Growing Your Property Management Business: How To Rise From 5 to 500 Units
With the year 2016 almost drawing its curtains, we can confidently declare that it was one hell of a ride for a bulk of property management firms. The real estate market scene in the US has indeed lived up to earlier predictions, as houses continue recording some of the highest rental rates and prices since before the economic downturn in 2007- fuelled by downright low mortgage rates and increased demand for property. And fortunately, it probably won’t end this year. Although a survey by Urban Land Institute and PricewaterhouseCoopers recorded a drop in positive sentiment at 69% down from 84%, a significant majority of the biggest research and reporting firms, including Trading Economics, Forisk and NAR, predict a continuous growth curve in 2017, all through to 2020 and beyond.
The biggest beneficiaries of this boom, apart from property owners, of course, are property managers and real estate professionals. A majority of the 231,457 registered property management firms, however, going by figures reported by the U.S Small Business Administration, fall within the small-business bracket- managing a limited number of properties. This restricts the amount of profit such businesses make, with a bulk of the $74 billion annual revenue going to large firms with extensive property portfolios.
Of course the only way to bounce into the big league of the most profitable management firms is growing your property portfolio. Unfortunately, going by the average annual property management firm growth rate of 4.6%, it would take you about 2 decades or so to climb from a 5 to a 10 unit portfolio. And sadly, that would still be far from the large firm bracket of, say 500 units.
So, how can you boost the number of your managed properties from 5 to 500 units? In other words, what are some of the most effective growth tricks for property management firms?
Boost Your Firm’s Visibility
Marketing is undoubtedly the top and most critical strategy for growing any type of businesses, regardless of the type of clientele. Creating brand awareness is usually the first step to successful prospect conversion, and property management firms are no exception.
With the internet currently hosting more than 3.4 billion users, digital advertising would be a good place to start. Build an attractive and responsive website as a core element of your online marketing framework, and leverage other tools like social media and search engines. Combining content marketing and search engine optimization for instance, could push your website to the first position on Google’s search results, which according to Advanced Web Ranking, enjoys a 34.36% click-through rate.
Since creating such an extensive online presence may take quite some time and effort, it’s advisable to employ metrics for tracking and measuring the efficacy of different strategies on your target market.
Manage Employee Efficiency
Working in a property management firm may seem like a relatively simple undertaking on paper. After all, what’s so hard about converting a couple of prospective clients, following up on tenant payments and tracking ledgers?
Interestingly, according to Steve Murray, a senior author at Real Trends, it’s actually not that simple. Through a slide presentation at the 2016 NARPM broker/owner retreat in Las Vegas, he indicated that one of the hidden issues that are currently being felt at all levels of property management and brokerage firms is finding the right talent to run and management such businesses. Additionally, according to research conducted by his company, employment and benefits costs are constantly rising sharply, and there are no specific measures to mitigate this trend in the foreseeable future. While this may be great news for employees, property management firm owners now have to dig deeper into their pockets just to keep a professional workforce.
Since you cannot control the rising costs of employment, the best way to approach this would be learning how to leverage your workers for maximum company growth. And that requires effective efficiency management at all levels of the firm. It’s important to note however, that overworking you employees doesn’t necessarily translate to eficiency. You should rather employ a quality management system that analyzes productivity at all levels and aligns business operations according your goals, including marketing, attracting prospective clients and expanding your property portfolio.
Reduce Tenant Turnover
One of the most effectual strategies of attracting new property owners is maintaining a solid foundation of steady tenants and low turnover rates. Otherwise, increasing your property management portfolio would only be counteractive if your turnover rate matches the growth rate. In addition to improving your reputation among property owners, minimal turnover rates considerably saves you the trouble of cleaning, painting and prepping empty units for new tenants.
Although external factors like politics apply, tenant turnover rates are largely dependent on strategies you employ to keep happy tenants. And it all begins before tenants move in, with a comprehensive tenant screening process. Although tenant screening is constantly emphasized, only a minority of landlords commit to the entire process. According to a study by Liminality Inc, a Boston based research firm, only 51% of landlords get in touch with past landlords for references, and 23% don’t even bother to conduct credit checks. As a matter of fact, only 44% bother to go a step further and conduct sex offender checks on their applicants. This, of course, increases the risk of signing in a tenant who may cause problems down the line, or even force other tenants to move out.
Although you could employ necessary measures for a comprehensive tenant screening, it’s advisable to leverage a good and comprehensive property management software. It comes with all the tools you’d need, plus other features for effective property management- hence keeping your tenants happy and satisfied.
Develop Creative Business Models
The business world, including the real estate industry is fast paced, making survival a reserve for only the most creative businesses. While property management simply entails looking after a piece of property and tenants on behalf of a property owner, you could get creative with the entire process and develop additional revenue streams, not to mention a growing portfolio.
One of the best ways to do this is critically analyzing your local market and identifying loopholes. If you’re based in a popular holiday destination for instance, you could get in touch with travel companies and develop a model where you temporarily house tourists for a specified period of time. This alone could build your reputation among property owners, consequently increasing your prospective client base.
One of the key strategies of growing your management portfolio is adapting to ever-changing real estate environment. In addition to developing critical assessment skills, your firm should be fluid enough to accommodate new elements as you respond to changing trends. And finally, you should seek to employ necessary metrics and KPIs to analyze the risks and efficacy of strategies within your firm. This will keep you informed on what you should continue leveraging, and elements your firm would do better without.