The Property Management Show

In typical fashion, we ended up covering so much ground with Ray Hespen of Property Meld that we had to split our full conversation into two episodes. In Part 1, we discussed what maintenance analytics is, why it’s important, and what it can do for a property management business. This is Part 2 of our chat on The Property Management Show, where we’ll talk about the current shortage we’re having on tradespeople, its effect on net operating income (NOI), and what property managers can do about it. Maintenance Analytics Surprises Some data around owner and investor retention was surprising, according to Ray. While looking at landlords and investor/owners who had one to four units, it turned out that owners who renew their property management agreements for a year or two or three had a higher maintenance rate per unit annually. More maintenance was performed. The number of actions were about 20 percent higher than in the cohort of owners who churned and left their property management company. The actual maintenance spend was lower, but the number of maintenance touches was higher. This seemed impossible until the team dug a little deeper and realized there were more preventative repairs, on average. So, it ties back into that big correlation we discussed during Part 1. Drive spend per unit down and resident satisfaction up. That behavior is triggered by more preventative programs. Maintenance is getting more expensive and it’s harder to find people to do repairs. There’s a high demand for tradespeople and vendors, and no one is running out of jobs. It’s supply and demand. Given that, how can property managers invite more maintenance but lower maintenance costs? Ray doesn’t know. He points to a report released by Invitation Homes and American Homes for Rent that forecasts an increase in costs that have dropped their NOI from 11 percent to five percent. It’s an industry-wide challenge. What’s becoming more important is keeping renters in a unit. Someone Ray recently talked to said that they could get a price increase on a lease renewal, but not by putting that same property on the market for a new tenant. That’s where rents are right now. Renewals are an important part of revenue generation and they also keep your expenses down by avoiding turnover costs. On the maintenance side of things, you have to find ways to get work done during the shoulder months. Schedule your inspections, your work, and your preventative services before summer and after summer. The Case of the Disappearing Tradespeople The trick in keeping up with the necessary speed of repairs is ensuring vendors WANT to work with you. If vendors are avoiding you, maintenance suffers and so does tenant satisfaction. Three or four years ago, property managers could set forth a list of demands before agreeing to work with a vendor. Maybe you had legal and insurance requirements that had to be met. Maybe you wanted your vendor to accept your work request within an hour. All of that has evaporated. The balance of power has shifted, and you have to find a way to make it easier to work with you. Ray has over 40,000 vendors working within the Property Meld platform. The want some of the requirements taken away before they’ll work with a management company. Scheduling and communication has to be easier on them. His recommendation to you? Grease the skids so you can attract vendors and tradespeople. They don’t need your work, and they’re going to be selective about who they’ll work with. Non-monetary incentives are important. Vendors are willing to negotiate better rates with property managers, and you’ll always pay less than an independent consumer. It’s part of relationship building. They’re going to choose the work they want to do. Don’t leave yourself on the retail side of a vendor relationship. Make sure it’s easy to work with you and that there are incentives such as simple systems and processes. Scheduling should be automated. Payment of invoices should be immediate. These things matter. Non-monetary incentives. Most vendors have fewer than 10 employees. These are small operations. People start a plumbing company or electric company because they want flexibility and freedom. Controlling their calendar is more important than driving a profit number. So, attract vendors by reducing the friction points that often come with scheduling, updating property managers, and invoicing. Why is it so hard to find vendors and tradespeople? Ray’s hypothesis is that the pipeline of talent cannot keep up with the demand. A lot of capital was invested into the economy during and after COVID. Home improvement projects became huge. It was easy to borrow money. Build to Rent is now an industry. The tradespeople who are in business are busy. There’s also still some social pressure around these types of jobs. It’s not cool to be an electrician or a plumber. There’s societal pressure to go into debt getting a degree. It’s actually a really good idea to become an electrician right now. The solution that Property Meld is looking at is this: how can maintenance professionals complete more jobs in the same hour with the same resources? Most of the 40,000 vendors in their system work with more than one property management company. So, helping them to serve more clients without sacrificing time, talent, or quality of work is the goal. How can the data they gather help tradespeople maximize their time? Scheduling maintenance in a way that maximizes time and resources is a great application for A.I. It could be meaningful. Data and How to Start Using It Are you interested in doing more with data but unsure of how to get started? A lot of property managers might not understand how to use good data to make smart decisions. Ray says that data should always be easy to understand – even if you’re not a data scientist. Also, don’t be afraid of what you’re seeing. Sometimes, property managers don’t want to know what they’ll find. But, if you’ve read the book Good to Great by Jim Collins, you know that great companies are willing to accept the brutal truth about where their challenges are. So, just take a look at where you are and take some steps towards making your business better. It’s okay to know what you’re good at and what you’re not good at. We hope you enjoyed our conversation with Ray. If you have any questions, as always, feel free to ask them. We’d also love to hear your feedback, so please don’t hesitate to get in touch with us at Fourandhalf. LinkedInThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY The post How Property Managers Can Deal with Rising Costs and Labor Shortages in Maintenance with Ray Hespen – Part 2 appeared first on Fourandhalf Marketing Agency for Property Managers.

