eight phases. First, there’s the assessment phase. Your prospect is considering whether or not to do business with you. This is the marketing and sales part of the journey. It’s where you should be able to give your customers-to-be a preview of what it will be like to work with you. What will it feel like? Do you keep your word? Are you timely and organized? The Emotional State of Your Prospect As property managers, we tend to be tactical instead of emotional. So, you may not be paying attention to tracking, identifying and working with the emotional state of your prospect. Step into the shoes of the property owner you’re trying to reach. That owner spent a lot of money on this property. You’re suggesting that they give up some of the income they could earn by hiring you to perform services they believe they can perform themselves. They probably don’t think you could ever care for that property as well as they can. Are you considering that emotional state when you deliver a sales pitch? Or, are you focused on the minutia of convincing them they’ll never have to answer a maintenance call or chase down late rent? Shift your approach and start thinking emotionally. The owner is probably a little uncertain. They’re worried they’ll make the wrong choice. They’re anxious that you’ll put the wrong tenant into the property, and they dread the headaches and the expense of bouncing back from your bad decisions. They fear disaster. How can you reach them on an emotional rather than a tactical level? You can invite them to a property you already manage. Show the results of working with your company. Assure them that you want to visit their property and understand its

Here at Fourandhalf, we love our sixth-floor office that looks out over Silicon Valley, and we find it helpful to have everyone in the same place. But, we often wonder whether it would be possible to build a property management business that is completely virtual. The Property Management Show received an email from a listener named Nicholas who wanted to know if it would be possible to start and run a property management company without a physical office. Can it be done virtually? We reached out to a company that’s doing it, and our guests today are Noel Pulanco and Mike Sargent from HomeQwik. They also run yesVIRTUAL, a business providing highly trained virtual assistants to property management companies. The Thought Process Behind Going Virtual Leasing agents and property managers spend a lot of time in the field already. There are so many tasks that don’t even require a desk: following up on leads, taking marketing photos of properties, posting signs, leaving keys in lockboxes, and meeting with renters. All of these things happen outside of the office. Inside the office is where most of the customer service happens. If you’re transitioning those customer service tasks to virtual assistants already, as HomeQwik had begun doing, there are very few reasons to keep a physical office. Renting office space costs a lot of money, so moving all of your current office-based staff can save money and provide flexibility to your employees. As long as you have good software, good systems, and processes that work, you can keep your company virtual and mobile. Pre-sale Considerations When Running a Virtual Property Management Business Having a physical office does not provide any advantages when it comes to signing new owners. There might be a tendency for people to hire you based on where your office is. You might attract owners who are within five miles of your office just because they know you are there. But, those are easy clients. And, it really doesn’t matter how close you are to the properties you manage when you’re not the one fixing the garbage disposal or locking the tenants out. It’s probably rare that you meet with owners at your office. Most property owners want to meet at the property. You’ll want to see the home, walk through the property, and talk about the necessary repairs and the most advantageous marketing strategies. You don’t have to bring potential owners into an office in order to manage their homes. You can take them out for coffee or to lunch. Usually, you’re going to meet at their property. However, your website will need a physical address. Without a physical tie-in, it’s hard to rank a website. So, you’ll want to use your home office. Tie yourself to a physical address so you don’t have problems ranking your website and getting leads and traction. Anchor your office somewhere, even if it’s not a physical office where your entire staff goes. Post-sale Considerations When Running a Virtual Property Management Business After you’ve landed new business, you can implement systems to manage properties and tenants. There doesn’t need to be paperwork, for example. DocuSign allows you to get documents back and forth through email. That doesn’t require a physical office. All of the tenant application and screening processes can also be done online. There’s no need for a tenant to walk into your office to talk about a property or an application. You can collect virtual copies of identification and have conversations over the phone. You don’t have to drive them around to see properties. If you’re not showing properties in-person already, there’s no need to feel like the process cannot happen without a physical office. Instead of having tenants come into the office to review and sign the lease, HomeQwik will send them a video that talks about all the important points in the lease. The keys will be delivered to the lockbox, and even though they’ll talk to the tenants multiple times before they move in, the team at HomeQwik won’t have to see their tenants. Showing a property can be done virtually with lockbox technology. This automates the process and keeps you from having to show every house. You can use virtual assistants to handle direct contact or to answer questions. You don’t need a licensed broker to answer questions about pets or move-in dates. With the amount of help you’re getting from virtual assistants, you want to make sure they’re trained in certain processes. Work with VAs who understand the leasing process and how to submit an invoice and start a work order. A company like yesVIRTUAL trains them in these processes before sending them out to property management companies. These virtual assistants know how to enter leases and manage data. They understand the property management software and the processes involved in this work. The technology stack that’s needed to virtually manage the move-in process is probably something similar to what most property managers have in place already: Have a so

On The Property Management Show, we love helping people in the industry learn from the successes and failures of property management business owners. The feedback we’ve received on our How I Did It series has been phenomenal, so we’re bringing you another episode today. Our guests are Kristin and Shawn Johnson, and they run a successful property management business out of Farmington, New Mexico, called Independence Capital Property Management. We’re talking to this husband and wife team specifically about what may help and hurt you while you’re building your property business from 100 doors upwards. Introducing Independence Capital – Where They Are Today Currently, Independence Capital manages about 500 rental properties, down from their high of 615 doors. Most of that portfolio is made up of single-family homes as well as some four-unit and six-unit buildings. They have been in business for six years. As a husband and wife team, they have learned the importance of respecting each person’s role and talents. Their business starts with a solid relationship and a good marriage. While their skill sets are similar, their passions are a lot different. Kristin has a marketing background but prefers the sales and accounting side of things. Shawn is a helicopter pilot and needs to be constantly engaged, so does a lot of marketing and creative work. Shawn sees the growth, and Kristin operates against it. The system works, and it works well. The Big Lesson Learned: Being Quick to Buy Kristin and Shawn said their biggest failure was twofold. They bought a portfolio of 295 doors, and missed a bit of due diligence. Several of the properties within that portfolio turned out not to be legitimate contracts, and they faced about $70,000 in lost value. The properties in the portfolio were legitimate at some point, but while the portfolio was being sold, those properties were listed for sale, and the clients terminated after Kristin and Shawn took over. They had a clawback clause* specific to a client with a large percentage of the portfolio, but it didn’t extend to all the properties. There are many things they would do differently today. *(A clawback clause allows you to regain revenue for lost accounts that may leave within 12 months of acquiring a portfolio.) The second error was to push changes too quickly. Independence Capital enjoyed a high level of client satisfaction among their existing clients. There was a lot of trust. While bringing new clients on board, Kristin and Shawn expected those new clients would be just as happy. So, they immediately introduced their own fee structure, and that didn’t go so well. They upset a lot of clients, and they had to back off and take a deep breath. This caused a 17 percent loss, which was higher than expected. Here’s the important takeaway: Even with all the losses and the stress and the mistakes, Kristin and Shawn said they would still do it all over again. That’s how property management companies grow. They experiment. Focus on Integration: How to Make it Work The previous management company had neglected a lot of maintenance and even charged owners for repairs that weren’t completed. Once they took over the portfolio, Shawn and Kristin had a line out their door and had to field about 450 phone calls a day. They had hired extra staff, but this was hard to predict. There are a few things to remember when you’re integrating a new portfolio to grow your business: New clients deserve a personal phone call. This goes a long way, especially if they’re caught off guard by the purchase and they don’t realize they have a clause in their contract that says their account is assignable to someone else. Don’t change management agreements for at least 12 months. Keep the terms the owners know, but provide your own higher level of customer service. Don’t touch the tenants’ leases until renewal time. Kristin and Shawn had a zero-day grace period policy in place, and the company they bought allowed five days for rent to be paid. You want to keep your tenants happy and in place. The Independence Capital Founding Story Not everyone chooses property management as a career, but Kristin and Shawn did. Kristen worked in real estate as a paralegal for a large investment company. Shawn was offered his dream job of flying helicopters in his hometown of Farmington, New Mexico. There was a huge need for good property management in that market, so they moved back and started their company. Their goal was to get to 150 properties. This goal was achieved in the first two years of business, thanks in part to membership in National Association of Residential Property Managers (NARPM). Then, they doubled in size the next year. Independence Capital just opened their second office in Flagstaff, Arizona. Why Flagstaff? Kristin has a sister living in Flagstaff who was having a terrible time as a tenant. None of the property management companies would call her back when she wanted to see a home. From a tenant’s persp

The Property Management Show is based in Silicon Valley, and the beauty of our location is that we get to meet entrepreneurs driving property management innovation. Today, our guest is Daniel Shaked, the founder of Home365. This is a company that sells maintenance end-to-end through technology, specifically using artificial intelligence (A.I.) and their own network of service providers for one flat fee. Home365 and Property Maintenance Traditional industries can be more efficient by leveraging cutting-edge technology, and that’s where Home365 comes in. They want to connect homeowners and property managers with service professionals, and they want to do it in a way that’s more reliable and more cost-effective. There can be pain and friction between homeowners and maintenance service providers. There’s a low level of trust, and Home365 believes they can remove that pain and provide a better experience when you need maintenance on your property. They believe maintenance is one of the biggest components of property management, and it should be handled by professionals in a predictable and transparent way. There’s a shortage of qualified contractors, vendors, and tradespeople all over the world. It’s a global pain. But, the question you may be asking is – how does Home365 help property managers? It may sound like the business platform actually competes with them. After all, property managers are in business to solve maintenance issues for homeowners. The way Daniel sees it, a property management company’s main job should be to manage more doors and to do less manual work. Instead of focusing on logistics, a growing property management company needs to focus on winning more business. Remember, only 35 percent of rental properties in the U.S. are professionally managed. There’s a lot more business to go after. Do you want to spend your time going after that business or chasing down maintenance service professionals? Daniel believes Home365 offers a real value proposition for property managers. Leveraging Data and Evaluating Quality in Maintenance Professionals Daniel says that Home365 can predict what will be spent on each property by leveraging the data they collect. Using A.I. and looking at a house and its address, the company can predict what the home will need in maintenance over the next five years. That allows them to build an insurance product where property owners pay a monthly premium, and then after that – they have no expenses when repairs are needed. It creates freedom and removes obstacles. There’s also an element of service assessment. Home365 also uses data to assess the quality of the work and the customer service that’s provided by vendors and contractors. The good companies are rewarded with additional work. It’s tech-based and works like a credit score. You don’t necessarily do anything to impact your credit score – you pay your bills and you create a financial footprint. This technology does the same thing. Service providers do their work, answer their calls, and make their repairs. Home365 aggregates how those tradespeople are dealing with incidents. They track how they communicate and what tenants think about the work. It allows them to quickly figure out who the best vendors are. For example, a person who is always late for meetings will never finish the tenant’s turnover on time. A person with a habit of rescheduling when he gets a better job somewhere else will not always be reliable. If technology can be used to sort out the reliable vendors, the fair prices, and the good workmanship, property managers can win, and so can their owners and tenants. Algorithms are used to match the service workers to the problem. The right people are going to the right projects and there’s more time and cost efficiency. The Home365 platform can find people who did similar jobs at similar properties for similar tenants. Tenants and homeowners are guided in the description of the maintenance that’s needed. They get something that’s like a teleprompter on top of their screen, and they can explain the problem, record video, and share pictures. This structures the best solution. The full project description is sent to the vendor who seems to be the best match. The vendor gets to see the same description of the problem. Then, all parties get access to a messaging platform. They can video conference or chat, and that often reduces the need to travel and diagnose a problem. This all happens in real-time communication with real-time technology. How Can Property Managers Make this Service a Revenue Center? This can be an interesting way for property managers to offer a new product to their customers. Every property comes with a flat-rate price for maintenance. If your owners pay this flat rate every month instead of paying for maintenance issues as they happen, you no longer have to wait for their approval before fixing something. With a modest markup, this can provide some additional recurring revenue. Instead of m

How I Did It: Lisa Wise Discusses Property Management Growth Today on The Property Management Show, we’re talking to Lisa Wise, who runs a boutique property management company called Nest DC. She spoke at PM Grow Summit in 2017, and she’ll speak again in 2019, so if you’re curious about the conference or you haven’t bought tickets yet, go to pmgrowsummit.com. It’s the perfect event for property management entrepreneurs who are looking to improve business outcomes. In our How I Did It series, we’re talking to successful entrepreneurs about the mistakes they made as they were growing their businesses. Introducing Lisa Wise and Nest DC Nest DC is six months from turning 10 years old. The company has gone from being the new kid on the block with a novel marketing plan and way of doing business to one of the largest management companies in the city of Washington, D.C. for single-family rentals. The company is currently looking at ways to build on their reputation and introduce new income streams while helping the community. That energy keeps the staff engaged and excited, and growth mode requires inspiration and excitement. Nest has developed a sister company called Spruced DC, which handles condo and building management for HOAs and owners. The newest brand coming from Nest is Starling DC, which handles turnover and light construction. So, even though Nest is turning 10, they always feel like they’re in start-up phase. But, they’re not in a start-up phase because they’re earning over $3 million in revenue. Measuring the Property Management Growth Curve Nest DC has been on the Inc. 5000 list, which was a big win. However, Lisa points out that you reach a stage where you can’t have hockey stick growth any longer because the portfolio just gets too big. When a property management company moves from 100 to 200 properties, it’s an inspiring math equation. But, you cannot go from 800 properties to 1,600 properties in a year. It’s simply unsustainable. Leveling out can be good. A business that keeps growing isn’t necessarily thriving. You need healthy growth. Giant profit numbers year after year are hard to come by in a service-based business. And, the core business clients are important and need your attention. Don’t seek growth just for the sake of growing. For Nest DC and Lisa, growth right now means allowing the leadership team to take over more of the day to day business operations so that Lisa can be more visionary. She feels lucky that she’s built a good senior team who is willing to continue taking on new challenges. Growth Can Mean Complementary Business Units (CBUs) To really have a healthy and growing business, you need a profitable company. One way to increase profits and growth is to introduce CBUs. Maybe that’s a maintenance division or a sales division within a property management company. The goal, according to Lisa, is to use those additional businesses not as independent companies that are predatory and focused solely on profit, but to use those business units to improve and develop relationships. While you’re building CBUs, it’s important not to sacrifice what you do best just to do something new. Property management companies often make this mistake. There’s a shiny ribbon of a renovation business or a sales business, but suddenly you cannot get your lease done or your basic customer service needs met. Don’t threaten or risk your core business. You can monetize your current relationships with customers without being predatory. People trust the relationships you have. Here’s an example of how Nest DC made this work with their new company, Starling DC: When a property owner comes back to occupy the home after being away, the Starling DC business can make sure the space is ready when they get back. Nest is losing a door because that property no longer needs to be professionally managed. But, they’ve made a grab for some cash flow on the way out the door. That’s pretty smart. In addition to starting two new brands, Nest also provides some consulting services that build additional income. They do expert witness work in court, and they consult with small condo associations who cannot afford full-time management but need help with some of the shared responsibilities like roofs and taxes. Building long term relationships is the best way to cash flow your company, especially when you’re adding extra services and businesses. There’s a window of opportunity for CBUs, and a growth-minded property management company will identify that window and act. Learning from Mistakes: Liability and Insurance Lisa’s main mistake while growing her business was legal exposure and not being able to identify and address risk before getting into trouble. Like many entrepreneurs, she and her team pieced a lot of those systems-based regulatory risk management activities together without investing in good legal and accounting advice right away. There were several points when Lisa realized she should have had more insurance. There

