The Property Management Show Legacy Planning for a Property Management Business
Two guests are joining The Property Management Show today, and they are Scott Brady and Garrett Brady from Progressive Property Management in southern California.
Scott has been on the show before, and tends to talk about forward-looking topics that involve challenging the status quo. Garrett is his son, and a big part of the company’s future.
The topic today is legacy planning, which can be rather difficult for property management companies. Scott and Garrett are sharing their journey and where they are.
Progressive Property Management Then and Now
Scott has a story that’s similar to many property management company owners. He began as a real estate agent and had a brokerage business. The recession arrived in 2010, and he wanted to be prepared for the next recession. So, he started Progressive Property Management in 2012. It became incorporated in 2015.
The company grew organically through marketing and relationships. Over the last 12 years, they’ve grown to about 1,000 doors under management. Garrett joined the residential side in 2018.
The business model is unique. It’s a virtual company that hires real estate agents to be property managers. Three years ago, they began an association management department, and now manage around 130 associations with about 7,000 owners, total. They use the same business model; people are hired to be off-site property managers for these communities. The team at Progressive takes care of all back office operations.
About three years ago, Scott was diagnosed with cancer, and he realized the company was not prepared to be sold or handed off. Decisions were made, and a choice had to be made: did Scott want to prepare the company to be sold, did he want to hire someone to run it while he lived off the cash flow, or did he want someone in the family to take it over?
He’s made a decision, and he and Garrett have been busy structuring their legacy plan over the last three years.
Garrett says the company – and the entire industry – was old school in 2018. There wasn’t a lot of technology, and everything was very regional. He’s been able to see the industry move from the stone ages to embracing modern technology. It’s a more appealing industry to join. So while it was a family business that he was happy to join, he now sees the value of real estate and how it interacts with so many other business sectors.
Legacy Planning: Starting the Discussion
The diagnosis spurred the discussion around legacy planning.
Scott hired a consultant outside of the property management industry and the first thing he recommended was to have Garrett go to graduate school. This did not make sense at first, but it was pretty transformative. He earned his position with his education and his experience, not because of nepotism.
The next step was to invite Garrett to earn some controlling interest in the company. Every year that he’s worked for the company, he’s earned 2.5 percent ownership in that company. By now, he’s up to 15 percent. The idea was to have Scott maintain the controlling interest, but to give Garrett a path towards more ownership.
Garrett has skills that Scott doesn’t have, and they both recognize that.
Scott excels at sales and marketing while Garrett is all operations. Scott said he knew the future was in the company’s operations. With 130 associations under management, they need good systems.
Garrett does all the hiring of remote team members and he trains them, too. The company now has 13 remote team members and 13 full-time employees. The future isn’t expanding full-time payroll, but in hiring remote contractors.
Understanding his own skill set allowed Scott to bring Garrett in, and together they sit down and look for the next opportunities while ensuring everything is running properly.
Marc Cunningham mentioned to Garrett that he had to do a buy-in for his ownership in the family business, and so it made sense to Garrett that he would buy ownership over time with his time and with his commitment to the business. He says he gets more value out of learning how to run a business, deal with staff, and handle operations and corporate accounting. He’s happy to have that security for the long term, especially as the business grows.
It’s never a good idea to arbitrarily give ownership of your property management business to someone just because they’re family. Garrett is qualified, and that’s important. Scott says he’s the most qualified person to run the residential side of the business and manage the remote team members. He’s learning more about the association management side, and will eventually be comfortably with full ownership of the company.
Finding the Fit with Legacy Planning
It’s a perfect fit, with Scott on top of the sales and marketing and Garrett taking care of the operations.
That doesn’t mean that Garrett isn’t prepared for marketing the business. As a high school student and as an undergraduate, he took care of the direct mail for his father’s company and for other real estate businesses and brokers.
He’s also looking at other potential income streams. Maintenance, for example, is a big passion for Garrett. He’s looking towards the future and thinking about a point in which the company can introduce their own maintenance service.
Garrett knew that to create value, he had to do what his father could not do or would not do. He and Scott complement each other, and that’s what makes them successful.