On The Property Management Show, we recently had a conversation with Ray Hespen, the CEO and co-founder of Property Meld. We always find ourselves talking to him a lot – and about a lot. This episode is no different. We covered so much ground that we split the interview into two episodes. Here’s part one – where we talk about what maintenance analytics is, why it’s important, and how it can help a property management business hold onto business and grow. Property Meld and Maintenance Analytics In total, this is the seventh time that Ray joined the property management show, which means there’s a lot to learn from him. In this conversation, we want to know what his team has been so busy doing this year. It turns out, they’ve been combing through maintenance analytics. Ray says he’s thrilled that the industry continues to evolve into something more sophisticated, especially around maintenance. Property managers are looking for more information to make data-driven decisions around maintenance, rather than relying on a gut feel. So, the questions Property Meld has been focusing on are: How do we make decision based on quantitative or numerically-driven data? How can a property management company use that information to move the needle as an organization? Property Meld has collected data on hundreds of thousands of maintenance issues and units. That data is used to transform how people run the maintenance part of their property management business. Maintenance analytics is a term that sounds technical. It’s also called maintenance insights. This is simply following the data and learning from it. Basically, maintenance analytics or insights is this concept of allowing any operator to, at a granular level, understand how they’re doing on maintenance. The maintenance analytics will help you understand how to think about maintenance, and to understand what happens before the next things happen. This provides visibility into a maintenance operation. How is your communication? How is your scheduling efficiency? How is your maintenance staffing? Are you prioritizing preventative maintenance? Some of the information that Ray and the team at Property Meld have been gathering will be ready to share, soon. It will help property management companies really get into the weeds of how they’re doing with maintenance. If there’s a specific KPI you’re trying to move, you might learn that you need to engage your vendors better. Maybe you need to work on efficiency with your maintenance coordinators. The deep dive will move you into a pointed plan of attack, and that’s going to improve your business. Think about your bank account. What are you spending all your money on? By examining the withdrawals and the expenditures, you might see your rent payments and your gas and then you’ll also see a lot of brunch. You know that you need to reduce the brunch budget if you want to save money. That kind of visibility is essential when you’re making spending decisions. Ray’s maintenance analytics can bring that visibility into the maintenance world for property managers. As a business owner, you need to make data-driven decisions. Other industries have figured this out, and it’s exciting that property management finally gets it. Lagging Indicators and Leading Indicators What kind of data do you need? First, you need to know what’s going on. Then, you need to be diagnostic, and then predictive, and then prescriptive. The data presents itself. It tells you what to do. Ray tends to start with lagging indicators when looking at insights. Your lease renewal rates, for example, is a lagging indicator. Resident satisfaction is lagging. Things will tell you if it’s going well or if it’s going poorly. That’s what we call a leading indicator. Then, you have to consider behaviors. What behaviors can you incorporate to bring in good leading indicators, which deliver a good lagging indicator? Here are some really good lagging indicators: Speed of repairs Resident satisfaction Vendor health scores Technology utilization rate. Annual maintenance spends These are good indicators around quality and efficiency, and it’s information that can help you focus. What are the leading indicators that contribute to those big ones? If you’re trying to talk to a maintenance coordinator and you need them to get the speed of repair down from one number to another, they need to know what to do. So, you’ll look at communication indicators and scheduling speed. In order to get the speed of repair down, you need to reduce the time between maintenance request and maintenance assigned. The lagging indicators are descriptive. They tell you the speed with which something is being done. The leading indicators help you identify what’s going on higher up the river. Knowing what’s happening right now, what will happen in the future? It’s more predictive. Identifying the Leading Indicators that Impact Lagging Indicators The job of a property manager is to drive net operating income (NOI) for a client. Optimize rent and keep costs down; those are the ways you do it. The five indicators we listed above will show you how well you’re doing in keeping your residents happy and your retention rates up. You’ll also know how good you are at keeping costs down. Historically, the biggest challenge has been around figuring out which leading indicators