Mike Catalano and Steve Rozenberg joined Alex on The Property Management Show to talk about growth through acquisitions. Mike Catalano is one of the most experienced property management owners to talk about acquisitions, and Steve Rozenberg runs a tightly systemized company and is thinking about acquisitions as part of his growth strategy. Alex and Mike spent some time talking about acquisitions in 2015. A lot has changed since then, and a lot hasn’t. Why Would Anyone Want to Acquire a Property Management Company? Steve has a successful company and is growing organically. He executes well. So why would he suddenly be interested in acquiring new companies? Many people would see it as an unnecessary headache. But, you don’t have to grow one way or the other. You can use both strategies to grow – organic marketing and new business acquisition. When you’re trying to grow your property management company, you have to look at all the avenues. Adopting a growth through acquisition strategy doesn’t mean you have to stop pursuing your organic growth. If you’re thinking about expanding into a new city, for example, acquisitions can get the momentum moving. It provides instant doors, an immediate presence, and a lot of momentum. You don’t have to build in a new market one property at a time. When you have a strategy of both organic marketing growth to attract new leads, you win on every level. Your organic growth is steady and your growth through acquisition is immediate. When should you not acquire companies? When you don’t have solid systems and procedures in place, and you cannot support the growth internally. As they say in the airline industry, that will get you to the crash site quicker. Acquisitions help you capture a market share, and you have to be procedural. Before you buy: Operations and Sales/Marketing When you’re buying another company, you need to know that the operations are in place. From there, you’ll decide what you’re going to change and what you’re going to keep. Once you know a company is set up operationally, take a look at their sales and marketing. Before you do any new marketing, you’ll want to make sure you have the capacity to support the new business it will bring in. You don’t want to bombard the staff you’ve kept on board. Operationally, you want a company that has a structure allowing them to stand on their own. Structural soundness is essential before you acquire. And, every single company runs differently. Sometimes, you can learn from the companies you acquire. For example, you might buy a company with value-added fees and services that you never heard of before. Then, you can incorporate those into the rest of your business. Evaluating the brand value is a little more complicated than evaluating a company’s operational soundness. You can look at the website, reputation online, and how long they’ve been in business. If a company has been around for 25 years with a percolating website, that’s valuable. But, it’s hard to quantify brand value. The industry is learning metrics. Understanding value per door and the cost and value of the leads that are acquired every month are valuable tools in evaluating a brand. People are tracking more in this industry than they ever have before. So, the day will come when it’s easier to put a value on each brand. Some companies know their numbers and can talk about lifetime customer value and profitability. But, not all companies can currently say what their acquisitions costs are or how much they spend per lead. Until it becomes easier to identify brand value, don’t evaluate for current opportunity. Evaluate for future opportunity. Did you get that? Evaluate for future opportunity, not current opportunity. Remember, that company’s reputation might be strong and you don’t have to change the name or intrude upon their brand. If they have a company name in the area that people recognize and embrace, leave it alone. They’ve been in business for a long time, so changing their name to yours won’t help you. What is a Property Management Company Worth? Property management companies are worth whatever a buyer is willing to pay. Currently, the industry standard is pretty wide, and every acquisition is different. In general terms, your company is worth between 8 and 18 times the monthly gross revenue. When you think about your monthly gross revenue, you’re not just talking about management fees anymore. It includes any consistent income on anything – from management fees to leasing fees to late fees, pet fees, etc. A sample size of two or three years is also required to make these calculations. The amount that company owners are willing to sell for often depends the motivation behind the sale. There’s now a generation of property management company owners getting out of the business. They often have lower valuations because they made their money, they ran a good company for a while, and they’re ready to exit. The newer companies that are operationally strong oft

On this episode of The Property Management Show, we’re talking to a guest about fiscally responsible growth after he emailed Alex a response to the podcast about Mynd.co and Doug Brien, who received a lot of venture-backed funding to grow a property management business. Benton Cotter remarked that it was a great interview, but thought our audience should know that it’s possible to grow a property management company quickly without raising funds. We thought that might interest you, so he’s here with us today, talking about how he went from 450 properties two and a half years ago to 4,000 properties today, in 12 markets. He has no venture capital backing him, and he calls his strategy fiscally responsible growth. What’s more – he wants to get to 10,000 doors in 20 markets by 2020. Benton is the co-founder of RentVest (rentvestpm.com), and he has a lot to teach us. Growth through Acquisitions vs. Organic Growth Initially, a big company fell into Benton’s lap in Phoenix, bringing 850 doors with it. So, the breakdown has been about 60 percent acquisitions to 40 percent organic growth for RentVest. The key to finding people who want to sell is simple: cold calling. Benton and his business partner, Jacob Ash, get lists of property management companies from NARPM and other sources, and they make a phone call and introduce themselves. It doesn’t take long to get an idea of whether there’s a deal to be made. If you want to grow this way, get connected. Talk about what you have to offer, and start building the relationship. It’s a hustle. AdWords and Its Role in Organic Growth Growing by 700 units organically is some pretty incredible growth, and it was done in new markets. Benton admits he doesn’t have great SEO. But, he does have a firm grasp on how AdWords works, and it’s the cornerstone of his digital marketing efforts. AdWords delivers a benefit that others platforms cannot. It captures people who are searching and learning and visiting websites. By the time they pick up the phone to call you about your management services, the lead has really self-nurtured already. They are taking the initiative to call you. That gives you a tremendous advantage when it comes to closing business. The approach to AdWords is strategic and includes: A projected customer acquisition cost for AdWords before opening a business in a new territory. An understanding of the search volume in an area. Researching search terms and average monthly rents and competition. Spending $1,000 or $2,000 just testing a market. This provides a good idea of what can be done and what it will cost to attract customers. When you know your cost per click, you can figure out your cost per lead and your cost per customer. All of this data helps Benton decide where his company has a chance to earn the most ROI. It’s hard to get it wrong when you have this data to work with. With a plan to move into more markets, adopting a system that’s easy to duplicate is critical. Benchmark the data, check the data, and study how it works in each market. There are always going to be variations, but when the system is easy to duplicate, growth is inevitable. Mailers as a Marketing Tool: How to Reach New Audiences Mailers have not worked particularly well for Benton because they results are so different in each market. He prefers the digital marketing strategies, where the leads he receives are prepared and already in the buying funnel. But, if you’re growing your property management company, mailers can work. Five or six touches are usually required. It can be expensive, but not cost-prohibitive. You get a different set of people than you’ll get through an AdWords campaign or other online marketing leads, and you’ll never overlap. Prospects aren’t going to receive your mailer and then also click on your AdWords campaign. It’s a different clientele, and they require a trigger. But, with those five or six touches, you’re able to convert. A Unique Sales Process: Enabling Entrepreneurs It’s no secret that the property management industry has some catching up to do when it comes to operationalizing sales. With Benton’s explosive growth, he must have a pretty outstanding business development manager, right? Wrong. In emerging markets, keeping the overhead low is critical. So instead of hiring BDMs, Benton goes after really qualified employees and agents. And, their success starts with their ability to sell. Finding someone who is strong with sales and marketing and also knows property management can be a challenge. In their emerging markets, Benton uses 1099 employees. Their first month on the job carries one task: to grow a business. Can they sell? Can they be effective property managers? Can they present a message and understand the sales content and read a client? That one unicorn of an employee who can sell, manage maintenance, and be the overall real estate expert who can help landlords buy and sell will do very well opening up an office for Benton and his company. This defin

Are you still passionate about property management? If you’re not, you may be driving away business. Today on The Property Management Show, we talk to Steve Welty, owner of the hugely successful Good Life Property Management. There’s a lot to discuss, from how to become competitive in a new market to the importance of reputation to – barbers. Alex can’t go back to his barber because his barber has lost passion for what he does. The barber is more interested in thinking about other things he’d rather be doing than trimming hair and beards for men. Alex isn’t willing to work with someone who is no longer passionate about the services he’s delivering – and your clients probably feel the same way. Passion and the Three Pillars of Success Passion is required in your business to achieve success. You have heard about the Three Pillars of Success before, and Alex recently did a NARPM webinar about these pillars: Know the purpose of your organization and what you’re driving towards. Know your numbers. Embrace a culture of experimentation and innovation. Passion drives these things. Steve understands passion, and the danger in losing it. He came to a place where he had to decide if he was going to go full steam ahead with his property management business or just find something else to do next. He decided he still had a lot to accomplish with property management, so he set a five-year goal: to get to 3,000 units with a 30 percent profit margin. That goal has given his entire team purpose, and passion is a part of that. Enthusiasm and passion fuel the purpose. Pivot Towards Passion and Decide Where You’re Going Entrepreneurs often take too little time zooming way out to decide what they’re doing and where they’re going. Even the most motivated business owners struggle to focus on their purpose in life and in their company. It’s an easy way to miss your purpose entirely. Don’t get caught up in the weeds of your business. If you do, your life will stand still and your batteries will die. Think about who you surround yourself with. If you’re a micromanager and you don’t understand the basic principles of human psychology and delegation, you’re going to suffer and so is your business. Put together a brilliant executive team and feed them passion and motivation. You can set the long term vision and show up. Your team can do the rest. You have to build your business. You have to know where you’re taking your team. People want to be taken somewhere and if you don’t know where you’re going – fire yourself. Steve recently had his team review him. He did a performance evaluation on himself, and he got a lot of great insights. One of his accountabilities is culture. His team said the culture had been struggling because of their workload and the fact that they hadn’t had a team outing for a while. If Steve had not asked for this review, he wouldn’t have known what he needed to do to re-ignite the passion in his team. Communication is critical. Happiness starts with a competent leadership team you can rely on. Put people in place who are better than you in their specific disciplines. Getting to the Goal: Operationalizing Sales and Marketing to Reach 3,000 Doors The plan for reaching those 3,000 doors is this: SEO Reputation Conversion After studying great companies that have grown, Steve noticed one thing they had in common: killer SEO. Google property management or any related keyword, and those companies pop up every time. So, Steve educated himself on what that meant and how to achieve results. He hired a writer to focus on blogging. The number of website visitors went up and so did their ranking on Google. He worked with Fourandhalf to build a good marketing foundation. With SEO comes conversion. Once you have that visitor to your website, you want to be irresistible to that potential customer. You want to understand your perfect client so you know how to appeal to that client. Great content brings you website traffic, which brings you potential conversions. This is the next phase after SEO mastery, and between the two is reputation. Steve built his company on Yelp. He understands reputation and its importance. Yelp is a missed opportunity for a lot of property managers, and Steve has some good advice about what he’s learned when it comes to gathering reviews: It’s important to have so many positive reviews and be so in the game that a few negative reviews don’t matter. Customer reviews are only going to become more relevant. Set up a culture of asking for reviews. Talk about asking for reviews in every team meeting. Appoint a Yelp Czar on your team. That person is responsible for increasing the number of reviews your company receives. Try to convert the negative reviews. They are usually tenants, and find out what you can do. Maybe it’s someone who didn’t get the apartment they applied for. Refunding their application fee can turn a one-star review into something better. Don’t delegate one-star review responses. The number of

On The Property Management Show, we’re starting a new series called How I Did It, which focuses on property management success stories. The goal is to empower property management business owners with success stories from those who have done it. We all have challenges when it comes to running our businesses, and in this series, my guests will share how they overcame those struggles. We’re going to be honest and open, and we hope it will help you build your property management company. The first guest in this series is Stephanie Gordon. Stephanie is a longtime customer of Fourandhalf, a good friend, and one of the most successful property management entrepreneurs I know. Her company, Gordon Property Management, is the leader in the San Francisco market, and she’s owned her business for 31 years. We asked about the most difficult time she went through and what her biggest challenges were. Managing People Instead of Properties: Becoming an Employer Stephanie is open about the fact that her biggest challenge has revolved around employees and being an employer of people. Like many business owners, she started the company out of her house on her own. She did everything. Then, adding people became necessary. Before too long, you’re no longer managing properties. You’re not managing owners or tenants. You’re managing your employees. That can be a difficult transition. Stephanie believes she stinks at that. It’s not her personality. She wants everyone to get along and do their jobs and be friends. She avoids confrontation. But, that doesn’t work when you’re the boss of people. She has a great team now at Gordon Property Management. But, it wasn’t always so cohesive. The Difficult Maintenance Employee – Let’s Call Him Mark In 2008 or 2009, Stephanie had two maintenance guys working for her. One was great and the other one, we’ll call him Mark, was difficult. They didn’t get along. But, it was more than that; it was making Stephanie unhappy. It was making her so unhappy that she dreaded going into work every day. She considered doing something else with her master’s degree; maybe teaching real estate and property management. She acknowledges now that she waited too long to fire Mark. But, maintenance guys are hard to find in San Francisco, so she was reluctant to let him go because her company had maintenance needs to meet. Mark worked primarily on a large account; an owner who had about 50 units. One day, Stephanie realized she didn’t like Mark. She didn’t like the account he was spending 80 percent of his time on, and something had to change. So, she fired her client. Then, she fired Mark. It was the first time she ever fired a client, but after that account and the maintenance problem were gone, the whole dynamic in the office changed. Mark had been a drag on everyone, and the client had been demanding all kinds of different things that the team was struggling to provide. Firing a client is a measure of success. When you can fire your clients who aren’t a good fit, you know you have done something pivotal for your business. Remember when we talked about Robert Locke on this podcast? How becoming a Big-A Agent means your owners trust you to make all decisions for their properties? This is in contrast to a little-a agent, who is always asking for approvals from their owners. Stephanie was transitioning from small-a to Big-A at this point, and losing that one account meant losing nearly 10 percent of her overall income. But, Stephanie has learned that when she fires a client, her income dip doesn’t last long. New business is quickly brought in. You also have to remember she was so unhappy that she was willing to give up her whole business. Stephanie’s Story: Becoming a Property Management Entrepreneur She started managing properties owned by her family. Her father bought and sold apartment buildings, and she grew up in the industry. She’d paint apartments in the summer and help out in the office before anything was automated. There were no computer systems. Stephanie worked as a sales agent for a while, but she wasn’t great at it and she hated cold calling. As her mother become tired of managing properties, Stephanie’s parents were looking for someone to take over the business. Her brother wasn’t sure, but Stephanie was ready. She started with two buildings, which had 65 and 38 units. When she got started, the property management industry was much different than it is now. It tended to be the poor stepchild of a real estate office. There was no business development. But, she began to gather referrals from the real estate agents she knew. She began adding properties and adding clients. The Next Level: Buying a Management Company In 2003, Stephanie bought a management company from someone she sat next to at a property management lunch in San Francisco. The lesson here is that when you go to industry functions; sit next to someone you don’t know. There’s no telling where it could lead. She got a great deal. The seller len

Thank you for joining us for another episode of The Property Management Show. Today, we’re talking to Doug Brien, who is the co-founder and CEO of Mynd.co, a property management startup. Before we talk about his innovative new property management platform, there are a few other things you need to know about Doug. First, he’s a former NFL kicker who went to the Super Bowl with the San Francisco 49ers. He also co-founded and led Waypoint Homes, a company managing 17,000 single-family homes in 13 different markets around the U.S. He personally has investment properties, and his entry into the property management business began with his inability to find effective and exceptional management for his own rental investments. Today, we’re talking about Mynd.co and how he’s using the lessons he learned at Waypoint Homes to make the property management industry better. A Property Management Startup Raised $35.6 Million Mynd.co is a venture-backed property management company that raised $35.6 million and has 2,500 units under management. This is significant. There’s a lot of momentum behind Mynd. With more private equity and VC-backed money in the property management industry, acquisitions and consolidations are moving rapidly, changing the landscape of this business. Technology and systems can scale the potential of property management businesses. This is what’s behind Mynd, and it’s not new to Doug and his team. This is what they began at Waypoint. The goal is to create a property management company that can perform at a level high enough to attract institutional capital. There’s a tremendous opportunity to build a 21st century property management platform by using technology to systematize and measure tasks and outcomes. You can’t improve something if you don’t measure it. Data is the new oil – have you heard this saying yet? People are beginning to realize that data is the most important resource in the real estate business, and especially in property management. The companies that know how to collect it and harness its power can create simpler and more profitable investments for people who want to own rental properties. Property Management Performance Gaps: Lessons Learned One of the major performance gaps in the property management industry is the visibility and use of data, metrics, and reporting. The things that an individual investor wants in a financial package are much different than the things an institutional investor wants. End-of-the month statements are great if you’re looking back at your performance. But, your new investor clients may want real time data. When you can create real time visibility, you can use what’s happening right now to make adjustments and corrections. You can focus on the right things. Vacancy is a problem for investors of every size. Data has shown that self-showings can make a big difference in lowering your vacancy rate. With smart locks that generate codes for limited periods of time, prospective tenants can see a property immediately. There’s no time to waste with scheduling and coordination. One of the biggest conversion fails is scheduling appointments with agents. With self showing technology, people can be pre-screened and given a code to let themselves into the property. Things move faster this way. The philosophy of Mynd is to meet people where they are and create a seamless experience. A mobile-enabled experience allows people to find an ad, see the property, apply for the home, pay a deposit, and sign a lease. It’s seamless and it’s faster. You rent the property quicker and to a better quality of tenant. These are tenants who are willing to self-serve. That shows you something about a potential resident. This is not forced. Mynd offers both self-showings and appointment settings with an agent. A competitor of theirs, Progress Residential, completed a helpful study that showed 90 percent of their prospects chose self-showings over personal showings, and those showings have a higher close rate. That data is hard to ignore. The Depth of Opportunity for Professional Property Managers More data that’s hard to ignore is what the Iceberg Report has published. The report focused on single family properties and multi-family units up to fourplexes. The findings showed that there are about 22 million rentals in the U.S. Only 30 percent are professionally managed versus the 70 percent that are self-managed. In Australia, it’s the other way around. Why are U.S. real estate investors self-managing? Who would want to do that? This is the trend that Mynd is trying to reverse, and Doug has two suspicions on why landlords and investors are managing their own properties. First, finding good property management is difficult. That doesn’t mean good companies aren’t out there. They are. But, there are also a lot of mediocre companies, and there are some that just aren’t good. If an investor has one bad experience with a property manager, trust is lost. That investor concludes that the asse

