Property manager starting up: Couple of questions!

Buying my what?
I've never bought a rent roll, ours was grown organically.

I have considered it a few times though.

 

Oh ok, thought i read one of your posts a few years ago saying you bought one to start it up. All good

Yeah, have considered it too, but they're pricey. Which is good for you and me if we ever want to sell

 

out of curisotyr

how would one create a rent roll starting from scratch?

me thinks, mail drop, poaching a few clients and offereing them a cut throat introductory price, and then relying on word of mouth? realesteate.com ad?

 

Find a community of investors. Network with them, be helpful answering their questions, solve their problems? That would probably generate some business.

 

Really depends on what you're trying to be, work that out first and the rest follows.

For some, it might be all of the above because they're just trying to build up a big asset at the expense of good service, morals, etc.

For me, didnt do any of those things. Had people lined up asking me when I was starting because they had no one else to go to (and I did the things Peter mentions above)

 

You would need deep pockets and a 2nd job to start that way, you have to have a place of business/home office to start off, which in itself costs - and you cant avoid insurance, software, car expenses etc as well as previously mentioned.

 

If I were starting a PM business, I'd get friendly with all the independent buyers agents in the area.

 

You would be surprised to hear that this would not work!!! You can't poach clients who are happy. And even if they are not happy, what proof do you have that you can handle their concerns?

Also People are not going to give you business just because you are cheap. You need to be more that that.

 

Some would - but are those the clients that you would want?

 

Yes and if you position yourself as being cheap you will get all the fee sensitive high maintenance clients that no one else wants.

Not a good business model

 

First of all you must have passion and genuinely want to provide a better service for investors. The reason property management is done so poorly is because most property managers simply don't understand what they are actually providing. They think they're big shot property gurus when most have never even owned a single property, let alone a portfolio. They don't actually know what is important to investors because they've never been a true investor themselves and they therefore focus on the wrong things. All the base line service provisions of PM are important and should be completed, but they're not points of difference and not what investors are truly looking for in a PM service as everyone provides those.

Property management is about customer service, plain and simple. Managing the relationship on behalf of your client (the investor) with their customer (the tenant) and the various other contractors and entities that form part of the investment equation - insurance, trades, council, strata, etc. Once you understand that and make all efforts to provide a good customer service, the rest will fall into place.

Be prepared to answer emails at all times of the day and night, 365 days a year. Be prepared to speak to disgruntled tenants and enforce the terms of the agreement on behalf of the landlord. Be prepared to speak to disgruntled landlords, sometimes who don't understand the professional advice and guidance that you're providing them or actions taken is to help protect them from breaking the law or stepping outside their bounds as a landlord.

You don't need a fancy office and plethora of capital intensive infrastructure. As with any business, you will need operating capital until your business becomes self sustaining and as with any investment or business, you should consider your cash flow requirements and use projections. Referrals are your greatest source of business, not fancy signage so get the grass roots concept of the service right and your rent roll will grow.

 

thats a very good point!

 

Which one is it?

 

At the end of the day if you did not have the passion for this stuff you would not last.

Problem as I see it with this industry is some of the larger pm companies get too large and their staff end up managing too many properties and burn out their staff and the service goes from good to bad.

I agree with what you are stating regarding pm not understanding what investors want.

Sometimes you have to train your pm and it can work well, I don't mind this as long as the pm has the right attitude if this makes any sense.



MTR

 

~ 500 properties grown organically one at a time with structures in place to keep the service would be an ideal scenario for me.

By big I did not mean buying a rent roll of 2000 properties, I meant small rent rolls of 100 - 200 properties are not profitable enough. Small rent rolls lose money are are too much work.

For me personally, I'm modelling people like taplin real estate in SA, they have the strength without the problems of detachment that the large franchises have.

I would also bet the smaller non franchised boutique agencies have a healthier profit than the franchises who continuously purchase rent rolls. I get letters from the larger franchises wanting to buy us out almost on a monthly basis.

So to answer your question, I would go as big as I can go organically.......

But ... this view point is what works for me today. It could change once I get there.

 

This is true. Rent rolls work on scale and to achieve profitability on base costs you really need 250+. Of course, if the owner is also working in the business and drawing a salary that can make it sustainable, but not technically profitable.

It also depends on what the agency decides to spend money on. For example, many agencies don't use Inspect Real Estate (IRE) to conduct letting because it's very expensive, particularly for a small agency. However, it's an amazing platform for minimising vacancy and maximising letting efficiency and organising private inspections etc. so we choose to use it. It is possible to run an agency without a range of internal provisions (like IRE), but it makes the job a lot harder and ultimately, we believe the service could be degraded given the significant additional time-cost by not running it.

On that note, one thing PMs don't place enough emphasis on is time-cost so I would suggest focusing on that as part of optimising your business. We time benchmark a range of tasks, from completing a CMA to submitting a rental reference, because it's as important to know where your minutes are going as much as it's important to know where your dollars are going.

 

Agree with that. Just like the airline industry, there are different market segments. Some people want a price proposition and choose to fly Tiger and Jetstar, others want a service proposition and choose to fly business class on Virgin or Qantas.

If investors want a price proposition that's fine, but they must realise that service is commensurate with price and with PM in particular, the price difference is not that large! For a few extra dollars per week you can experience a vastly different service looking after your multi-hundred thousand dollar asset. It's not a difficult choice in my experience.

 

What does IRE do for a PM? If investors understood what it does for a PM they may ask if a potential PM uses it when vetting which one to use. A bit like asking a potential bookkeeper if they use a computer, a calculator or an abacus?

 

Many agents only conduct open homes on a Saturday because "that's how it's always been done". IRE allows full optimisation of an inspection schedule and keeps tenants and landlords fully informed. For example, tenants can register via the software using the listing on re.com.au which we will conduct as a private inspection at a time suitable to the tenant e.g. 6pm on a Tuesday evening. It will then open that slot and other potential applicants can register for the same slot effectively turning into an open, or register for another private slot that suits them.

The PM can manage the whole process using the software including any changes to times or status e.g. the property is let before the inspection time on a Friday lunchtime, it will notify all registered parties that the property is let and all inspections cancelled. It will also send out inspection reports from private/open inspections to the owner telling them how many people registered, how many turned up, how many took applications and what the feedback was etc.

PMs get the inspections and letting process wrong from a customer service POV because it's a big job! Managing multiple enquiry and times and trying to coordinate the whole lot while keeping the owner informed. This basically does it all from one platform and makes life much, much easier and the customer service is vastly improved.