Identifying Opportunities While Planning Ahead
Both Scott and Garrett see opportunities not in hiring people but in bringing on remote workers. Most property managers don’t see community associations with 8 to 20 owners as being a huge profit center. Progressive Property Management has found a way to do it.
Scott says that residential management is touch-and-go right now. No one is buying investment properties and there have been only a few sales. Association management is where new opportunities and potential earnings can be found.
Garrett appreciates that his father is willing to focus on long term goals. They’re saying within the company goes like this:
- Everyone has to be on the bus.
- Everyone has to be in the right seat on the bus.
- The bus needs to be going in the right direction.
Garrett sees Scott as sometimes driving the bus at 100 mph. His job is to pick up the pieces that are sometimes flying off at such a high speed, and put them into place.
One of Scott’s favorite sayings is that the best times in business are when you’re uncomfortable. If you’re uncomfortable, it means you’re growing.
Balancing Growth with Core Values
Both Scott and Garrett have some big ideas about ancillary companies, additional income streams, and creating new departments. How to balance innovation with the success of current operations?
It comes down to the team, Garrett says.
- Team members are paid well.
- Team members get the flexibility to do their jobs. Management is very hands-off.
- Bad clients who take up too much time and bring in too much liability have been weeded out of the company’s portfolio.
As they progress and grow, it all seems to works out. They’re comfortable with slow growth, and that’s important considering their business model is not traditional. Scott believes in managing processes rather than people.
Formal and Informal Legacy Planning
It’s one thing to bring the person who will take over into the company and put them on a payroll and give them a position. But, how do you document the plan for succession?
For Progressive Property Management, there’s an informal and a formal plan in place.
The formal plan includes Garrett’s 2.5 percent ownership every year. That’s well-documented.
Informally, there have been many discussions about how things are meant to happen. If something terrible happened to Scott today, Garrett would be prepared to keep things moving the way they planned. Nothing is in writing, but everyone understands what will happen.
Garrett won’t have controlling interest for a while, but he’s naturally progressing in making more decisions. He says looking at things objectively helps. They know they’re not the only ones in this position. A lot of property management companies are wondering what will happen to their businesses. The choices are to have a good process or deal with a messy situation.
No one is going to last forever.
Innovation and Property Management
Garrett is looking forward to eventually not only exploring maintenance services but also commercial real estate. You might have heard the adage that commercial real estate a dollar business. Residential management is the dime business. And, association management is a penny business.
It’s okay to collect the pennies and dimes while everyone else is going after the dollars.
Scott says he’s always saddened by the industry and how little innovation there is. People follow the herd, and the herd moves towards residential management only.
Legacy Plan Challenges
Not a lot of challenges have popped up, but Scott and Garrett do believe in complete transparency.
Everyone knows that Garrett will take over. There’s no doubt about the company’s future, and the team members recognize that Garrett is good at what he does. They also know he’s dedicated. The company still has an emergency line that’s kept in-house. This is where they shine, according to Scott, and so they don’t outsource it. Garrett still has that phone on the weekends. He’ll take an average of five or six calls every day about water leaks and other emergencies. That shows his dedication and everyone knows he has that phone.
Garrett says he appreciates being able to spend time with his father while working and growing the business. That’s a perk that’s hard to quantify and it’s not an opportunity that most people get.
Scott acknowledges that he has always hated having business partners. But, he doesn’t mind now. Both he and Garrett know when to step in and when to step out.
Family can be emotional, but Scott and Garrett are both on the same page and in the right seats on their bus.
Scott has always been a proponent of not selling even with attractive offers out there, and he has some advice for property managers who are in a family business and thinking about their next steps: Don’t just hand it off. That’s a good way to drive your business into the ground. Make sure you’re handing it off to a family member who has bought into the business with their time and their labor, and make sure they’re qualified to run the company.
Garrett adds his own advice: have patience. Recognize what’s been put into the business and pay your dues just like you would in any other business. Have patience and know your value.
If you have any questions about what we’ve discussed with Scott and Garrett, contact us at Fourandhalf. If you’d like to hear more about what Scott and Garrett Brady are working on, or if you’re interested in some of their other business pursuits, get in touch with them at Progressive Property Management.
The post Legacy Planning for a Property Management Business appeared first on Fourandhalf Marketing Agency for Property Managers.