Today on The Property Management Show, Robert Locke is joining us to talk about how to structure your business without growing pains. This probably sounds impossible, but Robert is going to help us elevate the conversation and explain some BIG IDEAS. Why We Should Learn from Robert Locke Robert started his property management company 35 years ago with 50 units. He is candid about having made all the mistakes possible in the first few years. But, he sold his large, very successful and immensely profitable property management company to a Fortune 500 enterprise. That sale came with a nondisclosure agreement. He couldn’t speak or teach for a while after the acquisition. Today, he’s finally able to deliver his knowledge to the world, and we’re humbled that he chose to make his debut on The Property Management Show. The Things You Think are Critical May Actually be a Hindrance Robert started with five rental houses in 1980. He began selling properties to investors who said they would buy the homes if Robert promised to manage them. So, Crown Realty and Management was born. After 10 years of steadily growing his business, it became clear that at every level of growth, it was necessary to let go of some of the things that had seemed so sacred and necessary and important to running a business. When you go from 200 properties to 300 properties, you learn some lessons. When you go from 500 to 600 properties, you learn some more lessons. Most property managers build a system that works for where they are today. Whether that’s 50 properties or 500; there’s a tendency to design a structure that works for what you have right now. But then, if you double in size, it’s easy to crash and burn. A critical mistake that will hinder your growth is holding onto the things that you think are essential to your management model. What works for you at 200 properties will not work for you at 400 properties. Many of the systems that were working perfectly will hold you back. When Systems Hinder Growth: Some Examples One property manager had a sales model where he gave every owner and every tenant his personal cell phone number. His pitch was that if people didn’t like the answer his staff gave them, they should call him directly. This works when you manage 50 or even 100 properties. But, it won’t scale. It would be impossible to get bigger than 200 properties because you cannot have 400 owners with your cell phone number. Beware of building things into your model that will prevent you from going to the next level. Another property manager in Savannah was managing 200 units. His model was to send the full rent to the owners every month and then invoice those owners for the management fee. That’s $60,000 of accounts receivable every month, and an accounting firm had to be hired to handle the invoicing and collecting. Obviously, that’s not scalable. You cannot go from 200 to 500 properties by invoicing your owners every month. It became a hindrance, and the owner of the property management company had to give that up and begin taking the management fee from the rent that was collected. It required some conversations and some strategizing, but changing the system was absolutely necessary to grow. Now, that company has doubled in size and the wheels haven’t come off the business. Everyone builds things into their systems that impede growth, and those of you who have gone to the next level can spot them. You know what you had to give up once you move from 300 properties to 500 properties. But, at 300 properties, you don’t necessarily see it so clearly. The Mac Daddy of Slow Growth: Are you an agent or an Agent? A lot of people who move into property management come from real estate sales, where you’re an agent (small a). They do what the owner asks them to do. The owner is in charge, and the agent executes on the owner’s directive. It makes sense in sales, but it doesn’t translate with property management. In property management, agents think that they have to confer with an owner before approving an application. They think they need to call the owner before handling maintenance or dealing with an eviction. They think that because it’s what you do in sales. You are facilitators and scribes. You don’t make decisions and you collaborate on everything. You have to change your thinking and become an Agent (big A). The number one hurdle preventing property management companies from getting to the next level is the idea that you have to collaborate with your owners on every decision. You don’t. An Agent gets authority through the management agreement to approve and deny applicants, to handle maintenance under $500, and to file an eviction when it’s time. You can handle the wobbly deck and deal with the deadbolt that’s not working. You can replace a dead shrub, and you can do all these things without calling the owner first. Get a spending limit and stop collaborating with owners all the time. It’s stagnating you and preventing you from going to t

In this episode of The Property Management Show, we’re talking about top-line growth versus bottom line performance in your property management company. There’s a belief that’s accepted among business owners that you suffocate without profit. However, it’s also possible that you can suffocate without healthy top-line growth. Profit may be achievable, but top-line growth is possibly more meaningful for a company, even though profit is what indicates what a company is worth and how much you’re taking home as its owner. Two guests are exploring this idea with us today. Jordan Muela is the co-founder and CEO of LeadSimple. He’s also the co-founder of PM Grow Summit and the co-founder of The Profit Coach. With him is Danny Craig, who digs into numbers like nobody else. He partners with Jordan at The Profit Coach. True or False: Growth Solves Nearly All Problems In the discussion of top-line growth versus profit, there’s an idea that growth solves nearly all problems. You could be operationally efficient and really good at what you do, but you have no clue how to grow your business or use sales and marketing to achieve bigger outcomes. Or, maybe you provide an average service but you’re great with sales and marketing. The company with the grasp on sales and marketing will probably out-perform that company with outstanding services but no way to sell them. Also, there is no point in scaling something that doesn’t work. If a business is hemorrhaging cash and losing money or underperforming even without the sales and marketing budget factored in, nothing good will necessarily come from trying to grow. Another thing to consider – what does your end state look like? In other words, why are you in the business? If you want to maximize your cash flow from month to month, that’s one outcome. If you want to accumulate a bunch of doors, scale up, and then sell, you have to measure whether you can feed the business enough cash to get the growth you want before you sell. That’s a different path. Depending on your end game, you’ll know how concerned to be with scaling and profitably. Growth won’t solve all issues if you can’t at some point optimize that growth. Growth is great. But, if you cannot get profitable, you’ve got an issue. Remember this: When you strip out the sales and marketing expenses of an organization and that company is still consistently losing money, it’s pointless to scale. That business needs a lot of help, and top-line growth isn’t necessarily the answer. Falling into the Black Hole: Where and How this Happens A business can grow to the point that nothing seems to work anymore. As the organization scales, it doesn’t matter how efficient you were before. You cannot continue to deliver the same output at the point where everything seems to be breaking because you’ve reached a new level. Even with the best processes and systems, it seems that nothing is in place to support the growing machine. This can happen to property management companies at two stages: First Black Hole: Between 200 and 300 doors are under management, and the owner wants to transition from being a property manager handling the day-to-day work to being a true owner who is spending time bringing in new business and strategizing for the future. Second Black Hole: Between 700 and 1,000 doors are under management, and processes suddenly aren’t sufficient to handle the growth. It feels like you have to rebuild everything. An owner is acting as a CFO, managing HR and leading the marketing charge. It’s too much. Moving Past the First Black Hole There are three major drivers when you encounter black hole number one, based on benchmarking and consulting done by Jordan and Danny. First, profitability. Cash and profitability are closely related in property management. With the recurring revenue model, if you don’t have cash, it’s because you’re not profitable. So, you have to understand your direct labor efficiency. For every dollar spent on direct labor, how many dollars do you get in revenue? Direct labor is where everyone in the company is spending 50 percent or more of their time delivering property management services to owners or tenants. You need to know how many dollars you’re generating in revenue for every dollar you’re spending on salaries and commissions. Second, revenue per unit. There is so much focus on growth, but sometimes it’s easy to forget whether the revenue is there. Is the top-line revenue there per unit? You can grow top-line revenue not just through acquiring more doors, but by getting your profitability per door where it needs to be. Data shows that you cannot make a profit if you’re earning less than $150 dollars per unit, excluding maintenance. Third, controlling costs. This is an obvious requirement. You have to watch your facilities and operating expenses. What do you do as a business owner if you find yourself in this black hole? It starts with intention. If your intention is to be profitable, you’ll be committed to dr

This week on The Property Management Show podcast, we’re treated to an amazing entrepreneur who has been doing property management for 36 years. We’re talking to Melissa Prandi, the owner of Prandi Property Management, and we’re picking her brain for some wisdom on running a property management business successfully. Founding Story: Prandi Property Management in Marin County Melissa started as a receptionist in the company she now owns when she was 19 years old. She got her real estate license and began doing property management. The company she worked for managed about 100 properties as a side business. The original owner was a CPA, and could see from his clients’ cash flow reports that better rental management was needed. Melissa bought the company at the age of 25, and it’s now the go-to property management company in Marin County. Prandi Property Management has over 600 doors. Getting Started: Approaching the First Couple of Years in Business Most 25-year-olds know hard work, and that’s about it. Melissa didn’t waste time getting the word out, and that’s the best way to get your new company growing. Let everyone know what you’re doing. Reach out to family and friends who have rentals. In the beginning stages, you need to let everyone know that you’re available to manage rental properties. While you’re talking about what you do, get educated. Take classes. Learn from people who have been doing this for a long time. Melissa took a two-day residential property management class from the one person who was teaching residential property management 30 years ago. She took that class seven times. Seven times. Why? Because she found she was learning from other students in the room just as much as she was learning from the teacher. NARPM is an excellent resource for classes. Get educated, and make it as much of a hustle as gathering new clients. If you want to start strong and grow your business, you have to be obsessed with educating yourself. Integration into the Business Community: You Have to Participate Join associations. Network with other business professionals. Volunteer your time. You can put in hours and hours of volunteer work on something as simple as a town parade, for example. People will inevitably ask you what you do. When you say you manage properties, they will perhaps have a rental property, or they’ll know someone who owns rental property. When you participate in your local community, you get to know people and their needs. These are all potential clients. Everyone will be sending you referrals. Start in your local market. Teach a college class. Conduct an investor panel. Learn about leadership. All of these things will bring you new business. Many people don’t realize that one of the advantages of public speaking at NARPM and elsewhere is that you get a lot of exposure in person and even online. It’s called “link juice.” So you may think that you aren’t actually gaining new business when you’re busy conducting presentations to your colleagues. But, you are. You’re promoting yourself, and Google will notice. When you’re listed in authoritative sites like NARPM, your local chamber, and business journals, your own website will begin to propagate in search results. Google gives a lot of value to these websites that include your name, bio and website. This is an under-appreciated value. Networking and presenting also establishes you as an expert in your own field. That’s going to generate referrals. Some of the resources for education and networking that you may be missing through NARPM and other associations include: Designation courses through NARPM. Property Management 101 through NARPM. Speaking and leadership courses through the National Speakers Association. Local colleges, chambers of commerce and other professional business groups. How Growth Happens: Moving from 100 Units to 250 Prandi Property Management doubled in size over about two years. The referrals kept coming in, from Melissa’s personal connections and her work on nonprofit boards and in associations. Some of the other things she did included an ad in the yellow pages and marketing postcards. She still does the postcards today. With the high number of referrals Melissa was receiving, you may wonder if she was paying a referral fee. Gift cards and personal appreciation always seemed better. The top realtors she talked to didn’t care about the money as much as they cared about their clients being well-cared for. Personal touches matter. Handwritten note cards and coffee dates nurtured current relationships and brought in new business. Another idea; visiting realtors at their open houses. Melissa would stop by, especially if that realtor had referred a client. She would bring a flower or a plant, and the relationships and referrals would grow naturally. Realtors have team meetings or monthly and weekly meetings. If you can get yourself in front of those meetings – not necessarily to pitch your business, but to provide information and

Welcome to another episode of The Property Management Show. We’re glad you’re participating and providing us with feedback, because we see a need for quality information that will help you take a bite out of the huge opportunity that’s out there. As some of you know, 75 percent of the rental properties in the U.S. are self-managed. We want to help property managers tap into this large self-management market, which is absolutely ready to move into professional hands. As we’ve discussed in the past, tenants have a lot of protection, and it’s harder for landlords to self-manage. There’s also a generational shift. Many of the current landlords are getting a little older, and they don’t want to deal with the day-to-day management. We’re talking to Steve Rozenberg again. He’s a part-time pilot and a creative business owner. He does a radio show, videos, and a lot of things that no one else does. That’s what identifies his company as a success in the making, and we always get good information from Steve. Recently, he began talking about his Owner Education Series, which is really exciting. This may be your opportunity to go after that 75 percent of the self-management market. Starting an Owner Education Series for Current Clients Your current clients need to feel special. When you can give them something that your competitors can’t, you’re guaranteed to retain them and attract a lot of new business. People want to feel like they belong to a club. People won’t leave your company because of your prices. They leave when they feel like you don’t care. Statistics show that 68 percent of customers leave for that reason. They equate price with value, and if they cannot see the value you’re providing, you’ll lose them. So, give your current owners a way to feel special. Starting an owner education series is a great way to do that. Many of your owners have questions about their investments, and how to continue investing. You know there’s no rule book when it comes to owning a rental property. Your clients may be interested in buying additional properties (which is great for you), but the Ferris wheel is spinning, and they don’t know how to get on. Your owner education series will help them do more. Evaluating and Prioritizing Your Current Owners Steve started this series as a way to add value to his current clients. He also attaches a grade to each owner, from A to D. The client with a D grade is a bad owner of a bad property. These clients take too much time, and they will be dropped at some point. The client with a C grade is either a bad owner with a good property or a good owner who has a bad property. These are clients you might still be able to work with, as long as you’re trying to bring them up to the B or A level. It takes work from both you and your client. The client with a B grade is a good owner who has a good property. There are no problems or dramas with these clients. When you have an issue or their property needs maintenance, they let you get it done. The clients with an A grade are your B clients who refer people. A-level clients are your raving fans. As a property management company, you should always grade your clients. Once you have evaluated all the people you’re working with, you should commit to spending 80 percent of your time on those top 20 percent of clients. It’s the top tier that’s making you money. Invite your A and B clients to your owner education series. Tell them they are valued clients, and you’d like to invite them to this event. Then, ask them to bring a friend. Clients who bring a friend will be invited into the VIP section, which will include a front row seat and other perks. The friends they bring are potential clients, which is great for you. The existing client is getting something of value and VIP treatment, which is great for them. Owner Education Series Example: Find It, Fund It, Forget It One owner education series that Steve and his team found particularly successful was Find It, Fund It, Forget It. Why did this work so well? A wholesale company was present to talk about finding investment opportunities. They discussed where the good deals were uncovered, and how to quantify opportunities so investors aren’t just buying anything that’s on the market. They explained how it was done. Then, a lender joined the event and talked about how to fund the investment purchase. This was a hard money lender who discussed how he funds deals for investors. Finally, Steve talked about how investors could forget their rental home when a property management team like Empire Industries stepped in to leverage their property management services. Creating Strategic Alliances with Property Management Partners How do you get started? To successfully run an owner education series, you need to create strategic alliances with like-minded partners. Make sure they’re worthy of your time and event. Here are some criteria: They must have a database of prospects because you want their people to come. They h

The Property Management Show’s audience has grown to about 8,000 downloads a month, with thousands of views on YouTube. So, the intricacies of property management and how to do it right are interesting topics for everyone, especially new entrepreneurs going into the business. The guest we have today has been described as a hardworking hustler. The topic is how to expand into new markets without having to acquire a new property management company. There are multiple episodes on acquisitions that you can go back to. Check out Michael Catalano and Andrew Propst if you want to access their methods for acquiring a management company and expanding into new markets. Today, Brock Forkey is going to talk about a different way to expand into new markets. Brock Forkey Bio Brock has been a lifelong entrepreneur. In grade school, he sold a skateboard in third grade for $80 and offered pet sitting services. When he graduated high school, he went into construction, where he learned about real estate. In 1999, he purchased his first investment property, and by 2001, he owned 80 properties. Now, his property management company is based in Albany and Troy, and they are expanding into Rochester and Buffalo over the next few months. Managing Owners Rather Than Doors Currently, Brock is managing about $30 million in real estate, which breaks out to 400 doors. Over the next 12 months, he hopes to get to 600 units, and over the next 24 months, 1,000 units. Brock believes it’s better to look at the numbers in terms of owners rather than doors. If you have an owner with 74 properties under management with you, losing that owner is going to hurt a lot more than losing one unit. So, the goal for Brock’s company is to gain 180 owners over the next year, which will hopefully bring in 300 to 400 additional units. This type of strategy allows you to diversify your management portfolio in terms of owners rather than properties. Shifting Strategies from Sales to Property Management There are a lot of moving parts in property management; more so than in other businesses. Add to that the fact that people have their safety and well-being wrapped up in their properties, and it’s a pretty critical business. Brock began buying and selling real estate, and eventually found himself flipping houses by 2006. Then, the financial landscape changed. People with credit scores in the 500s could get 100 percent financing. Selling homes was profitable. Homes were sold to investors and homeowners. By 2007, it was getting harder to sell anything. Not everyone saw the warning signs – but Brock did, and he made the necessary adjustments to his business model. Knowing when to pivot is an important part of achieving success in real estate and in any entrepreneurial business. It’s like Madonna. Madonna has been relevant for 30 years because she knows how and when to change. You have to be willing to change. Sometimes, you’ll get hit with a brick and that’s how you’ll know it’s time to change. Other times, you’ll see it before the rest of the industry sees it. People might resist where you’re going and what you’re thinking. It’s not because you’re wrong or they’re wrong – they just haven’t seen it yet. If you’re tracking your numbers and you’re following patterns in the industry, you’ll see the shift, and you’ll be able to pivot. Fake it till you Make It: Shifting with Momentum Changing the business model requires preparation and confidence. When Brock moved from sales to management, he spent $3,000 on a phone system that led callers to believe his company had a number of different departments (they didn’t…yet). He sent out some direct mail with a paragraph about their company, some bullet points, and a call to action. People called. People called because there was a need for this type of business. Accidental landlords were just arriving on the scene, and they needed their properties managed. Now, there’s less of a need for fancy phone systems and direct mail campaigns, and there’s better marketing through Google Ads and Pay-Per-Click. Brock says those marketing platforms have been life changing. And, he knows his numbers. 2017 Marketing Numbers: Marketing spend: $37,300. Cost per lead: $234.59. Cost per client: $643.10. Conversion rate: 41%. This year, Brock is spending about $72,000 on marketing. It’s an aggressive growth budget. Justifying the Marketing Spend You may be cringing at Brock’s numbers. But, he says it’s important to know what your clients are worth. Brock’s company earns an average of $20,000 per client. That’s the average over the last five years. Who wouldn’t spend $234.59 to get $20,000? Not a lot of property managers understand what a client is worth. One of Brock’s competitors on LinkedIn said they’d pay $100 for a referral of up to 10 units, and $200 for a referral to a client with 100 units. That company clearly doesn’t understand a client’s value. You have to know your numbers, and you have to be willing to spend the money. This is a busine