impact lagging indicators. It was a big breakthrough for Ray to see that speed of repair and resident satisfaction are so connected. A lot of people thought that satisfaction depended on having a personal touch and how you answered the phone. It turns out, residents just want their stuff fixed. Quickly. There hasn’t been a lot of data to even start the conversation around cause and effect and leading indicators and lagging indicators. We finally have that data, and it’s shown us that the lagging indicators are pretty core. One consistent metric that always seems to matter is annual maintenance spend per unit. This once seemed like a metric that only large institutional investors could care about. But, we looked at the landlord investors who have between one and four properties. We found that maintenance spend per unit was a big percentage of the rent roll. So, keeping maintenance costs down helps you keep client. The maintenance spend per unit, therefore, is a lagging indicator and it’s also a leading indicator for owner retention. Here, a really good leading indicator to speed of repair is understanding how fast the repair is assigned. How fast can you move from assigning it to repairing it? From scheduling to completion, you have to know where the process is working and where it’s breaking down. If Ray’s team can show you what the industry best practice is, compared to the industry standard, compared to your statistics, which show you that your time from schedule to completion is three times the industry standards, you know what you have to do. This is more than tracking numbers. This is a way to visualize the data to drive action. What is the Job of Data? The first job of data is to motivate. Do you need to get better at something? Do you need to focus on something or is there something else that needs your attention? You need the motivation. The second job of data is correlating cause and effect relationships. You want to know which things impact other things. Finally, data has to be accurate. Accuracy is important, but motivation and correlation come first. Maybe you’ll get some financial metrics that surface and you’ll wonder why you paid so much for something. That’s not necessarily bad; you have to know if you spent that money for a good reason or a bad reason. Next, you need to know if things are getting better or worse. The data should show you if you’re going in the right direction. Finally, how quickly is that change happening? Let’s say you’re putting gas in your car or charging up your electric vehicle. Your car will tell you how much energy you have. Maybe you’re at 73 percent. Next, you’ll need to know how fast you’re consuming that energy. Are you draining your battery or your gas tank every 10 minutes? If so, something is wrong. If you don’t have that information, you’re stuck on the side of the road. These three pieces are important: am I doing good or bad, are things getting better or worse; and, how quickly is it getting better or worse. These are the questions to focus on as a business owner. Data is Only as Good as Other Data Data is not going to help you unless you can compare like for like with other data. Maybe your maintenance invoices look great. But, if you’re not including the cost of labor and you’re comparing yourself to other maintenance invoices that do include labor, you’re going to think you’re doing great, but you really aren’t. There’s no way to know if you’re comparing the same things. The challenge, therefore, is finding an agreed-upon process on what defines information. Here’s another example: what’s your turnover time? Your answer will depend on how you define turnover. Does it start when a resident moves out or when your first vendor comes through the door to get the work done? Does it end when the work is complete or the new tenant moves in? There’s no standard. No one has agreed to definitions and collected data in that way. Establishing consistent definitions remains a large challenge for property managers using data. In 2017, even profitability was misunderstood. Until every property management company was pulled through the same filter, there were varying definitions of what it meant to be profitable. Accounting has been around since the Romans. No one today has invented accounting. But, standardizing accounting practices is a huge delta. It’s a big climb. The information is there, but is everyone using it the same way? Those three jobs of data that Ray mentioned came from a podcast entitled Correlations of Human Behavior and Data. They used an example of a scale as it pertains to people who are trying to lose weight. Most scales tell you how much you weigh. However, better results were achieved when the scale didn’t provide an exact number but told people how much weight had been lost or gained and how the trends were going. Results improved. So, accuracy is not the most important job of data. Insights around Preventative Maintenance Preventative maintenance impacts annual spend per unit and resident satisfaction. Residents are happy when things aren’t breaking down at their property. And, your owner’s annual maintenance spend per unit goes down because you’re providing effective preventative programs. Your customers – owner and tenants – know your preventative plans are working because: There are fewer