Do you want to start your own Property Management Company?
Property management firms should improve efficiency and develop new services and revenue sources to evolve and become more profitable. Of course, your business and clientele are unique, so the point is to prioritise profitability and develop your business.
It’s hard to argue that more profitability, new business leads, and more market presence are unimportant in any business. If you focus on this, you’ll find many new opportunities to grow revenue based on your local market, technology, and owners’ needs.
Property management companies range from enormous firms that manage thousands of apartments, shopping malls, and commercial complexes to small firms that specialise in vacation rentals. All share making maximum profits as their goal. If considering starting a property management company or improving your current one, there are best practices to ensure you make a profit.
Successful property managers manage multiple properties.
Successful landlords and property managers have multiple income sources enabling them to earn more. If you’re able to scale, you can do even better.
Using the latest property management techniques, landlords using a professional team have more than ten properties under management. They can accumulate different income sources by continuing to expand their property management empire.
The important thing to remember when managing rental properties is not to get in over your head. As your rental properties expand, you will need help managing them.
Many property managers are hesitant to outsource help because they want to have complete control. As you hire gradually, your management team will also expand to help oversee your properties and remain profitable.
If you’re managing a high-rent complex, you’ll enjoy a larger income while doing the same work as managing a lower-rent unit, at about 10% of rent.
Technology helps property managers manage their properties profitably.
The advancement of the digital age has made managing, owning and investing in properties even more lucrative.
Property managers can automate most processes, eliminating most of the unpleasant tasks that take up time and effort.
Handling tenants, payments, evictions, communication and repairs professionally is much easier with the digital tools now available. Rental property managers and owners can now monitor more properties with minimal effort.
Software apps allow you to safely manage rental properties anywhere—all you need is a computer and a mobile phone.
Own your properties for even more income
Rental properties are a tangible investment you are in control of.
Unlike other investments where you hope your money is being managed properly, rental properties are physical assets with real returns.
When you manage your properties, you can increase your returns and protect your investment.
Owning property is easier when someone else is paying for it. Rental property owners and managers can own multiple properties free and clear while enjoying a nice residual income stream. As the rental property owner, you only have to deal with your tenants and not those of other owners.
Professional managers have systems to protect rental properties from bad tenants and deferred maintenance issues that could wipe out their returns.
Like a professional, you can reduce the risks and increase income when managing your properties.
Tips for Running a Profitable Property Management Business
Successful Property Management Companies Hire Well
Hiring employees is an important duty for a business owner. Those who have ever made a bad hire understand this all too well. The next time you are ready to employ a new hire, slow down your interviewing process. Here are top tips for hiring more staff:
- Schedule multiple interviews. Talk less and make them sell themselves as the best person for the job. Don’t be afraid to ask difficult questions.
- Look for a reason to say “yes”; rather than an excuse to say “no”. Once you have found the candidate you can’t say no to, you have your new hire.
- Don’t over-focus on technical skills or overemphasise experience and talent for the task. Look first for “soft skills,” like the ability to communicate effectively, energy, and likeability. Hire for personality, train for skill.
Put your candidate through the four Cs
- Character: Can you trust them with your business intelligence and your clients?
- Chemistry: Do you click?
- Culture: Do they seem comfortable with the way your company operates?
- Competency: Do they have the skills or experience to do the job?
This process will save you frustration, salary on a person who won’t last, and headaches. Take your time and secure that top performer.
Conversely, successful companies also turnover quickly. If you have an employee performing poorly or is a bad fit, you need the courage to do what is necessary, as leaders must do. It’s not easy, but your life and business will be better for it. Not dealing with HR issues hurts yourself, your business, your team, and even the person themselves.
Successful Property Management Companies Rely on Systems
What makes so many fast food restaurants successful? Thanks to standardised manuals and rigorous training programs, people keep returning because of consistency. Four important benefits of this approach are that they:
- Stop the same questions. Do your staff members keep coming to you with issues they should know how to solve? Instead, they should reference their systems manual before seeking assistance. The result? Saved timed, more empowered staff and reduced stress for yourself.
- Reduce liability. If the unimaginable happens and you face a lawsuit, you can show that you have training processes in place and that your team member has completed the modules. While that won’t completely release you from liability, it will give you added legal protection.
- Increase the net worth of the company. Utilising systems manuals is an easy way to increase your business’s value. A company with solid systems has much more market value and can sell for a greater price. A a business that is future-proof and can run on automation.
- Create accountability for your team members. They need to know exactly what is expected of them and how to do it. A robust system manual will list key areas that define success for your team and provide a quick overview of roles and responsibilities.
Successful Companies Have Multiple Profit Centres
Profit is not about being greedy or trying to squeeze the last penny from your clients. You must ensure your business is profitable.
Profits allow you to do many things: fix mistakes, improve customer service, hire the best employees, and explore growth opportunities. Perhaps most importantly, however, healthy profits will ensure you’re stress-free.
The property management industry is ripe for multiple offerings, enabling you to charge accordingly.
- Clearly define the scope of your services. If you don’t communicate to your property owners where your services cap, they will keep asking until you sacrifice your personal time.
- Consider the apartment industry, which runs its properties like businesses. Most apartment complexes charge application fees, lease administration fees, roommate addition fees, inspection fees, and non-refundable pet fees. Consider these charges and whether it gives you some ideas.
- Stop overlooking opportunities. Ask, “why not?”. Missed opportunities are a cause of a failing business so begin to look for new opportunities for your enterprise.
There are three considerations necessary to succeed in the property management business. Engaging in these will dramatically impact your business’s success.
What are the keys to profitability in your business?
Managing people costs by investing in technology.
The biggest influence on profitability is the number of people needed to manage your portfolio. Did you know, you can increase your portfolio with technology investments without adding people and expenses?
Track important metrics closely.
It’s easier than ever to see and measure performance by property. Watch your metrics in detail and keep close tabs on expenses and income while accessing these reports from anywhere.
Specialise and maximise roles.
Support staff in the office can now do even more. Hire great people and make sure you trust them.
What profitability mistakes do Property Managers often make?
Not measuring often enough.
Take a weekly (or daily) look at important metrics to highlight issues before they get too big.
Not valuing people investments.
People are the biggest operating expense. When companies ignore the cost of becoming more productive, they miss potential opportunities.
How Can Property Management Companies Increase Profit?
Number of Properties
Increase the number of properties to see your revenues increase. If you maintain operating margins, each additional property results in a percentage fall in profits.
Property management services include such marketing, maintenance, and renting out or selling the property. Providing additional services results in additional profits if your expenses for providing the service are lower than generated revenues. Concierge services within an apartment complex, or a meet-and-greet upon check-in at a vacation home are examples of these add-ons.
Types of Properties
If your business manages short-term sub-leases for apartments, you could offer that same service for townhouses and units.
Property management companies generate revenues from several channels; the owners of the properties they manage, and the guests or renters who occupy the properties. Increasing rates when management contracts are up for renewal increases revenues and profits, ensure the rate increase is not too high. You can also increase rates generated from the guests or those who pay to occupy your properties.
The rate generates revenues for occupying the space times the number of spaces occupied. If an apartment building leases apartments at $500 per month and 200 of the 250 apartments are rented, revenues generated are $100,000. If occupancy increases to 225 apartments, gains are $112,500; that occupancy rate would increase profits by $12,500.
By decreasing expenses, you’ll increase profits as long as it doesn’t affect revenues. For instance, decreasing advertising may result in fewer properties being leased. Reducing maintenance efforts might also result in tenants leaving once their lease is up.
Avoid perfectionism. Successful companies implement a new idea immediately, then go back and make adjustments as needed.