Growth has been the topic of our last few podcasts, and today we have a guest who can help provide some mutual mentorship and coaching with Alex, our host. Growing is easy, but putting a framework around growth to have a successful, profitable business with happy people is challenging. It requires real leadership. Steve Rozenberg hardly needs an introduction. He has been on this show previously, and there’s a good chance you already know who he is. Steve is the co-founder of Empire Industries, he’s a commercial airline pilot, and he’s an international speaker. We’re talking about how companies can sometimes choke on growth, especially if there’s not a structure in place to support it. Steve will share the four specific things that he and his company are doing to make growth manageable. These 4 things are: Develop a leadership team. Put together a scorecard. Provide Tier 1 and Tier 2 positions. Develop quarterly themes. Leading versus Managing: Growth Depends on Vision and Structure Growth is sexy, and everyone wants it. But, someone needs to steer the ship. If everyone in the company is rowing and no one is steering, you could be going in the wrong direction. Your company needs to have a structure in place to manage the growth. As a leader, it’s up to you to show your team members what the vision is for the company. It’s easy to lose the vision and start managing. But, if you’re managing, you’re not leading. If you have found that you’re spending most of your time managing people and systems, then suddenly you’re doing a job – you’re not leading a company. You cannot grow that way. You should have a compelling story of what your company is doing. When you’re hiring new team members, make sure you’re able to talk about what your company stands for. As a property management company, you’re providing solutions. You’re solving problems for your clients, and you’re trying to be the best customer service company in your area. Create a Leadership Team Every company should create a leadership team comprised of leaders from different departments who have a say in the company. These are individuals who can see the company’s vision. At Empire Industries, Steve has a five-member leadership team, and they meet for an hour and a half every Tuesday morning. The first thing they talk about is the company’s scorecard. Everyone has to contribute to the discussion of the KPIs (Key Performance Indicators). This is a 30,000-foot view. They’re not digging through the weeds; they’re simply checking to see if they’re on track or not on track. Put Together a Scorecard You don’t want to track any more than seven to 10 metrics. These are the things that can kill your company. Focus on business metrics, not property management metrics. Look at the number of doors that have been gained or lost; the number of leads that are coming in; what your conversion rate is; how many doors you lost; how much money is in the bank. Track these things weekly, and you’ll know if you’re on track to grow in a way that aligns with your vision. Developing a Tier System To get the most out of your team, you need to separate tactical roles from strategic roles. Your property managers won’t be productive if they’re handling the 100 phone calls per day that come in from owners, tenants, and vendors. Steve and his company have divided tasks and responsibilities into three tiers. Tier 3 is upper level management. Tier 2 is strategic property management. Tier 1 is the tactical response team; the people answering the phones and deciding what can be handled at that level and what needs to be escalated. Steve’s Tier 1 people are in Mexico, where he has a team of 16 people working directly for Empire Industries. This system protects the time and productivity of your best team members. Property managers feel stressed and burnt out when they’re trying to manage properties and at the same time answer the same phone calls and solve the same problems. You don’t need a property manager to respond to a tenant who can’t log into their portal or an owner who is confused about an HOA bill. Losing property managers means losing money. When a property manager quits, that manager actually quit three months ago – you just didn’t know it. And, when you lose a property manager, you also lose a lot of very valuable knowledge about your clients and their properties. Hiring someone new requires a training period. You might lose clients as well. The best way to retain your best property managers is by keeping them in strategic roles so they are productive and growing with your company; not answering 100 phone calls a day. With a tier system in place, 80 percent of the work can be systemized. That takes a lot of pressure of your property managers, and your company can start growing the way it should. But what about that single point of contact? One of the challenges that you may face, whether you adopt a tier system like Steve or a squad system that you may have heard Alex talk about at

Elevate Operations, Systems, and Talent on both Pre and Post Sale Sides of the Business, or Become Irrelevant On November 9th, 2016, we gathered a group of industry leaders on this podcast live at the NARPM National Conference in Hawaii. Our aim was to decode the future industry trends and help property management entrepreneurs develop strategic plans to take advantage of industry opportunities. We discussed: Industry consolidation Competitive advantages of smaller independent companies Tasks for the CEO of a property management company Building a company culture Property management technology Today, we’ve gathered the same group of people on The Property Management Show to update our vision for 2018 and beyond. Guest Introductions Andy Propst is the CEO of HomeRiver, one of the largest privately-owned property management platform companies with operations in 15 states. He’s the past national president of NARPM, an international speaker, and one of the most respected thought leaders in the property management industry. He also speaks fluent Russian and made a movie about his experience as a missionary in Russia in the late 1990s called The Saratov Approach. Michael Monteiro is the CEO of Buildium, and has spent the last decade turning Buildium from a home-grown software solution that was created out of individual frustration to one of the largest property management software companies in the world. Over 12,500 property managers are using Buildium, and Michael is going to help decode the future of the industry. Jordan Muela is the CEO of LeadSimple, the first and only true CRM and sales process solution for the property management space. He’s the co-founder of PM Grow Summit, which is the fastest growing annual conference for top-level property management entrepreneurs. Jordan is also the co-founder and CEO of Profit Coach, and he authored the only property management financial benchmarking study of its kind, which demystifies profitability. Alex Osenenko, your host, is the CEO of Fourandhalf, a marketing company helping to solve growth for property management clients. Fourandhalf has grown over the last six years to 32 team members who are absolutely committed to their craft. Alex is a co-founder of PM Grow Summit and his latest venture has been the creation of the OnePartner Platform, which combines the latest conversion and SEO science into a website that drives quality leads for property managers on the front end, and a business performance dashboard on the back end, tracking actionable marketing and sales KPIs. The OnePartner team converts that data into decisions, driving a constantly improving process. With these four leaders talking about the property management industry, there are tens of thousands of hours of experience that can help your business fine-tune its pre-sale and post-sale operations. The Property Management Industry View for 2018: Accidental Landlords Cycle Out, Investors Cycle In In 2016, when this group first got together, there was still a large number of reluctant and accidental landlords, and their expectations of price and value varied based on their individual experiences. Today, the market has crested to the top of the cycle parabola, and economic uncertainty keeps amateur investors and accidental landlords mostly on the sidelines. The largest pool of prospective clients to emerge are sophisticated and disciplined investors, who demand transparency and results. Who is knocking on the door, and do those prospective owners match your perfect client profile? The Effect of Less Inventory One difference today is inventory. When accidental landlords were the predominant clients, there was a lot of inventory that couldn’t sell. Today, all those single family homes that used to be rental properties are now being sold. Inventory is going down, but demand for single family rentals is going up. Single family homes are in demand among renters, but they aren’t coming onto the market fast enough. There’s a shortage in the construction industry. One out of every three construction jobs is unfilled. Fewer young people are going into construction, and the industry still hasn’t recovered from the last recession, when a lot of migrant workers went home and never returned. Without the inventory, demand will continue to outstrip supply. Investors are buying outside their Markets A lot of investors are buying outside of their markets, and they need professional property management. These are investors that may have managed on their own locally, but in their markets, cap rates are down in the 3 or 4 percent range. To increase ROI, they’re moving into other markets that can provide that 7 or 8 cap. Coastal investors buying property in Memphis or Kansas City will need professional management services. There’s also a generational shift. A lot of the landlords and owners come from a generation of people who do things on their own. If your father wanted a clean car, he’d probably spend two hours on a Satur

Over the last 48 episodes of The Property Management Show, at least 40 of them have covered sales and marketing. So, there’s a wealth of information for growing your property management business. If you missed those, go back in the archives and pull out a roadmap on structuring your sales team, organizing your marketing, and growing your business. Today is a little different. Many property managers want to grow their businesses, but they feel like they cannot take on any additional growth. They think it would be irresponsible to continue growing, because they are struggling to keep up with serving the customers they currently have. That’s a good problem, and a real problem. Today, we’re talking to Todd Ortscheid, who can systemize a business better than anyone. Background on Todd Ortscheid Todd is at GTL Real Estate, where he manages around 400 units with five employees on the payroll, including himself. He systemizes, outsources, and uses independent contractors whenever he can. Todd feels he can add 200 properties without adding any full time staff. The plan is to do that with more outsourcing and automation. Releasing Less Profitable Properties The first thing Todd did was to look at his portfolio and let go of the less profitable and labor intense owners. Most of the work was coming from the same 10 percent of owners and tenants. Those were C-class properties, which are usually owed by C-class owners and attract C-class tenants. All the company’s work was there. When Todd decided to change their processes and procedures, it was a natural point at which to get rid of the properties that weren’t working. If you’re wondering whether it was hard to withstand the revenue hit – there wasn’t one. At the same time that these properties were being released, Todd’s company instituted some new ancillary fees. Owners began getting charged for yearly inspections, and the rest of the new fees were coming from the tenants. The application fee went up, and other things that they hadn’t charged for previously were suddenly falling into place. That canceled out the lost revenue of those 55 properties that they shed from their portfolio. That’s important. The concurrent implementation of ancillary fees while culling the herd of properties can be the way to go when you don’t want your revenue affected. Occupancy and Tenant-Related Systems Automating the processes related to tenants and occupancy can save money and provide scalability. Are your leasing agents bogged down with calls and emails? Instead of having them spend their time taking phone calls from prospective tenants, explore different options. Todd’s company uses Rently, and there are other platforms that use similar technology. There’s a combination lockbox and leasing line that make it easy to outsource the showing and leasing process. When someone calls based on a sign that they see or an advertisement, the call is routed to Rently. Everything is automated. If they want to see the house, they get a code and they let themselves in to see the property. If they have questions or want to talk to someone, those calls are routed through PropertyWare. This is an important piece of the leasing process that property managers can get off their plates. Prospective tenants always ask the same questions. They want to know if the property has a fence or they want to know what the leasing qualifications are. When a call center takes care of answering these questions, your leasing agents can protect their time and only get involved if there’s an unusual question or a problem. Integrating the Application Process with the Leasing Process After a prospective tenant views the property, they get an automatic questionnaire that they’re asked to fill out. This gives you the opportunity to collect feedback on the condition of the home, etc. The prospects are also asked to indicate whether they want to apply. If so, they get a link to the online application. This is an integrated process and a good way to improve the tenant’s experience. You might worry that people will want to meet with someone – get through the process face to face. But, do you really come across those people very often? Maybe renters of a different generation, but most tenants today are Millennials, and they are not interested in meeting with someone in person. They want to look at properties and fill out applications on their own time and on their own schedule, without ever speaking to a person. For Todd, the application is hosted by PropertyWare. With this system, all of the application information becomes the leasing information. E-signatures are gathered, and after the tenant is approved, the lease goes right out to the new tenant. Todd and his team don’t interact with the tenants until they get past the approval stage. Once a tenant is approved, they receive an email with their security deposit information. Lower credit scores often have a contingency fee. This is the first time the tenants hear from their prop

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Mike Kalis is the CEO and president of Marketplace Homes. He joined us on the Property Management Show podcast to talk about growth plans and discuss the challenges of acquiring property management companies. Marketplace Homes – 19 Markets and 3,100 Doors Marketplace Homes was born 11 years ago, in metro Detroit, during the collapse of the housing market. The idea was to help people get out of their existing homes and into a new home. At that point, the only way to do it successfully was to rent out the existing property. The company grew quickly, and they appeared on the Inc. 500 list four years in a row as one of the fastest growing companies to watch. Marketplace Homes grew in 19 markets, and they presently manage 3,100 doors. They’re adding 150 to 200 doors per month. The goal of Marketplace Homes is to give the property management industry the multiples it deserves. They want to have 30,000 homes under management and be the first public property management company on earth. As a company, Marketplace Homes has done a lot of acquisitions, and they want to do more. Some people become accidental property managers, just like others become accidental landlords. The market is pretty hot right now, and brokers who were making money selling homes full time are not so enamored with the property management business anymore. They’re burning out with this business, so Marketplace Homes is pursuing the portfolios of people who are ready to retire or pursue other opportunities. Marketplace Homes plans to get to that 30,000 homes in five years. They currently employ 85 people, so they are ready and staffed up to handle that growth. The Reverse of Growth and Castle Property Management With the previous podcast focused on the lessons that could be learned from the closing of Castle Property Management and Mike’s presence in the Detroit market, it was hard not to talk about what went wrong with Castle. Like Alex, Mike believes they ran out of money. He also believes that people need to come first and tech needs to come second. Great people will fix lousy processes and ineffective technology. However, great technology will not fix lousy people. The team at Castle was great. But, in a service-first industry, it’s very hard to focus on the tech and succeed. The Challenges of Acquiring Property Management Companies Acquiring property management companies comes with a number of challenges. Three of them are pretty obvious and difficult to overcome. They are: Financing the purchase. Finding companies that want to be bought. Integrating the companies into your own operations. How Do Companies Like Marketplace Homes Finance Their Acquisitions? It’s a lot like buying real estate. You pay with cash or you settle for terms. Cash can come in through investor money, operations money, or other types of income. If you’re trying to put together several deals and you have the cash flow to support it, you might explore an SBA loan. Otherwise, you can rely on outside investors, bank loans, and your own capital. The other option is to buy a company with terms. You know that each door you acquire will generate a certain number of dollars every month. With an acquisition, you’ll take a percentage of that income and give the rest back to the owner. It depends on what the sellers want and the buyers agree to. Some want a large check so they can go off and explore different opportunities. Others like getting a monthly payment coming in from those properties. The key is a good partnership. The sellers have to be sure they’re going to get their payment if the deal is for terms instead of cash. To offset that risk, sellers often earn two or three times more than they would in a cash deal. Otherwise, you have to trust the buyers. If you’re worried that you won’t get paid, you probably shouldn’t do the deal. Deals don’t close when there’s a lack of trust. Face to face meetings can make a big difference. Meeting each other and getting an idea of what each company is about can inspire a better business relationship. Physical connections are helpful when you’re acquiring a company. So is the exit strategy. If the seller doesn’t have a clear exit strategy, there’s a good chance the deal won’t close. So – cash, loan, or terms are the best ways to finance an acquisition. Or, some combination of all those. And, meet someone face to face when you’re buying or selling. Be honest, and talk about exit strategies. Why Sell a Property Management Company: Fitting into Industry Shifts Property managers who were once brokers know there’s more money to be made on the brokerage side now, and that’s a good reason for them to sell their companies. The industry has shifted. There aren’t as many accidental landlords right now. So, if you built your business off those clients, you have a shrinking portfolio. The property management industry is in a state of suspension. Property managers do well in a down market, such as the one in 2011 and 2012. Property managers do pretty