unexpected maintenance emergency. This keeps residents happy. There’s less spent on maintenance. AND, tenants are happy so they’re staying in place. This increases ROI and keeps owners happy. You can make a compelling case for a preventative maintenance package this way. Maybe an owner doesn’t want to spend $300 or $400 a year on preventative maintenance. But, if you can show them that they save more money than that every year, you’re making a case for it. This isn’t an opinion fight on whether preventative maintenance is necessary. It’s a data fight that proves it works. This simplifies the decision making process for consumers. The rest of our conversation with Ray Hespen can be found in Part 2. But just to give you a little teaser, Part 2 will cover insights about the current shortage in tradespeople, how that’s affecting NOI, and what property managers can do about it. Don’t miss the second half of this conversation. And, if you have any questions, don’t hesitate to contact us at Fourandhalf. FacebookThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY The post Maintenance Analytics with Ray Hespen – Part 1 appeared first on Fourandhalf Marketing Agency for Property Managers.

Byron Thompson from Monument Real Estate Management is joining The Property Management Show to talk about a subject we’ve never addressed on this podcast: urban real estate markets. Byron has been a listener for a long time, and we’re happy to have him in the guest seat today to talk about the unique challenges and opportunities for both investors and property managers who work in urban markets such as Cleveland, where his company is based. Introducing Byron and Monument Byron owns and operates Monument Real Estate Management in Cleveland, Ohio. They manage properties and portfolios in Columbus as well and recently, they’ve begun expanding into the Carolinas. There’s a strong growth mindset in his business operations, and he’s always looking for new opportunities. What’s unique about Cleveland is that it has a strong urban market that he talks about in his book: Your Guide to Investing in the Urban Real Estate Market. The urban market doesn’t get a lot of attention from influencers in our industry and speakers at conferences. No one has been talking about it, so we asked Byron how he found himself in this niche. Discovering and Exploring Urban Real Estate Markets His journey began in 2016, when he got his Realtor license and immediately started working with investors who had good portfolios. Many of these investors had been buying properties all around the country and finally landed in Cleveland. While he worked with them to locate and purchase properties, he learned a lot about real estate investing. They were buying 15 or 20 or 30 houses a month. This was a big education, both in real estate and property management. The investors asked him to manage the homes for them when they became rentals. At first, he said no. But, he soon realized the opportunities this could provide. That’s how Monument Real Estate Management began, and it didn’t take long to realize how different the urban market of Cleveland was from other real estate markets. How We Define an Urban Market According to Byron, there are three conditions that must be present in order for a market to be considered an urban market: 1. The overall economic conditions of the city. It’s usually poor. Crime rates are likely to be higher. Available housing and employment rates are likely to be lower. 2. The assets investors buy are going to need more maintenance for asset. Most of these homes will be older; potentially 100 years old, even. 3. There’s heavy government compliance to the management that’s requirements in an urban market. There are more Section 8 homes. There are more inspections. You’ll have more transient tenants and potentially more evictions. Byron has identified and researched similar markets in cities like Birmingham, Memphis, and Detroit. There are a lot of similarities there, but also unique challenges in each urban market when it comes to investing and managing. Urban markets will generally focus on C and D class properties. These are high risk and high reward, versus other markets that provide a slower yield. They’re generally safer. They focus on A and B class properties, which provide less risk and fewer headaches. If you’re going to specialize in the urban market like Byron does, you have to know what makes them lucrative for property managers and investors. For property managers, it’s all about volume of business. The number of rental homes in urban markets is high. They need management because these markets are heavily impacted by investments. Most of the investors are out of state or even out of the country. For investors to make money, they must have the appetite for high risk and high reward. There’s an opportunity for heavy cash flow and these can be cash-positive investments. You need to know the risks, as a property manager, and you need to gain the trust of your investors. Managing Investment Properties in Urban Markets Property managers need to help investors earn their returns. It’s also a property manager’s job to educate investors who may not know the market. Sometimes, an agent will sell you a property and you’ll never see them again. At Monument, that won’t work. They find that in an urban