Don’t Reinvent the Property Management Wheel
Make sure you’re aware of all the resources available for property management.
In an industry with an estimated 70% of investment property owners managing their own properties, and 36% of Americans living in rental properties, property management is here to stay. This industry, however, is not for the faint of heart.
Although many resources are available for the DIY property manager, any investor considering the self-managed strategy needs to assess the benefits of hiring a property manager versus self-managing.
Here are a few things to consider.
Financial Savings
A common misconception is that you’ll save money if you do it yourself. The most time consuming and costly part of property management is maintenance. Third-party property managers have relationships with maintenance vendors who will provide lower pricing and reliable services. They will have software and programs to build efficiencies in processes, which will save you hours per week. What is your time worth?
Relationships Matter
A survey of investment property owners revealed the following service attributes ranked among the Top 4 in a list of eight:
- Effective communication
- Accurate accounting
- Honesty and integrity
- Availability of the property manager
Interestingly, price ranked last.
Owners want to do business with companies they can communicate well with, who can competently manage the accounting aspects, who they can trust and who have local boots on the ground. Selecting the right property management company is less about being the lowest price, and more about building a long-term relationship.
Diversified Portfolios
What makes a stable property management company? Age? Experience?
A diversified portfolio typically points to a strong property management company. When it comes to your financial investments, you invest in many different stocks and opportunities, not just one. This applies to property management as well. Strong property management businesses will provide services not only for long-term residential management but also for commercial and short-term rental management, and community/association management.
A diversified portfolio allows property management companies to weather just about any storm. During the COVID-19 pandemic, long-term residential management saw very little change in rent collected. Through the months of April, May and June, 95% of rent was collected compared to 98% during non-pandemic months. Community and association management held steady during the pandemic because many investors weren’t making any changes to their management companies.
In some markets, there was a dramatic decline in short-term rental management due to state mandates to close. But as we emerge and start to reopen, travelers are changing their travel behavior. Instead of flying and traveling internationally, they are traveling locally, to more rural destinations, for longer periods of time. They are driving instead of flying. And, with schools and offices offering remote working options, bookings for a short-term rental for 30+ days in not uncommon.
Through the pandemic, most businesses with diversified portfolios were able to weather the storm fairly unscathed.
Trends in Property Management
More and more often, we are seeing property management companies convert their business to a brand name to help them grow and take their business to the next level. We hear regularly that they’ve gone as far as they can on their own and would like to tap into the brand’s additional resources. Here are the top 10 reasons property management companies convert to a brand:
1) Tried-and-true tested systems and processes for everything from accounting to marketing. Most property managers say they don’t have time to develop and document their processes, so having them available allows property managers to scale their business.
2) Access to systems and processes to build a diversified portfolio through all four pillars of property management. These include short term, long term, commercial, and community and association management.
3) Access to additional revenue streams.
4) Technology. A brand’s buying power can provide technology and systems not available to a single business owner.
5) Support. When working with a brand, property managers find that they are in business for themselves, but not by themselves. They enjoy having a network and support team to collaborate with and learn from.
6) Marketing. There is no better way to increase the value of your business than by partnering with a brand name. National brands will provide a “soup-to-nuts” approach to marketing and building your brand name in your local market as well as nationally.
7) Exit strategy. Many property manager veterans have worked for years, but they haven’t figured out how to exit their business and benefit from their hard work. When you align yourself with an established brand, you will build long-term equity you can convert to cash when you retire or are ready to start the next adventure in your life.
8) Competitive advantage. Aligning yourself with a brand name gets you to the front of the classroom when you present to new potential clients.
9) Ability to stay current with trends. Brands will have their pulse on the industry and will develop new programs and processes to adjust and adapt to these new trends. Whether you’re creating new housekeeping certifications to comply with new post-COVID 19 regulations or adapting to the new travel trends, a national brand will help you pivot as needed.
10) More manageability. Most property managers quickly become overwhelmed with the little details it takes to make their business work. As a result, they neglect adding new doors and growing their business. They are so busy working in their business that they aren’t able to work on their business. Don’t make that mistake. As you can see, whether you’re a seasoned property manager or new to the industry, you don’t have to reinvent the wheel. There are great resources available through associations like NARPM, CAI, VRMA and social media groups. Know what your customer is looking for and build your marketing message around it. Finally, you will need to determine whether joining an existing property management brand will help you take your business to the next level.