The Property Management Show Case Study The latest event in the property management industry is quite significant. Castle Property Management, a VC-backed, technology-first start-up in Detroit is closing their doors. Let’s talk about what we can learn from the failure of this property management start-up as an industry and as entrepreneurs. Our guest on the podcast today is often the smartest guy in the room. He’s the founder and president of RentWerx, which is growing by a door a day: Brad Larsen. The Story of Castle Property Management Max Nussenbaum, the co-founder and CEO of Castle, spoke at last year’s PM Grow Summit. His talk was inspirational, and his message was on point. Take a look at the start-up’s TechCrunch profile: “Property management is one of those industries that typically lags behind the rest of the US economy in terms of technology, customer service, and transparency. Castle is trying to bring the industry up to date with its automated property management platform.” Is the assertion correct that technology and customer service are lagging in property management? Perhaps. Property management is an industry that started in the back rooms of real estate offices, and for years, property managers did not get any resources, attention, or technology. Let’s face it: the only people who went into the property management field were the ones who had failed at selling real estate. So, technology and customer service have room for improvement, especially in the property management field. What about the third part of Castle’s statement: transparency? What Transparency Means to Property Managers Brad argues that many management companies are as transparent as they can be. Everything just short of the company books is online. Companies mean a lot of different things when they call themselves transparent. Being open about fees and costs is very common already. A lot of property managers are doing that. Are transparent at every level? Do your communication practices make people feel good about renting with you? Many owners who hire a property manager can’t be reached or don’t want to be reached. They hired a property manager to take the work off their hands, and because of this, the drive to be transparent can sometimes have unintended consequences. Brad and his company constructed a unique, state-of-the-art portal that told owners everything they wanted to know. Statements and inspection reports and leases were uploaded and available. However, rather than helping owners, it seemed it was only inviting them to complain or point out mistakes. It wasn’t worth the time or the effort anymore, and he realized it was just easier to provide things to owners when they needed it. Alex looks at transparency from the perspective of an investor looking to hire a property management company. He says he’ll want to see all the accounting and all the forecasting and all the documentation right there in front of him; neat, organized, and accessible. He also believes that while Brad works with the best of the best in the property management field, not all companies are as transparent as they could or should be. Transparency for its own sake may not be impactful. However, implementing meaningful transparent practices has the potential to create a better user experience industry-wide. Castle may have missed an opportunity there, or perhaps they simply weren’t ready for the specifics of their market. Property Management as a Service Business: Castle’s Team Property management is a service business, and there’s a bit of a modifier to that service when a company calls itself tech-first. Alex and Brad both run companies that are tech-focused. But. The tech should enable the service. Some technology is built and some is bought. Castle tried to combine technology with on-demand labor by hiring 18 people domestically and 30 people in the Philippines. Then, they had 15 stewards managing their homes. These were likely contract employees conducting inspections and showing properties. That’s a lot of people to manage 400 homes. The plan was to put this in place and grow and scale to the point where that kind of team made sense. It never happened. The service component, it seems, was put onto an assembly line. Somewhere on that assembly line, things broke. Having control over labor costs is a definite positive, but if there’s a disconnect and customers are getting phone calls and emails from people they don’t even know, it can feel like their property isn’t being properly cared for. Things fall through the cracks. According to Brad, it results in something like this: No one was in charge of everything, and everyone was in charge of nothing. Brad’s company uses the portfolio model of building a team, and Alex uses the squad structure at Fourandhalf. The squad structure, if you’re not familiar with it, looks like a triangle. There’s a campaign director on top, an account manager and an assistant account manager underneath, and then a virt

A Chat with Aaron Robertson of Authority Property Management About a year before Alex Osenenko started Fourandhalf, he met Aaron Robertson, and they were both doing different things. Alex was working for Appfolio and Aaron was running a property management company with some business partners. Today, Alex is hosting The Property Management Show, continuing to grow Fourandhalf, and presenting The PM Grow Summit, a conference for the top level property management entrepreneurs. Aaron has started Authority Property Management, and after only 30 months is up to 435 units. The two are on the podcast to discuss leveraging tech experiments, marketing, and the importance of running an emotionally intelligent company. Experimenting and Decision Making After nearly 10 years in the property management business, Aaron realized that he didn’t need a business partner who wasn’t his wife or his bank. He likes to make decisions quickly because it’s easy to start something, fail, and then get up and try again. Usually, that process is a lot faster and more successful than taking months and even years to contemplate whether or not to adopt a particular business strategy. Making decisions in two or three minutes makes sense to Aaron and his wife, and it’s helped their business grow. To grow quickly, you need to implement technology that puts systems into place and automates a lot of the work. This is a huge factor in fast growth. Those experiments cost money. But, it may be worth it to you to spend a couple of hundred dollars to try a system or a product for a month. In that time, you’ll know if you want to use it or if you want to look somewhere else. Run tests on software. Experiment with new technology. Every management company is different and you need to adopt whatever works for you and your customers. Automating and Saving Time: Some Examples Aaron is willing to invest in high quality walk-through videos of his properties. A prospective tenant can look at walk through video and really get an idea of what the home looks like. His team writes beautiful, detailed descriptions that read like real estate sales ads. There’s a cost, but it gives a property management company an edge. It also gives the property owner an edge, and it helps the prospective tenant who is looking for a home. A lot of companies talk about the importance of quality walk-though videos, but very few invest in them. Remember that you don’t always have to hire out for these services. Maybe you will pay for drones and camera equipment, but a staff member can go out to the property and take and edit photographs. The equipment is then worth the investment because it makes that staff member’s job easier. The result of this process is better quality for tenants and owners. Appfolio is another amazing tool that can save a lot of time. Use software in a way that works for you and your clients. Property managers need to think past the generic things that are offered by software, and add to it when necessary. Do some integration and overlap your systems for optimal functionality. Google Suite is a good example. You get calendars and Gmail and hangouts and messaging all on your phone as well as your computer. The efficiency and collaboration makes a difference. Put it to work for you. The advice here is to experiment with what you already have. Adapt your process to see what sort of efficiencies you can gain from a piece of software. Stop Saying We’ve Always Done it This Way Don’t be afraid to re-evaluate your systems. It’s pretty easy to do things because they’ve always been done a certain way. But, the world is changing. Ask your team if they have the tools they need to do their jobs. Your staff can provide feedback on what’s working and what isn’t. One of Aaron’s mottos is: We Make Rentals Simple. To live by that motto, it’s important to always re-evaluate and make sure the best programs and technology are in place. But…Don’t be a Squirrel There is a squirrel mentality, and you want to avoid that, too. You can get carried away with all the vendors out there who are trying to get your attention. There’s so much tech out there, and the industry is ballooning into something much bigger and more advanced than what it was. It’s hard not to try everything. But, you need to be disciplined. Find out how long a company has been in business before you jump into discussions about what they have to offer. Aaron won’t waste his time sitting through sales webinars and demonstrations. He’ll ask if he can test a product on his own for a while. If a company is willing to let him run his own demonstration and sample what they have to offer, he feels comfortable that it will be a decent project. This criteria protects him from the squirrel mentality – or the need to try everything. Marketing a New Property Management Company The quickest way to introduce a new company to landlords and investors is likely through the local marketplace. Aaron talked to the Chamber of Commerce, met w

The Property Management Show has been on the air for about two years, and each episode inspires a lot of feedback from listeners. There have been some questions along the way as well, so on this episode, host Alex Osenenko is answering some of the specific questions that listeners have submitted. Alex will use his experience and expertise to answer these questions, and you’ll notice they apply to nearly all property managers and small business owners. Background: Alex Osenenko What makes Alex uniquely positioned to answer these questions? He has spent the last 10 years in the property management industry, and the last six of those years as an entrepreneur and business owner. He has scaled Fourandhalf from being a garage business with 0 employees to a thriving company that currently employs 27 people and continues to grow. In addition to this experience, Alex has talked to thousands of property managers at different stages of their careers. He has spoken to successful business owners, business owners that have failed, and a whole section of professionals in the middle of the spectrum of success. Alex sees the purpose of his professional life clearly: it’s to help small businesses grow. This is his passion, and the podcast serves that purpose. Here are the Questions and Answers he’s chosen for this episode. Question 1: Struggling with Business Structure Sam from Longmont, Colorado started his company about four and a half years ago with a few properties he took over from another management company. He got into the business because he was looking for something more stable than just selling real estate. Now, he’s managing 85 properties – most of which are high quality single family homes. As Sam has grown at about 30 percent for the last two years (way to go, Sam!), he’s wondering how to structure his company. When he first began, he was doing everything himself. That included maintenance, accounting, inspections, and showings. Most of you can probably relate to that. Once he got to 40 properties, Sam knew he had to make a change. He hired two people; one to help with maintenance and one to help with showing available rentals. As he continues to grow, Sam wants to know how to adjust to increased business. His question is whether to bring in some extra showing agents or switch to a portfolio structure and bring in an administrative person. Alex has another idea. Answer 1: The Squad Structure According to Alex, Sam is in the perfect position to continue scaling with a squad structure. For Sam, that means having a Property Manager Executive on top, who is responsible for speaking to clients. All client interactions should go through the Property Manager Executive. Below that, there is someone handling maintenance support, rentals and leasing support, and maybe accounting. So as a squad, that structure operates efficiently because there’s a single point of contact for your clients. According to expert Adam Hooley, you should be able to handle between 150 and 300 properties with a properly organized squad. So, Sam’s path is pretty clear. Take the time to spend a day or even half a day reviewing and listening to the Framework of the High Performance Property Management Team with Adam Hooley. Check out that interview, listen to the podcast, and pay attention to the book that he mentions and allows you to download for free. Put the structure together and fill it in with properties. Then, when you’re ready to build that second squad – you already have the framework. Question 2: Turning Leads Into Business Monty from Florida has owned stock and commodity investment firms for the last 25 years, so he’s comfortable using the phone and cold calling. It’s his favorite tool to generate leads at a low cost per acquisition. Property management is a good fit because he’s been helping investors get better returns for 25 years, and this is not much different. Recently, Monty hired one of his former commodity brokers to do cold calling for his property management business. There’s been some initial success, but so far most of the leads they have closed have been only for tenant placement accounts. Monty hopes to convert the placement-only accounts into management accounts in future. He knows he is one of the best salesmen and closers; and he’s good at hiring and training his procedures with similar results. Monty and his team close as much as 30 percent of their inbound leads and average a minimum of 15 to 20 percent closing rate. His struggle is in getting more leads. Monty says he sees companies like Empire in Houston, that claims to have built 0 to 700 doors in four to five years, or Larsen Property Management (now RentWorks), claiming to add a door a day. He knows those are impressive numbers, and he wonders why he has a hard time generating 40 to 50 leads a month, let alone 30 doors. Monty recently spent $15,000 on radio and internet marketing to only generate 60 leads in a month. He wants to know what the marketing budget is

Hiring someone to help you with your property management business isn’t as simple as it sounds. If you’re a business owner and you know you need to hire someone because you cannot continue to wear 16 different hats while trying to run and grow your business, the biggest challenges are immediate: You don’t have the time to hire someone, and you may not be able to afford to hire someone. But the need is there. How do you get out of that spiral? Kathleen Richards knows how to help. She has joined the podcast before, and she’s full of exceptional advice and experience. She ran a property management company for a long time, and she’s spent the last few years building a coaching business for property managers who feel stuck. She’s discussing how to balance your team without putting your business or your budget at risk. Process Before People: Preparing to Accept Help If you’re wondering who to hire, where to hire, and how to pay them, you’re not alone. It’s normal for entrepreneurs to start out doing everything themselves and then realize they need help. Before bringing those helpers on board, look at your processes. You need to have systems in place. Because if your systems aren’t working, perhaps you just need better systems, and not additional people. Hiring the right person is crucial, so you need to know your processes and your strengths and weaknesses. Where are you the most pressed for time? You may need a business development manager (BDM) to take over sales or an assistant to help with administrative tasks. Maybe you are overwhelmed by maintenance tasks and you really need someone to handle that part of your business. It may seem like you have sixteen jobs to fill at once, and in the moment it may be tempting to abbreviate the hiring process for quick relief. But, you need to be intentional about which part of the work you’re going to hand off. Think about what you’re good at. If you are a stellar sales person, don’t hire a BDM. Instead, get rid of the things you struggle to handle. If it’s maintenance, hire an assistant or someone to deal with maintenance calls, work orders, scheduling, tenant contacts and billing. Think about where you need help. Instead of screaming fire in a panic, identify which room has the biggest blaze, and hire someone to put that fire out. Paying for People: How to Hire Affordably When you’re still growing your property management business, you might worry that you can’t afford to hire anyone. There are a number of ways to address this challenge. Some people hire interns or students. This might work, but remember you get what you pay for. So, it might be better for you to pay a skilled person who can really make a difference in your workload. You need someone who can step in and take things off your plate on Day One. If you are busy, you probably don’t have time to train. An entry level person or an intern will need a lot of attention and supervision. Think about this before you choose this option. Hiring a virtual assistant is another option. Kathleen hired a virtual assistant to take over her leasing process. You can also try a virtual assistant to manage maintenance scheduling and follow up. This is a huge cost savings. You don’t have to pay taxes because you’re not hiring an employee. So much of what you do in your business is in the cloud. You don’t always need a physical person in your office. Hiring part time workers can also benefit you and save you money. If you do want someone physically present in your office or conducting showings, start with a part time person. You can advertise the job as part time to full time. Don’t hire someone who can’t grow into the position. Let the experts help you, too. NARPM has a lot of quality vendors who can help you with the things that take up a lot of your time but may not be in your area of expertise. For example, you can find someone to help with your marketing, your website, and lockboxes so you don’t have to show the properties yourself. Put your NARPM membership to work for you, and utilize the vendors who can support you. Test Your Budget: Put Money Aside Kathleen suggests putting aside the salary you think you’d have to pay an employee. If you’re not sure you can afford someone, spend a few months pretending to pay that future employee. Set aside the amount you’d be paying if you hired someone. If you truly can’t afford it, you’ll know after a couple of months. But, if you can easily put the money aside for six months and you have built up a bit of savings, you do have the money to hire someone. For business owners who plan ahead, this might seem silly. If you plan ahead and you know what each new customer is worth to your company and what you have to spend to acquire that customer, you know that the cost of bringing on new staff members is part of the growth process. But, not all property management company owners have business degrees. Maybe you started off managing a handful of properties for friends and family members and

Here Are Your Keys to the Rent Estate Revolution. Kevin Ortner runs the largest property management company in the country. He has some things to say about where the industry is going and how property managers can move it in the right direction while growing their own businesses and increasing their own potential. On the Property Management Show, he shared some insight and dropped some numbers that might surprise you. About Kevin Ortner Kevin was a pilot, and moved to Arizona for a new job opportunity, but lost that job because the company went under. He had some rental properties and became the first franchisee of the now-famous Renters Warehouse. Today, he runs the company. Kevin is the author of Rent Estate, a book that discusses the movement of owning rental property as a way to earn income and financial independence. It talks about important market trends. People who aren’t property owners yet are capitalizing on it just as much as people who already own and operate rental homes. Why Kevin Wrote Rent Estate and Why it Matters Kevin wrote the book for marketing purposes. He wanted to use this content to start conversations about real estate investing as a tool for retirement and to attract new clients. It was a way to position Renters Warehouse as a thought leader in the property management space. In addition to his marketing and content goals, Kevin is passionate about the fact that owning long term residential real estate will create wealth, security, and legacy. Retirement is different today than it was decades ago. No one is going to give you a pension and a gold watch. Your 401K was supposed to replace the security of a pension, but it’s not quite working out the way it was intended. So, rental investing is a great tool. It’s not always exciting or sexy. It’s not as fast-paced as flipping homes. But it is consistent and reliable. You can count on it. That’s the message Rent Estate is sharing. The Purpose of It All Before Kevin’s book was published, the term “rent estate” was just something that Kevin and his team threw around internally. The term refers to buying and keeping property, differentiating this strategy of long term, reliable wealth building from the concept of “real estate” – which is buying and selling. They have now trademarked the term. Kevin’s book, of the same name, demonstrates the power of rent estate and what it can do for people. Kevin’s purpose in writing Rent Estate is to help other people create wealth through real estate. The book provides the reader with both the educational background needed to begin this journey and actionable steps for making it happen. The first part is the macro view of what’s happening and why real estate is becoming that vehicle for wealth creation. Then, the second part is a micro approach to how it’s done. 22 Million Rentals and 70% of Them are Self-Managed. Why? Kevin wrote the literal book on rent estate, so it is no surprise that he has done his research. Renters Warehouse was a sponsor of The Iceberg Report, an insightful study into single family homes and properties up to four units. According to that report, there are 22 million rentals in the U.S that fit that property category. Only around 30 percent of those are professionally managed. That means a staggering 14.5 million properties are currently being self-managed. If you’re wondering what keeps landlords from turning their homes over to professional management companies, Kevin has 3 answers for you: 1. Generational Slant A lot of landlords now are in their fifties or even older. This generation is so used to the concept of “DIY”. They are very happy to learn how to do things by themselves in order to save a few bucks. It’s no surprise why they prefer to manage their own rentals as well. That’s a big contrast to the younger generation that is very comfortable with outsourcing things. Kevin thinks that over the next 10 or 20 years, rental properties will change hands between one generation to another. This generational shift will eventually put more properties into the hands of professional managers. 2. Communicating Value People don’t understand the value that property managers bring. They understand the dollars they’ll pay, but not the services they’ll receive. This boils down to educating owners and helping them realize that the time savings and expertise they get from hiring property managers are worth the cost. 3. Industry Reputation This is the biggest one of the three. The industry as a whole has a trust barrier to get over. Property managers used to sit on the sidelines while real estate professionals took the stage. In the early days, the industry had too many fly-by-night operators who had no training, no resources, and no technology. This led to poor service and it bred distrust from customers. No one took it seriously as a profession until the real estate sales market collapsed in 2007, and property managers were the

