Why Realtors Should Consider Offering Property Management Services
In any given market, approximately 60-65% of people live in a home they own. This means that at least 35-40% live in houses that do not belong to them. Most brokerages only choose to serve two-thirds of the population – buyers and sellers. What about the other 35-40% of people who still need a roof over their head?
Renting makes sense to more people than you think
My own experience last year is a good example. I wanted to buy a new house for my wife and I in the Short North area of Columbus, Ohio. Like so many metropolitan areas right now, the real estate market and local economy are on fire. Nothing we watched made sense. On a whim, I decided to check out the local rental market. We ended up signing a two-year lease in a recent building with a closed parking lot. I expect to buy here eventually, but I want to wait for the current frenzy to die down.
Offering real estate services to everyone who needs a roof over their head can be a key differentiator for you as a brokerage owner in your market.
Synergy pays off
There is great synergy in bringing the sale and management of real estate under one roof. The reason this synergy exists is that many real estate investors will regularly expand their portfolio if they have reliable professional management. Within our firm, the relationships with our property management clients are among the most rewarding and profitable that we have. (The commissions we earn on their new purchases are also very rewarding.)
Property management is not an easy job. However, with the right systems and support staff in place, it can become a self-directed business that could cover a large percentage of your current overhead. Over the past 10 years, we’ve put in place the systems, partners and technology to make this possible. Here are some tips and suggestions to get you started if you decide that offering property management services is a good way to grow your brokerage business.
• Go through your database and identify all the people you and your agents have helped buy rental properties over the years. Find out what their current management situation is and find out how you can help them. This is a great reason to reconnect with members of your sphere of influence that you may have lost track of over the years.
• How do you manage your personal investments? You may already have processes in place that you can formalize and develop that you haven’t even thought of.
• It should be relatively easy and inexpensive to alert your database of your new services. Again, this is a great reason to make calls and send personal notes.
• You will probably start with only a handful of units. Your current receptionist should be able to handle some additional incoming calls. If you have an accountant who handles your operating account, they should be able to handle an additional trust account for owner funds.
• We tried several property management software solutions before landing on our favorite. Test the waters and sample the solutions until you find the one that works best for you.
• As your business grows, you may consider hiring an accountant who specializes in using this platform to manage your accounts receivable and monthly reconciliations.
• The licensing law is in your favour. However, you will be handling other people’s money and the real estate division in your state will want to make sure you follow all applicable laws and regulations, so do your research and consult with your legal team.
• Starting small with a few key customers who already know and like you is the way to go. As the business grows, you can add staff. The key is not to let this new company take over your business – think of it as an add-on. This is “found money”. Your sales and activity, and more importantly the activities of your agents, cannot be affected.
• Maintenance staff is another consideration. At some point, you will want one or two employees to deal with issues in occupied units. In the meantime, take another trip through your database and use social media to find independent contractors to take care of any issues that arise, until you reach a point where hiring additional staff makes sense. .
• Getting paid is important. For example, our standard fee is 10% of any rent collected, including late fees, plus up to one full month’s rent as a rental fee. For new clients with a larger portfolio – over 20 units – we may charge a nominal listing fee to cover the costs of adding their properties to our system and bridging the gap with when we actually collect the rent and are paid the first time.
Offering property management services has transformed my business in three main ways. First, the business covers a huge amount of overhead in the good times and the slow – these are overheads that I would have had to cover anyway to support my agents and my sales business. Second, property management allows us to differentiate ourselves in the market as professionals who understand investors and their businesses. And, our sales activity has increased because our landlord clients are eager to expand their portfolios, knowing they can count on us to take care of their properties. To realize these benefits in your own brokerage, consider expanding your service offerings to include property management.