market, you have to be there for the long term. You have to support your investors on their entire real estate journey. Educating them and making sure expectations are understood are important qualities in a property manager serving this market. Urban markets generally have lower purchase prices. That’s going to attract a lot of investors who want to make money. You need to help them understand what they’re getting into, and what will be required in order for that money to be made. Byron says it’s important to keep investors informed. He provides quarterly assessment reports that show them what they need to know about their asset. These reports commonly highlight the deferred maintenance that’s often found in an urban investment. Often, investors won’t do their due diligence before buying, and you want to make sure they understand both their asset and the market. It’s important to dive deeper into asset management. Property management is collecting rent and scheduling work orders. Property managers in an urban market have to go further and talk about how the asset will perform for five years or more. They’ll have to talk about the neighborhood and any surrounding areas that may be up and coming. Choosing the Owners You Work With We’re not sure there’s a property manager who hasn’t had to let go of a client. Byron says the power of saying no is important. You have to learn and know your own value. As a team, Monument has focused on knowing who their ideal client is. They have a good grasp of that, and they’ve developed a detailed onboarding process that ensures they’re working with people who fit their model of service. A lot of processes have been streamlined. That’s because of the volume of properties being managed. Their model works with their specific systems and processes. It’s a strength. When he has to accept or deny a client, Byron says it comes down to expectations. He tries to set those upfront so there are no surprises. Every client wants to feel like a VIP. But, their onboarding process is the same for every client: this is what they do, this is how things work, and this is step-by-step what they’ll be doing. They cannot deviate. Byron says they’re professionals and they trust their process. Before he takes on a new client, he wants to be sure they’re aligned with those processes. Some of their clients have already purchased a property and others are thinking about it. Byron loves taking the sales calls because he likes that there’s a mix of everything coming in. He likes hearing about where investors are coming from. For an investor who is new or hasn’t bought a property yet, he’ll help them navigate the process from the beginning. The goal is education. For an investor who is transitioning or working with an occupied property, it becomes less about the investor and more about the asset. He wants to know what they’re getting. At one point, he would just take everything and anything (like most property managers). Then, he says, you realize you are managing a house without a water tank and there’s a tenant in place. Now, he decides if he wants to take on the asset. He’ll think about a 30-day, 60-day, and 90-day timeline and decide what can be done and what wouldn’t work. Defining Wealth in an Urban Market Here’s another insight from Byron’s book: everyone defines wealth differently. Most of us think that you need money to make money. Not necessarily, Byron says. He believes it all comes down to defining what you want first and knowing yourself and your temperature for things. Next, you need to build relationships. Byron has found it’s amazing that as you put things out to the universe, the wealth mindset starts. He believes that anything is possible because there have been plenty of times that he was surprised at how perfectly things worked out. Those things never would have happened if they hadn’t been spoken into existence. He believes in aligning himself with the right people and doing the right things for other people first. Opportunities can and will fall into your lap, and it turns out you don’t have to cut a check for them. Byron is also a big believer in sweat equity. That’s his secret sauce for the wealth mindset. It’s the way to gain success. Don’t do everything he does, Byron cautions. If you read the book, you’ll learn that he and his wife began their real estate journey while she was pregnant with their daughter. Byron quit his job, liquidated his 401(k)s and got started acquiring properties. It worked out for the best because he had his wife’s support and a lot of faith and good relationships and they worked hard. The Book We asked Byron why he wrote “Your Guide to Investing in the Urban Real Estate Market.” He said it was the culmination of all the pain points and the triumphs he had experienced working in real estate. He was thinking about his own portfolio and the mistakes they made and also how they ultimately found success. He’s had the opportunity to work with people from all over the world. He’s seen where they made mistakes. He’s worked with contractors and tenants. He’s navigated laws and lifestyles and worked with judges and bailiffs. He said he would have gone crazy if he didn’t get it all out and write the book. And, Byron loved the idea that his experience could help others. It is intended to be read by would-be investors