Disclaimer: This blog was originally published in 2017, and not all of the information regarding Jock McNeill, PM Grow Summit, Alliance Property Management, and Rent Napa Valley is current. However, the advice given is still applicable today and we updated the blog with even more relevant information in June 2023. Jock McNeill was a guest speaker at the 2017 PM Grow Summit, where he gave a thought-provoking talk about Growth Through Acquisitions. He’ll be back with Michael Catalano at the 2018 PM Grow Summit to discuss the 5 Principles of Success in Growing Through Acquisitions. While we were chatting about his presentation, he said in an alarmingly off-hand manner: “By the way, after learning at the last PM Grow Summit how a Business Development Manager (BDM) can help grow a business, I decided to try it and now we’ve doubled our growth.” DOUBLED OUR GROWTH. As if it was no big deal. Jock owns Alliance Property Management and Rent Napa Valley in Northern California, and he is joining The Property Management Show to discuss his past sales process, and what happened when he changed his course of action. Jock McNeill’s Background Jock is the co-owner and broker of Alliance Property Management, Rent Napa Valley, and also True Real Estate Partners. He has been doing property management since 1999, and his role has shifted from doing everything himself to currently having a staff of 12 or 14 people full-time, and a handful of part-timers. He has three offices in the North Bay area of California. Jock runs a tight ship, and he has a staff of people who have been with him for a long time. It’s hard to keep good people motivated, but he has found success by treating his team well and providing opportunities for them. His property management sales process has changed significantly over the last five years. The Alliance Property Management Sales Process Before 2014 Before 2014, their sales process was pretty old fashioned. When new or prospective clients called, Jock would take the call as the broker and co-owner. He set up the appointment to check out the property, and he went there to meet the property owners and evaluate the home. He’d sign them up, bring them into the Alliance Property Management portfolio, and hand the client off to a property manager. He tracked everything in a spiral notebook. Jock did his own follow up and knew he was missing opportunities. The sales funnel had leaks, but he was still able to close two or three new properties a month. He had to speak to five or six property owners in order to close those two or three, but that’s not a bad success rate. Jock’s leads were warm, and mostly referrals. His company was well-known in the community, so while he was closing enough new business to make up for the natural loss of current clients, he knew he could be doing better. going digital Revamping the Sales Process and Going Digital: 2014 – 2017 In 2014, at the Atlanta NARPM conference, Jock made a commitment to sign up with LeadSimple and Fourandhalf to begin managing leads and investing in marketing. This created a good foundation for his company’s sales funnel. He started tracking leads. He began following up. His close ratio went up due to the new processes he had in place. If you’re wondering what made him realize he was ready for marketing, it’s simple: Numbers. Jock said it was easy to do the math and see that if they invested a little in a sales and marketing infrastructure, they’d earn it back pretty quickly. They began to do more advertising, invested in marketing, and learned that the more volume they put in the funnel, the more efficiently they were able to use their efforts and resources. When you’re putting more money into that sales funnel, the leaks get more expensive. Jock knew to plug the leaks. With these new processes, the four property managers in the Santa Rosa office began taking new business calls when Jock wasn’t available. He didn’t want to miss those calls, and the LeadSimple system of call routing was put into place so that someone would always respond to a call from a potential new client. This increased business, and Alliance doubled what they closed every month. That meant five or six new doors were being signed every month. This also worked well because when property managers were talking to new clients, they’d be the ones who ultimately took on the management of that home. Sometimes, accounts are won simply based on chemistry. If you don’t like the person you’re talking to, you’re not going to work with them. If you can talk to one another with ease and it seems like you’re on the same page, your working relationship is already off to a good start. Exponential Property Management Business Growth After The PM Grow Summit 2017 A few months before the PM Grow Summit in February of 2017, Jock began evaluating his business plan and thinking again about going a different route. He was thinking about hiring a sales and marketing person because there was a sens

This episode is a little different because it was recorded via Facebook Live and was co-hosted by Jordan Muela from The Profitable Property Management Show. We asked six keynote speakers to give us a sneak peek of their talks for the PM Grow Summit, which will open its doors in January of 2018. In this podcast, our speakers shared topics they plan to cover, talked about the relevance of those topics, and mentioned key takeaways that make us want to learn more. Don’t have a ticket to the PM Grow Summit yet? Take advantage of this special discount code. Type in PODCASTVIP and you’ll get $300 off the price. But don’t think about it for too long – there are only have 10 tickets at this price for listeners, so scoop yours up. Who should attend the PM Grow Summit? If you’re not sure you should attend, remember this: it’s the only opportunity to be around the best and the brightest thinkers and leaders in the property management field and beyond. This is for the property manager who is truly committed to growth. If you want to be more entrepreneurial, and if you want to get out of a rut in your day-to-day operations, this is the conference for you. It’s about leveling up. It’s about being around the right people and not being satisfied with a baseline education. If you hunger for a strategy to grow your business, and you want to meet your challenges head-on, this summit has the people who can show you how to do it. Let’s meet the heavy hitters. Marcus Sheridan – The Sales Lion Marcus Sheridan’s book, They Ask You Answer provides a path for changing the way you market your services to potential customers. He’s going to talk about the digital consumer, who is smarter than consumers have ever been. He’ll explain how content marketing will help you reach that consumer, demonstrating how the buyer has changed, and what you need to do about it. Marcus will focus his talk at the PM Grow Summit on the visual experience. By 2019, you can expect 80 percent of online content to be video-based. If you don’t have video content, you’ll be left behind by this marketplace. So, you’ll learn from Marcus how to integrate video into your sales process. You’ll get tips, tricks, and hacks on how to put a video culture to work for you without blowing your budget. If you decide to spend the time doing what Marcus suggests, you’ll earn huge results. You’ll learn how to get over your imperfections when it comes to video. The people who are making progress are not perfectionists. Things are changing rapidly in the digital space, and wasting time trying to get it perfect will hold you back. In addition to his talk, you’ll get some pretty intense workshop help from Marcus at the PM Grow Summit. He’s going to talk about best practices behind the camera and in front of the camera. You’ll learn about the substance that makes you trustworthy and believable. Here’s a simple tip you can start using right now: Smile three seconds before you start filming. Not only does this smile impact your body, it lights up your cheekbones and gives your eye a twinkle. Start talking when you’re coming off that smile. You’ll look alive, excited, and you’ll instantly connect with your viewer. Jason Goldberg – Prison Break Jason Goldberg is a TED speaker and a coach. He wrote Prison Break, and his topic at the PM Grow Summit will be: Why What You’ve Learned Today Won’t Work for You. That sounds provocative, and it is. Jason will share his experience of going to amazing conferences and seeing a tremendous wealth of information being shared by industry leaders. Inevitably, people are motivated. They have action plans and intention. But then, they go back to work and give up on all the great stuff they learned at the conference. There’s no doing. Even worse – there’s no being. Jason’s talk will help you move past the barriers that make implementing what you learn so problematic. Your mind is either a liability or an asset. Your job is to be passionate about profound and impactful service. You could do this to make money, but you’ll only get so far. If your wealth creation is a byproduct of your profound service in the world, you stand to earn a lot more business and a lot more money. The takeaway tip from Jason’s preview is this: get rid of your ego. It’s not about you. When you’re in your head, wishing for things or worrying that your sales pitch isn’t going to sound right, you’re making your own barriers. You don’t have to be impressive or the best. The people you serve simply need you to be effective. Get rid of customer service and create client astonishment. It’s not about you. It’s about delivering value to people. Jason believes that apathy is the antithesis of mastery. Stop thinking about outcomes first. Instead, be present and care about what you’re doing and what kind of service you’re delivering. If you can internalize that need to astonish your clients, everything else will fall into place. According to Jason, you can show up to the PM Grow Summit as

Technology is huge. With emails, Facebook, Skype, and other platforms, it’s easy to lose the art of face to face communication and interpersonal communication. People can hide behind digital technology. That means communication and relationships are more important than ever. If you can master how to communicate correctly and develop relationships, your destination is only limited by your imagination. Introduction to Warren Tate Warren is a trainer and a coach and has worked as an estate manager for one of Australia’s largest property management companies. He is also the best-selling author of “I GET YOU: How Communication can Change Your Destination.” He worked in the real estate industry for over 20 years, and as a franchise manager doubled the size of a boutique management business. He loves helping people, which is why he decided to focus on training and coaching. Warren doesn’t deliver anything that isn’t proven in science, so he does a lot of research. All of his work is backed up by the latest data in biology and psychology. In today’s interview, you’ll learn the four different personality types that will help you better connect with clients, how to diffuse difficult situations with clients, and telling more engaging stories. Personality Types: How to Identify and Communicate with Eagles, Peacocks, Owls, and Doves There are hundreds of personality tests you can take and if you take them all, you’ll start to feel psychotic. What you really need is a basic understanding of yourself and the people you deal with. If you don’t understand your personality type and their personality type, you could be on opposite ends of the communication spectrum without even knowing it. That can cause clashes and misunderstandings. As a property manager, the best way to identify personality types is by asking a simple question: Can you describe your home to me, and what do you love most about it? Personalities can be introverted or extroverted. Extroverts are The Controller, or the Eagle; and The Colorful, or the Peacock. Introverted personality types are The Compliant, or the Owl; and The Comforter, or the Dove. Let’s break those down. The Controller |The Eagle The Controller or Eagle is your smart, sharp person who wants results. They are usually quick talking and they are often managers. They want results and outcomes. They want the facts, and then they will make decisions and move on. These personalities talk fast and make decisions fast. They will know if you’re not telling the truth, and they will lose patience if you don’t get to the point fast enough. You might write a detailed email about maintenance and the response will be a clipped, short response of yes or go ahead. You might worry there’s something wrong, but that’s just their communication style. They made a decision, and they’re moving on. You can tell someone is an Eagle by the way they are short and sharp. They won’t waffle. They’ll tell you how it is, and that might seem rude or blunt. But, it’s how they work. If you find yourself having to communicate a conflict or a difficult situation to these people, it’s best that you simply provide the facts. State the problem, the resolution, and your plan for follow up. Then, ask if they agree with you or if they’re comfortable with your plan. Be short and sharp, like they are. Don’t provide extra details and don’t share a long story about the tenant not paying rent because a dog died or someone’s Aunt Sally got sick. They don’t want to hear the sob story. They want to hear the facts and your solution. When you ask the Eagle to describe the property, he or she will give you a short, specific answer: it’s a townhome with four bedrooms and three stories and city views. The Colorful |The Peacock The next extrovert is The Colorful or Peacock. These personalities love to talk. They will tell you about their weekend and the movie they saw and the friends they went out with. They will talk until they run out of things to say. It’s obvious that they’re social and they love to name-drop. They are good, fun people. They are the ones organizing social events, and they know where the parties are. They need to communicate with a lot of description and detail. They love everything about themselves, and the best way to communicate is to let them speak. Don’t cut them short. Compliment them. If you’re meeting with them face to face, they probably put a lot of effort into their appearance or their property. Acknowledge and validate that. These people want to stand out. If you have to deliver bad news to a Peacock, you approach it with feeling from their side of the issue. Maybe a tenant has damaged a garden, so you can spend some time talking about how you understand the importance of the garden to the landlord, and how she worked so hard on it and the plants look so beautiful. Then, you’d explain that the tenant has not maintained it to her standards, but has agreed to hire a gardener to come every two weeks to keep

Establishing great relationships with the right owners will elevate your property management business to a more successful, more profitable level. Identifying and understanding who those owners are can help you be more selective in the business you bring in, and will give you an opportunity to control the customer journey and the professional relationship you have with those clients. Marc Cunningham, a successful property management entrepreneur, has developed specific criteria for who he works with and how he works with them. Marc Cunningham: Property Manager, Consultant, Educator Marc was raised on property management. His father started Grace Property Management in 1978, and he spent summers working in the office and learning the business of real estate and property management. Marc studied finance and real estate at Colorado State University, and after working for other property management companies, he returned to Denver and Grace Property Management. Twenty years ago, there were three people in the office. Today, there are 18 team members managing nearly 700 doors. Mark believes in following the opportunity, which means the company does both sales and management for residential and commercial properties. Ancillary businesses, he says, provide a full customer experience and increase revenue. He thinks property management can be a base on which to build a better business. Qualifying the Right Clients and Working with the Right Owners To build a better business, you need to build relationships with the right clients. You don’t work with every tenant who applies for a property you manage; you qualify them first, and maybe half of them are turned away. You need to qualify your owners, too. In fact, your standards for owners probably need to be even higher than they are for tenants. If a tenant goes crazy, you don’t have to renew the lease and the problem goes away. With an owner, however, an issue can get messy and even become litigious. For the success and the sanity of your business, create a system that helps you determine whether an owner will be a good fit for your company. This isn’t about liking someone or not liking someone. If your business model is geared towards hands-off owners because you want to be left alone to do your job, you need to be selective in the clients you accept. You won’t have a successful relationship or work well with an owner who wants to be involved in everything or provide approval for every move you make. If you decide the hands-off owner is right for your company, you limit your business to people who want you to do what you do and only call them if their property is burning to the ground. This isn’t as easy as saying yes or no to each potential client you meet. The challenge grows as your property management business grows. When you do more marketing, you attract a wider range of individuals. You’ll need to tighten your filters and ask interview questions that will tell you if prospective owners are going to fit your business model. Interviewing Potential Clients: The Process Listening is more important than selling when it comes to the owner interview. When an owner calls to start the conversation, don’t rush into your sales pitch. Be skeptical. Take your time determining whether this owner will be a good fit. An internal questionnaire can help you. Marc has his property managers trained to answer four key questions after an owner interview: Is the owner financially stable? Working with a client who is desperate to rent out a property within two weeks in order to make the mortgage payment is not going to work. Is the owner emotional? Emotionally unstable clients will take a lot of time and energy, and they can be difficult to work with. Does the owner have reasonable expectations? This is a big one. They have to understand what you can provide. Can this owner and this transaction be controlled? If you cannot answer yes to that, you need to decline that business. You need a situation you can control. Those are the assessment questions at the end of an interview. To start the process, you need to listen. Ask them to describe their property and what they need. It’s amazing what you’ll glean from staying quiet and letting them speak. You’ll be able to gather a lot of information, and you’ll provide an opportunity for the owner to sell themselves to you. That’s the best way to start. After the owners talk for a while, it’s a good idea to ask some questions so you can be sure your goals are aligned. Talk about long and short term goals. If they want to sell in six months and you have a sales division as well as a property management division, this is a good client for you. If they want to acquire 10 more properties in the next 3 years, it’s probably someone you want to work with. Talk about the goals for the property you’ll manage and the portfolio each owner has. If the first question an owner asks is about your fees, you probably don’t want to work with them. You should be

Growth Opportunities: The Iceberg Report Right now in the United States, there are about 22 million single family rental homes and multi-family rental properties that have up to four units. Out of these, 14.3 million, or 65 percent, are self-managed by the investor or landlord. This offers a vast opportunity to the 32,000 small or mid-sized property management companies. There are a lot of social and economic factors that keep rentals in high demand. Over the next five years, about 8 million single family rentals will come into the professional management market. The opportunity is clear, and to take advantage of these opportunities, it’s important and necessary to establish trust between property managers and landlords and investors. This is one of the divides that’s keeping property managers from growing and acquiring new business. To effectively win all the new business that’s available in local management markets, property management companies need to demonstrate their value and give landlords and investors who have been managing on their own a reason to trust that their properties are better off with professional management. Tony LeBlanc and the Need to Establish Balance Any problem in an organization can be traced to the top. If the leadership is off balance, the team will never reach its potential. The CEO’s mood or the director’s attitude affects the team. Tony LeBlanc is a successful property management entrepreneur, and he made the choice to balance himself and his team to achieve better results. The business is growing and thriving because of his efforts. He spoke to Alex about the need to balance personal and professional goals, and why it matters to property management executives. Tony is from New Brunswick, Canada. He owns and operates a property management company, Ground Floor Property Management, with three locations, and he’s been in business for eight years. He was born into the field; as a child he lived in a building where his mother was the resident property manager. Tony worked in the technology field after college and began investing in real estate. Then, he got back to property management and built a company that went from 0 units to 1,000 units in two years. Advice for Fast Growth: Call Everyone This type of fast growth came from calling everyone he knew. Tony called all the Realtor friends he worked with previously and used his relationships and connections to quickly establish himself. There was a snowball effect from picking up the phone and letting people know he was in business. Property management is a people business and a relationship business. It’s hard to earn new business sitting in the office. Go out and meet every Realtor in town and anyone associated with the rental business. Connect and create relationships to increase the amount of business you’re doing. Fourandhalf note: We were at the recent Inman Connect San Francisco 2017 – Real Estate Conference, where high-powered real estate agents meet to stay ahead of the industry. Of the real estate agents we spoke to, the majority of them did not have a relationship with any of the property management companies in their community. It is important for property management owners to be aggressive in conveying their value propositions to people like real estate agents, where there is a great opportunity for a mutual partnership. Sponsor for Today’s Podcast – NARPM Balance and Confidence – Define Your Property Management Purpose What does it mean when Tony says the property management industry is off balance? When you study this industry, you see a lot of the same trends. It’s chaotic and stressful and busy. There’s a lot of negativity associated with the work, and that negativity often comes from the property managers themselves. There is a lot going on at once in a property manager’s day. Everyone knows it’s stressful. But, if you’re in a position of weakness – either you’re having issues at home, or your health isn’t where you want it to be, or you’re not connected to yourself spiritually – you won’t be clear about where your business is going, and the stress and the chaos that comes with an average day will be magnified. You need a purpose to what you’re doing, and if you don’t have that purpose, the daily grind is going to be much harder to endure. Every day that you come into the office, you need to know where you’re going and why you’re doing what you do. Not only do you need to know that – your staff and your team need to know that as well. Everybody needs to be aligned with what all this is for. Tony has a two-year roadmap that he shared with his team and a list of goals and opportunities that he wants to achieve. But, the statistic that resonated with them more than anything else is this: Last year, Tony’s team housed almost 2,000 families. That’s the purpose that will balance and motivate a team; knowing that 2,000 families have relied on them. Well-balanced and empathetic property managers will un

According to the Iceberg Report, right now in the United States, there are about 22 million single family rental homes and multi-family rental properties up to fourplexes. Out of these, 14.3 million, or 65 percent, are self-managed by the investor or property owner. This gives a vast opportunity to the 32,000 property management companies competing for the business. By contrast, in Australia, about 70 percent of similar properties are professionally managed. If the United States follows the Australian model, there should be about 8 million single family rentals coming into the professional management market over the next few years. Property managers can double their business by default. But – there will be a lot of consolidation in those 32,000 management companies, and the best companies will get most of the business. One of the biggest problems in the property management industry is the lack of trust between landlords, investors and professional property managers. A large portion of that potential market doesn’t see the value in professional property management and there needs to be a bridge – one that places a focus on customer experience. One way to bridge this divide, improving the customer experience, is to implement a high performing team framework. A framework that results in an engaged team with a true career path, a team motivated to work with clients at a level that is otherwise impossible to achieve. To date, the real estate business industry has been ignoring fundamental concepts like this when it comes to developing motivated, engaged employees and getting better results in both customer service and employee and owner retention – with the profitability that comes along with it. The customer experience needs to be improved for both property owners and tenants, and the best way you can do this is to empower your team. Happy employees make happy customers who make happy shareholders. Our guest today, Adam Hooley, has been in real estate all his life and has worked in many corporate environments. Along the way, he picked up some good habits concerning how to manage teams and has brought those tools to bear, helping property management companies change the way they do things. Adam recently spoke about the framework of a high performing team, and he has a lot to share. Property Management Structure: 3 Ways Companies are Currently Organized Two main business “frameworks” currently exist in property management company structures: the portfolio framework, and the task framework. The portfolio framework is one property manager taking care of all aspects of a portfolio of properties from start to finish. That one manager is responsible for leasing, property inspections, maintenance requests, inspections, and contact with tenants and owners. The portfolio system can be more efficient, but if one property manager leaves, you lose a lot of knowledge and information about the portfolio that was managed. That’s a huge drawback, especially if there isn’t a clear path to advancement for experienced employees, causing them to leave you. The task (or departmental) framework is putting individual staff members in charge of specific areas for all of the properties the business manages. There will be different people in charge of leasing, inspections, maintenance, owner and tenant contact, etc. This large number of possible contacts can create confused owners, confused staff, and a loss of efficiency. Again, neither of these frameworks provide accountability or career paths for excellent performers. In the U.S., there’s a third system, which is a hybrid of the two. In the hybrid system, there is one property manager in charge of a portfolio, who has significant support from other property managers and others who handle maintenance, inspection, late notices, and other tasks. The hybrid system is probably the best system if you had to choose out of the three frameworks – but we’re going to give you a better option. Why It’s Time to Rethink Your Property Management Company Structure We understand it’s a lot of work to restructure a team and rethink their job descriptions. But, this alternate departmental structure solves a few key problems. For one, it provides a holistic view of your business for employees and prevents people from working in isolated parts of the property management business structure, without seeing the overall picture. For another, recruiting, retention, and turnover are issues all property management companies face. One of the ways to fix this is by providing an upward career path, which this framework includes. You’ll find that when these issues improve, customer satisfaction and experience improves. This provides a higher dollar value for each customer, as you’ll keep them longer. This also means you can spend more money to acquire customers. You’ll get a more sustainable staff, eliminate the costs of the hiring process and training, and achieve more engaged clients because there’s a consistency

Our guest today is Kasey McDonald, who trains Business Development Managers (BDMs) in Australia and here in the United States. She is a consultant for the BDM Academy, which helps property management companies grow and scale, paying special attention to sales.The topic we’re discussing today is how you can support your business development manager so that you can scale your property management business. Without a proper sales system and salespeople, a business will never grow to where you want it to be. In the U.S., it’s a huge area of opportunity. Kasey has been a BDM herself, and has over 19 years of experience and knowledge in this area. The Role of a Business Development Manager The role of a good business development manager is to bring new management accounts and be responsible for the complete sales cycle. This is typically done through different methods like handling telephone calls, building referrals, creating newsletters, and hosting workshops. You’ll need to be clear as to what the expectations are for any BDM that you hire. You need someone who: is organized possesses great time management skills can prioritize and delegate has fantastic sales knowhow has networking skills and most importantly, has the right attitude. Attitude is important. You can train skills, but you cannot train an attitude. If you are able to find someone with these qualities, then you will have the archetypal business development manager on your hands. If the BDM understands the direction and expectations from the business owner, you’ll get great growth, as long as they are dedicated to the process. Two Common Mistakes Owners Make When Hiring Business Development Managers Before starting on your search, be aware of two big mistakes people make when hiring and training a business development manager: First, owners employ a BDM before the business is ready. You have to analyze and assess your business. Otherwise you could think you’re growing, but properties are actually going out the back door because you aren’t providing the level of service that you need to provide. Make sure you know and understand your business and what you can take on. Have the processes, systems, and a database in place. The second mistake is not looking at targets and keeping the BDM accountable. Some business owners will employ a BDM and just let them go, leaving them to their own devices. No one is checking in or monitoring performance or keeping them accountable. Then, there’s no growth and no one knows why. You need to make sure that you keep your BDM accountable and sit with them regularly to review targets. In order to have success with a BDM, do your best to avoid these mistakes. Strongly consider the direction of your business. This means knowing what kind of income is being generated, and how much it costs to manage those properties. With this information, you’ll be able to work out incentives for your BDM as well as the Key Performance Indicators (see: Property Management KPIs) and goals. Once you have realistic goals and targets for your business, from there, you can go through individual activities that you want your BDM to handle. When Should You Hire a BDM? Kasey decided her business needed a BDM when she was at 50 or 60 properties. At that point, she herself moved from the role of property manager to the role of BDM, and hired a property manager so she could focus completely on this part of the business. It accelerated her business quickly, allowing her to add 127 new properties in a year. Where Do You Find a Good BDM? Look at your existing business. Depending on your size, you might already have a staff member in place who would make a great BDM. Maybe that person is not performing well on a sales team or property management role, or they are struggling slightly in what they are currently doing because their skill set is different. Look outside of the real estate industry. The hospitality industry is a great example; you always find great waiters and waitresses who have amazing communication and customer service skills. Deniz Yusef mentions that bank tellers are also a great place to source talented individuals. Ask them if they’ve ever thought about a career in real estate. Your BDM needs to effectively communicate with clients and deliver outstanding service. Tasks for a BDM When Starting Out As mentioned earlier, you need to be clear as to what you expect out of your BDM, or you and the BDM will find this to be a frustrating experience. When starting out, hone down what your priorities are for the first three months and then six months after that. You can even take it further and decide what to focus on in the first 30 days. These are a few things that you can have your BDM start out doing: Make sure the services you’re currently delivering are outstanding. That would be a specific task for the BDM because you don’t want to grow your business while losing business.

Two guests are needed today because our topic is complex: attracting and retaining top talent for your property management firm. The specific challenge is that, according to Forbes, 60 percent of everyone in commercial real estate services will be at retirement age in the next five years. Even if you are a single-family residential property management company, are you attracting younger talent to your company and to the industry? There needs to be a shift from hiring people who just want to make ends meet, which is transactional and creates turnover, to hiring professionals interested in growing in the industry. The guests today are Joe Killinger and George Pino, who are experts in this field. Two sponsors make this show possible: NARPM, the National Association of Residential Property Managers, and PM Grow Summit, the annual educational summit for growth-minded property management entrepreneurs. Introduction: Joe Killinger and George Pino If you visit therrd.com, Joe and George provide resources for real estate services and the property management industry. There is tenant screening, property and renters’ insurance, and other tools. It’s useful for property managers and individual investors. Like many successful Property Management company owners, Joe and George got into the industry by investing in properties themselves. TheRRD is meant to help property management companies build better communities. They understand the challenges of managing properties both as individual investors and as property managers. State of the Job Market in the Property Management Industry A lot of times, the starting pay is pretty low in property management. The numbers are tight and lean, and you won’t necessarily retire on property management unless you get to a large size. Typically, the property management industry tries to recruit people at low income levels. Employee turnover is high, and often they have no interest in growing. They are happy where they are. In order to combat this, there needs to be a fundamental shift of hiring people who are interested in the field as a career rather than people who just want to make ends meet. Turnover costs money. When you lose someone, you have to train someone new and hope they will work. Property management is not a sexy career, so you need to reframe how you’re presenting the opportunity if you are looking for people who are looking to grow. Overcoming the Challenge of Better Recruiting Property management may not be sexy, but the real estate investor is sexy. Plenty of coaches are teaching independence through real estate investing. You can connect that to hiring employees for the property management field. You can position your job offer as learning to become a smart investor on someone else’s dime. People can learn the whole industry this way, from leasing to management to identifying investment opportunities. Go after and look for people who are motivated by something other than a paycheck. Consider reaching people who are interested in property management because they want to become investors. If you can offer them an opportunity to learn how to be a better investor, how to save money, and how to learn from the property management mistakes that have already been made – you will find some great talent. They may not realize it at the time, but there is also the potential to shape the landscape of real estate. On the residential and commercial sides, you can build communities. What a property manager puts forward and how they interact with tenants and owners is reflective of the community at large. A bad property manager can pull an entire community down. How to Develop an Intern Program An intern program can work very well. Interns who start with you and learn with you tend to stay on for the long haul. They might start with tasks around the office and some leasing, then they can grow. Get to know high school guidance counselors and talk to them about property management and the growth opportunities you offer. Talk about how careers in this field can affect the community. Reach out to small colleges, and you can get some candidate referrals. An internship program is the top of the funnel. It’s as simple as having your intern do some business development database management. You might structure your internship to be during the summer months, these can be college kids who are graduating or beginning their senior year. It starts as a daily grind and if there’s interest, you can give them additional opportunities. Someone with a yearning for knowledge is a good indicator for talent you want to keep. Have them show vacant properties or work on marketing. They can also put together ads and review information on properties as they update them in your system. From there, they can progress even further. Usually, internships are unpaid because they are gaining knowledge and experience. Sometimes, you can pay for some living expenses, but it’s not typically a paid position. You can

Our topic today is maximizing fees, otherwise known as value-added services. The main revenue source for most property management companies is their management fee, but there are many value-added services that can be incorporated to increase revenue. Our guest, Darren Hunter, specializes in this and is a household name in the Australian property management community. He has spent most of his professional life helping property management companies figure out their business and today he’ll go over fee maximization for property managers. Learn: The typical profit margin of property management companies in the United States. The psychology behind landlords and three-part pricing strategies. How you can implement 3 different value-added services today. Who is Darren Hunter? Darren Hunter began as a property manager in 1989. A consultant and trainer now for the last 11 years, Darren works with property managers and their companies in Australia, New Zealand, and the United States. He has specialized in helping real estate business owners earn more money not only with new business but with their current business as well. It’s called fee maximization, which is the ability to increase and add fees with current owners. An Overview of Value-Added Fees In Australia, there is a mentality on the east coast that the management fee should cover everything. Property managers are afraid to charge for things other than management and leasing. So, those companies typically earn 15 percent of their revenue outside of management and leasing fees. On the west coast of Australia, however, you find 50 to 60 percent of income coming from fees outside of management and leasing. Those are the best earning companies in Australia. In the United States, most of a management company’s revenue is coming from management fees and tenant fees, but not anywhere else. It’s an interesting breakdown, and sets you up to easily double your profit margin. NARPM did a survey that said 20 percent of the average property management company’s revenue is profit. If you are earning a total fee income per property of around $2,000 per year for one property, and your profit margin is 20 percent, it means you’re only earning $400 on that property. With traditional thinking, to double your profit margin, you need to double your roofs and front doors. But, all you really need to do to double your profit margin is find another $400 a year in these extra value-added fees. That’s a more efficient way to double profit. You won’t need more doors and more staff and more overhead costs. On DarrenHunter.com, you can find a knowledge library that includes 11 Profit Laws Regarding Fees. The first one is easy. Two people meet each other at a barbecue and discover they own investment properties and they each use different management companies. Those two people will talk about what they’re charged in management fees but not any other fees. That’s not as high on their radar, and it’s not as important as management fees. Focus on getting the management fee to be the market rate. Then, maximize the leasing fees. A lot of areas in the U.S. don’t have leasing fees at all. But, if you maximize that fee to the accepted market rate, you can then do the work in the add-on fees. That’s where you get your results. Property owners really focus on the management fee. You can work with add-on fees because your owners are not thinking those are as important. Three-Part Pricing Strategies Some management companies will set up a tier system where they have a low fee option that comes with optional add-ons, a middle fee option that includes most of the management services but still leaves room for add-ons, and the highest tier, which is one fee that includes everything. People often go to the middle and they tend to negotiate which package they want instead of negotiating fees. There are also two-tier systems with a lower package and a higher package. Two package systems still offer a choice, so there’s not just one fee structure. You can usually get a property investor into the top package, where one management fee covers everything. Just make sure that the fee is high enough to cover all your services. Price anchoring plays to psychology. In a three-tier property management pricing structure, you’re really expecting to sell the middle package. The top tier package might not sell as often and the bottom tier package is the anchor against that popular middle package. There are different market cultures at play, and you have to go with what works. Do your best to limit pricing choices to three. The more packages you have, the more confused people can get. That’s going to prevent them from making a quick buying decision. If you structure three packages right, you can succeed as long as it’s easy to understand. If it’s too confusing, you can lose business because people won’t be in the mindset that’s required to make a purchase. Experiment and see what works. Testing and measuring is the