and existing investors who don’t understand what they’re getting into with urban real estate markets. There’s also a lot of value in this book for property managers. If you’re a property manager thinking about expanding into urban markets, Byron’s advice is this: Continue your education. He says one of the best things he did was to join NARPM. You can only grow when you’re around industry leaders like yourself. He makes a point to invest in education, and also in automation. Everyone knows you have to get the right people on your team, he says, but automation is equally important. There are a lot of variables in the urban market. Automation keeps things from going off the rails. Property managers need to think about revenue per door and not just volume of doors. Three things will make you successful in the urban market: 1. Maximize your profitability per door. 2. Provide excellent service to owners. 3. Provide excellent service to tenants. Make your management more efficient and effective. For a copy of the book or to learn more about Byron, visit www.monumentmgt.com. The book is also available on Amazon. If you have any questions about what we’ve talked about today, please be sure to reach out to us at Fourandhalf. NameThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY The post Investing and Managing in the Urban Real Estate Market with Byron Thompson appeared first on Fourandhalf Marketing Agency for Property Managers.

During Part One of our conversation with Heather Nicely, we talked about the pros and cons of adding short term rental (STR) properties to an established portfolio of long term rentals. Today, we’re getting more into the state of the STR market and how you can set yourself apart and serve owners better. Market Saturation and the Rush to Short Term Rentals There has been a rush towards short term rentals because investors wanted to capitalize on the rise in travel. Then, a single tweet set off alarm bells about many markets being over-saturated. Articles came out about people who lost money on short term properties, especially during the Super Bowl in Arizona. They were expecting to make more money. The (incorrect) data in that tweet induced a bit of a panic. The snapshot they showed of a few key markets alleged that there was a drop in revenue of 47 to 49 percent. Everyone thought this meant the Airbnb industry was collapsing. If you drill into this, it’s not true at all. You have to know your own numbers to accurately know how the market is performing. Heather says that property managers have a duty to know how the market is actually performing so they can be honest with owners and tell them what’s a good idea and what’s a bad idea. Grabbing onto every hot take on Twitter is never a good idea. Panic posts are set off by people who are not even in the industry. It’s very easy to get more accurate data on your own. Even better – study your own data and know your own market. Heather says you have to give your owners that reassurance. Increasing revenues on their own properties is really all they’ll care about. It’s important to encourage owners to stay focused on their own properties and not latch onto viral tweets. In Arizona, there was a bit of an exodus after the Super Bowl. People thought they’d be able to pay off their entire mortgage after one good rental season. Now, the gold rush has passed and people who should not have been in the industry have left the industry. That’s not such a bad thing. Heather works daily with investors, and she knows that her market isn’t the best market for everyone. There are still deals to find in and around Phoenix, but you have to know your numbers and you have to know that costs are higher now. Interest rates are at an all-time high. Insurance costs have risen. There are a lot of economic factors influencing the market that have nothing to do with whether it’s saturated with short term rental properties. Short term rentals, like long term rentals, are not a get-rich-quick scheme. Shifting Investment Mindsets Recently, the behavior of the market has caused a mindset shift with investors. They’re especially viewing mortgages differently. More capital is going into properties than before. That’s good news to Heather, who often has to have difficult conversations with the investor who only has $30,000 to put down on a short term rental. They have to talk about whether that’s possible with the interest rates so high. They’ll need money to furnish that rental and prepare it for bookings. Will they make it through a month when bookings are down? Short term rentals are seasonal, remember. Conversations have changed over the years. Rates are higher, and getting approved for more money is often necessary. So, more capital is needed. Heather doesn’t feel bad when she has to talk someone out of a STR investment. She doesn’t want to have to sell that house in a year because they couldn’t afford the property. As a property manager and real estate professional, it’s often your reputation on the line when an investor wants to make a bad decision. Make sure there’s a back-up plan. For example, if the property doesn’t seem to work as a short term rental, will it work as a mid-term rental for 30 or 60 days? Is it close to a hospital, where visiting nurses may rent it? Or, could it make an ideal long term rental? The