How do you restructure your property management company or property management department to satisfy a savvy client? Rhys Standley, Owner of Just Property Management in Australia, has a creative solution that has increased his company’s client satisfaction and employee satisfaction. We met Rhys at the recent LPMA event in Australia, where the best minds and operations in property management meet once a year. Rhys started his property management company six months ago and manages 1,000-plus properties. He has also founded an outsourcing company called qResults. Today, we go over what Rhys did to restructure Just Property Management. Property Management Clients are Savvy There’s a new economy compared to what has been standard in the past. Customers and clients have a lot more information at their fingertips than they have ever had before. Now: they want to know more they do know more, and they want instant answers. The days of making a phone call and waiting a few days to get a response is unacceptable in today’s climate. Because of that, a lot of property management companies are forced to change the way they do things. A process that once worked doesn’t work anymore because clients are able to expect more. Unless you adapt to new expectations, you’ll become extinct pretty quickly and you won’t grow your business. Perception of Being a “Specialist” in Property Management The typical real estate office is set up like a general practitioner’s office. There’s a lot going on; residential sales, commercial sales, auctions, homewatch services, residential and commercial leasing. That was the way Rhys had his company, until he completely rebranded his company by doing just property management. Doing only property management in his market was unique at the time, and landlords reached out to his company more often. Embracing that one specialty will shift the way your customers see you. You’ll no longer be a general practitioner – you’ll be a heart surgeon. People were happy to pay Rhys a little extra as they expect better service and advice because he’s a specialist, not a generalist. This will create a culture shift in your office and in your marketplace. At that point, reality changes. You need to have the expertise you claim to have. Your systems must be on-point and your checklists have to be thorough, and everyone needs the right training. Going against what everyone was doing at the time has allowed Just Property Management to manage 1,000 doors in a relatively quick time. If you already only do property management and your competitors do too, see if there is an opportunity to dig deeper and see what you can offer that the rest of your competition isn’t able to. Revolutionizing the Property Manager Job Function In your quest for efficiency and the best customer service, the role and the job of the property manager has to evolve. In the past, property managers have done everything, they’ve: shown prospective tenants their properties processed applications for properties completed property condition reports and entry reports typed lease documents conducted inspections and coordinated maintenance. All these tasks help contribute to a high turnover in the property management industry, due to the stress that comes along with the job. So, Rhys asked himself: What is the one main thing that a property manager should do? It came down to communication. Communicating with your clients is a manager’s most important role. If all a property manager had to do was take phone calls from investors, all of the other issues would take care of themselves. Owners would be a lot less likely to complain, and tenants would be happier too. Owners and investors don’t care who is taking care of maintenance or typing up lease documents. They do care when their property manager can’t be reached. Here’s a typical situation. A property manager is out of the office doing inspections or dealing with a tenant issue at the property. An owner calls because he drove past his property and noticed the lawn is overgrown. He tries to reach the property manager, but can’t, so he leaves a message. By the time the property manager resolves the issue in the field and returns to the office, there are dozens of emails to respond to and phone calls to return. That owner doesn’t get called back, and then the problem is not an overgrown lawn – it’s a lack of communication and responsiveness. When property managers are time-poor, customer service suffers, and the property management business suffers. The issue for the owner is that he’s paying a property manager but that manager doesn’t have the courtesy to return his call. That makes the owner feel like the manager doesn’t care about him or his property. If you can cut that off and take the call, you prevent a lot of brush fires from occurring. Internal communication is important for the property manager to focus on as well. Delegating tasks in the office is essential. The manage

The topic today is how to sell property management services by building a powerful local referral network. Our guest, Joe Stokley, can speak intelligently on this subject because he is a master networker. Joe runs Stokley Properties, a successful property management business in Walnut Creek, California. Joe and his wife began as real estate investors, and Joe worked for a large real estate investment company until the recession in 2009. Their own rental properties were facing foreclosure, so they learned how to do loan modifications and worked with banks to restructure. After fixing their own personal portfolio, they decided to start a property management company as they felt their skills were needed in the market. The business started at home, and within seven years Stokley now manages 500 properties. The key indicator to their success? Joe was able to build a third of his business through local networking. Below, you’ll learn Joe’s advice for any property management owner that is looking to gain business by being involved with the community. Committing Time and Expertise The most important thing to understand is that you can’t expect to show up to a meeting and expect business to come to you. It’s important to really jump into it and get to know the people and the process. Take advantage of the forum, and let the membership get to know who you are. This will help your networking plan take off. This is a community, and word gets around quick about who you are and what kind of work you provide. So take it seriously and get involved. People will get to know you, and that translates into business. If you want to bring half a million dollars in lifetime revenue, you’ve got to do it right. Where to Look to Find Existing Networking Groups You might find a Business Networking International (BNI) group that allows you to meet people from different industries. That’s where Joe started, but it felt limited for his needs. There was one Realtor and one lawyer who could help him bring in business, but he wanted more exposure. So, he got involved with the Contra Costa Association of Realtors, and an affiliated group within that organization called the Contra Costa Real Estate in Motion, or CCRIM. They met weekly and had 150 members, all of whom were Realtors or associated with the real estate business. There are local organizations similar to the Contra Costa group across the country. Lots of areas have a Board of Realtors, and there are networking groups that grow from there. They are specific to your local community, and it’s a great way to build a Realtor network. You need to show up to the meetings and see what sprouts. The Board of Realtors in your community may have their own networking group that goes on property tours or meets regularly. They can refer you to an existing group that is thriving, and that’s where you’ll begin to build your network. These are not the only groups we have seen property management companies have success in. Consider these groups, if they are available in your local area: Rental Housing Associations Chambers of Commerce Rotary Clubs A website like meetup.com is also a great outlet to help you discover networking groups within your local community. Getting into a Leadership Position As you network and share your particular area of expertise, there’s no reason why you can’t move into leadership positions, especially if you’re willing to put in the work. It’s as simple as sharing advice, and being proactive because when you do something for nothing, people will reciprocate. If you don’t do that, it’s easy to get discouraged and drop out. Consider doing a sponsorship so you can give a presentation. When you sponsor a breakfast or something similar, you get an infomercial-type opportunity where you can give a presentation about the advantages of having a property management partner. That allows you to teach other people your trade. See yourself as an educator, and your audience will respond with questions. The Realtors Joe was speaking to wanted to sell houses, not deal with property management. As a trustworthy resource, he was beneficial to them. Moving from sponsorship to leadership is a pretty natural progression. Many of these groups have board elections, so you can run for office. Talk to people, be friendly, and be open to others. It’s helpful to ask questions and listen to people. Make sure you’re prepared, whether you’re giving a presentation or simply networking. Be ready and be practiced because it shows. This is serious and it deals with the professional lives of the people you’re meeting, so respect the organization. The ROI on Joining Local Business Networks At the networking group that Joe discussed, he paid $3,000 a year to be an annual sponsor. That investment plus the investment of 100 hours a year on meetings and events resulted in a lot of business. Joe said about a third of his business came from these networking events and the contacts he made t

The topic of preparing your property management company for a successful exit is a big one, and our guest today is one of the brightest minds in property management. Andrew (Andy) Propst has experience in taking his company, Park Place Property Management, from 200 properties to 4,000 properties in eight years and in just the last year, he has added 700 doors organically, and another 400 through a local portfolio purchase. Andy is also a NARPM past president, and he is now the CEO of HomeRiver Group, a nationwide company that acquires property management companies and their portfolios. Andy will share with us his insights for any owner who is looking to position their property management company for a successful exit. What Size Do You Need to Be to Meet Your Financial Goals upon Exit? It’s an important question that 80 percent of property managers don’t ask themselves. People see property management as a source of income, which it is. But everyone who owns a business should eventually prepare to sell it and the sooner you start to prepare, the better. Let’s say you want to exit with $5 million, and the average rent you collect is $1,800. On the open market, you would need 2,000 to 2,500 doors to get out of the business with $5 million. Some people have a lot of doors but don’t earn as much on those doors and that’s going to alter your number. 5 Things to Avoid When You’re Planning an Exit There are some things we see that trip up the acquisition process. Try to avoid these to make a smoother transition. Accounting struggles. Your property management company must reconcile accounts on a monthly basis. Get good reports from your system. Have a trust account balanced and a historical units report available. You need clean financials. Unclear data. You need to know how many units you managed six months ago or two years ago. Have transparent, accessible data. Inconsistent Formatting. Sometimes, formatting gets in the way. Something as simple as not being consistent with St. versus Street can throw off a whole system. Lack of strategic planning. It is rare to see a strategic plan or a budget. These things are important as buyers want to see your future. Too many receivables. When owners and tenants owe you money and you’re not collecting, you could have hundreds of thousands of dollars outstanding. That’s a problem when you’re trying to sell your business. What’s More Important to Buyers – Top Line Vs. Bottom Line Revenue? When you’re building a business to exit eventually, you need to focus on both top line revenue (gross sales) and bottom line revenue (net income). People base the success of their companies by the number of doors, but who cares how many doors you have if you aren’t making money on them? If you want to sell your company, you need to have a healthy bottom line. A company like HomeRiver Group buys or evaluates on EBTDA – which stands for Earnings Before Taxes, Depreciation, and Amortization. You get a dollar amount based on your profitability margin. The higher the profitability means a higher payout for your company. The bottom line really matters. The door count doesn’t matter as much as the overall performance of the company. In Andy’s experience as an acquirer, there is the potential that HomeRiver Group can take a company that’s underperforming and add some efficiencies to make it more profitable. If they can change the performance, they will pay for a brighter future and not focus on profits. There are other companies that do buy per door or based on gross revenue. However, the typical model is to look at the bottom line, add a multiple, and figure out the value of the business. It’s best to not overcomplicate it. The Flaw in Evaluating Based on a Dollar per Door Method Some companies have a portfolio of scrappy B or C level multi-family properties. There will be a difference in value for those businesses versus someone who has really paid attention to what they manage and has the best properties. Buying a property management company in an area where the rent is a lot lower and is generally a rougher area is a lot different from buying a property management company that handles rental property in the suburbs of San Diego. It’s important to grow your business door-wise, but it’s more important to have high-quality properties. Ways To Increase Value in Your Property Management Company Increase Worth with Value-Add Services Value-added services are sometimes called ancillary fees and are also a great way to increase a property management company’s market value. It shows continuity and opportunities. The common ratio is 60 percent of revenue from property management fees and 40 percent of revenue from value-add services. Try to aim for a 50/50 ratio when it comes to these figures. Some people might diminish such services, but it’s starting to change as the buyers now value those fees. Property management is an amazing business with recurring revenue that’s har

Hosting events that educate real estate investors will increase your visibility in the local community, position you as an expert, offer major credibility, be a potential boon for referrals, as well as get you in front of an ideal customer. Needless to say, it is a great way to drive new business, and we have an excellent guest that will offer their advice on how you can successfully use it for your property management company today. We bring in Douglas Skipworth, Executive Broker at CrestCore Realty in Memphis, TN. Douglas has found seminars to be a great way to establish trust in a very competitive market, and this has helped CrestCore Realty grow into the business it is today. About Douglas and CrestCore Realty Douglas got into buying rental houses, and that evolved into managing property and helping other people buy homes. Today, his company owns 800 properties, and they manage around 2,600 homes in the Memphis area. He believes he is a better property manager because he’s an investor and he is a better investor because he’s a property manager. This episode is brought to you by the 2017 PM Grow Summit, gain access to 26 videos, 21 slide decks & 100 pages of notes for only $299. Click here to sign up for the exclusive material. Investor Education Topics of Discussion Putting together the content of your presentation is both an art and a science. When you’re trying to set up a class or a meet-up, choose topics that will attract people. You can: Go based off FAQs. Poll people and see what interests them the most. Think about what you wish you had known, what you want to know, or what people are asking you. Teach people what you have learned yourself. If something fascinates you, start digging. Then, share it. When you find a topic, don’t be afraid to ask for help. Reach out to your current circles and recruit some of your best investors to talk. People can learn from any expert who has deep-seated experience in real estate investments. Use Data and Statistics Your presentation will need to include data that is applicable to the topic. The data might be trends in specific areas of your local market or what you’ll see over the next 12 months. You can: Talk about what financing looks like and pinpoint where foreclosures are. Look closely at price points and determine whether it is a buyer’s or seller’s market. Report on areas that are really performing and providing cash flow. CrestCore makes sure to report back statistics they’re reading or data they have internally that they can relay to potential investors. They give them lease rates and rental rates and how much turnovers are costing. They’ll talk about evictions and challenges or how long properties are on the market. You can get as detailed as you want and provide ideas per neighborhood for returns and trends. Potential investors will find this information very valuable. To Pitch Your Services, Or Not to Pitch? For a property manager, you can occasionally pitch your services. You’re building your business by making these relationships and providing your content. You don’t want to sell your own services too hard in these types of events. Get in the frame of mind of doing your best to help people, this will indirectly help you. You are helping people become investors. But if pitching works for you, go ahead and pitch. Sometimes you want to sell and that might work for you. Figure out what you’re comfortable with and create something that fits. It’s possible to gain hundreds of houses a year, and many of those will be related to your investor education. CrestCore Realty grew by 700 houses last year, and probably at least 30 of those came through these educational opportunities. Then, there were indirect conversions. Ten to twenty percent of his new business can be tied to that investor education. The Not-So-Obvious Reasons Local Investors Benefit From These Seminars Providing crucial insights and knowledge isn’t the only benefit your attendees will gain from these educational events. Think about this: You’re sharing knowledge and materials as well as resources. There are reference materials so they can take deeper dives on their own. They are also getting contacts with peers. One of the things that’s most important for newer investors is they get confidence. They learn that it’s not rocket science. Provide a friendly environment, contacts, and resources, and people will feel they are capable of becoming real estate investors. You can see if people are ready to buy properties by sharing specific deals. There could be deals that close or get started just from your presentations. It’s a great way to help people become financially independent. No matter the location, people will always be interested in learning about real estate in their local area. Holding educational classes helps you stand out from your competitors, especially if you are just breaking into the property management industry. Getting People to Join Your Invest

Today, we are talking about maintenance services and how you can turn it into a competitive advantage for your property management company. Here with us to answer our burning questions on the subject is an expert in this realm: Curt Fluegel, the CEO and founder of PM Toolbelt. About Curt Fluegel, the Founder of PMToolbelt Curt started in the industry as a property manager, mostly fixing and flipping property during the recession. Maintenance is his specialty and had been a core part of his business — until he lost a lot of money on it. To combat this, Curt systematized his business and created PM toolbelt. PM Toolbelt is a software platform that helps property management companies manage maintenance services. Below are Curt’s tips for property management owners that are considering on providing maintenance services: When Professional Property Managers Lose Money on Maintenance If any property management company provides maintenance services without thinking it through or having a process in place, they would most likely make more money by not providing it. A lot of companies have lost money this way, and it’s often due to lost receipts or not tracking expenses well enough. You may not realize you’re spending more on parts and labor than you are earning. You have to make sure your maintenance personnel are busy working and not spending extra time at Home Depot. Fixing homes and providing a good maintenance service is great, but to avoid losing money, you need to track better and charge more. Managing Your Time with a Property Management Company and a Maintenance Business As a CEO you shouldn’t spend any more time on this than you do on other tasks. The amount of time a CEO spends on a maintenance business depends on communication and scheduling. There are tools that can help with the actual oversight of routine maintenance. You can look at profitability by property or by tech from a CEO level; it’s no different than spending time on anything else. To control scheduling, getting the right systems is key. You can get away with a lot until your company grows too large. If you can alleviate the pain points like confirming that specific work has been done, or making sure maintenance coordinators, techs, and clients are all in the communication loop, then everything else can get pretty easy. For maximum convenience, your software should allow you to drag and drop to schedule a work order. That way, there’s not a lot of task management activities except on your bookkeeping side. But, if you don’t have a dedicated bookkeeper, you may have a bigger load. How a Maintenance Company Allows You to Take on Any Property Curt managed to pull in 50 percent of his revenue last year with his property maintenance company. A lot of factors accounted for that, especially the property choices that were made. Because he provides maintenance services, Curt’s company has the flexibility to work with both carefree easy-to-manage properties and properties that would make the maintenance company a lot of money. So that opened up what they could go after, increasing his revenue. Everyone wants the high rent/low maintenance properties in their portfolio. But, you’ll see other properties a little differently when you have a maintenance company to run. Adding an older home with repair needs to your portfolio means that the maintenance division will make a lot of money – money you wouldn’t make offering nothing beyond standard property management services. Curt took on a lot of properties from new property managers who felt overwhelmed with the amount of preventive maintenance their investments needed. You can get away with a different management cost when you can come in as an expert and explain why the owner’s property will be a struggle to manage. Also, you can manage it better than a person who doesn’t know as much about maintenance. You can charge a higher rate and still bring in more profit from that investment because you bring stability to the property and to the owner. What to Track to Start Saving on Maintenance Services You need to track the location of your service technicians and where your parts are. If you don’t know how much time is spent on each project and you can’t say where each penny went, you’ll lose money every month. So you have to be firm with your service technicians. Service technicians are thinking only about what they need to do – you need to be planning their next move. Tracking can be made easy; there are GPS apps or vehicle trackers you can use. There are cheap or free apps to help with time clock tracking such asTime Clock Wizard. QuickBooks allows for time tracking as well. The key is to track your employees. Software like PM Toolbelt helps property management owners achieve just that. Your service technicians are getting paid by the hour and you’re supposed to be making a profit. You need to know if they’re