benefit, if you’re already a long term property manager, is that you already have the information to evaluate a property. You can talk about all the options. Unraveling the investor who is determined to make a bad decision usually involves encouraging that investor to work with someone else. Heather says there’s never an “I told you so” moment. She’s still serving the industry. Hospitality and Short Term Rentals Heather is looking forward to what artificial intelligence (AI) can do for the industry even while stressing that hospitality is absolutely critical. The personal presence will always be necessary, especially since a live person is required to clean between tenants and wash linens and solve problems. The influx of new technology makes it look easy. But, the hospitality comes first, and the tech supports the hospitality. According to Heather, individual hosts, even if they don’t know much about property management, do a better job at providing hospitality than rental managers. They’re more hands-on. Property managers will be more interested and more prepared to leverage technology to increase efficiency and revenue per door. Short term rentals are a hospitality business. This is another big difference between your STR portfolio and your long term properties. You cannot replace the personal touch. Syndicating Vacation Rentals: RentMyVR In addition to everything else we’ve learned that Heather does, she’s also the co-founder of a new platform called RentMyVr. We asked her to tell us more about this venture. She said that most hosts rely on Airbnb and Vrbo to drive bookings, but there wasn’t a single spot where a traveler could search all properties on all platforms at once. No one had brought them together yet, so Heather decided it was time. She thought it would be easy. It has not been easy. The process was to create a search engine for short term rentals. It gathers all of the homes available, regardless of the site they’re on. Users can see a list of links that can be used to book. Every platform is different, and the cost might be different, too, depending on the insurance that’s required or the fees that are charged. RentMyVR provides a page where it clearly shows every link where you can find the property. Maybe it has a YouTube video or a direct booking offer. All of the data about that property comes together in one place. This allows guests to make more informed decision. There’s also a management company directory. The platform launched seven months after Heather first had the idea. There are no plans to be a booking platform. Instead, the goal is to drive traffic to wherever a host’s booking platform is. Heather is also hoping to change the way reviews work. If you get bad reviews on some platforms, they just deactivate your listing. If you’re a crappy host with a crappy property, you simply set up a new listing. That’s hiding a problem. Most people want to see the bad reviews. Heather welcomes feedback and says they’re in the sponge stage of development, where they’re absorbing everything they can. They’re also providing a platform to smaller sites such as LodgeLovers, which has become one of their preferred partners. The marketing piece is necessary. You can be the best property management company in your market, but if you’re not showing up online when people search, you won’t get the business. All property managers can appreciate that RentMyVR is being built by someone who is already in the property management space. A lot of tech solutions, it seems, are built by people who know tech but they don’t know the industry. Not many people do know this because they’re not marketing themselves. It’s not a user-friendly experience, and that could be why Google isn’t pushing its platform too hard. People still want to go to a website and scroll through properties. Heather has been extremely helpful in talking about the short term rental space and whether it might work for your property management company. Go to RentMyVR.com and check out the search function. If you have any questions at all, please contact us at Fourandhalf. URLThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY The post Current State of the Short Term Rental Market with Heather Nicely – Part 2 appeared first on Fourandhalf Marketing Agency for Property Managers.

Heather Nicely is a Realtor, broker, and loan officer, and also the president of the Arizona chapter of NARPM. She’s been on all sides of property management and today, she’s joining us to talk about short term rentals and how managing those properties are different from managing long term rentals. Heather’s Journey to the Short Term Rental (STR) Space While other little girls were fantasizing about growing up into princesses, Heather was fascinated with real estate. By the time she was 12 years old, she knew she wanted to purchase a home in the mountains or near the beach so she could vacation there. Ultimately, she wanted to buy 52 properties so she could live in a different home every week of the year. She also wanted to make money off the properties while she wasn’t living in them. As she grew up, the idea seemed silly. But now, it feels like maybe she was onto something. Short term rentals were part of a platform within a software company she and her husband owned. She took the time to dig into it and learn about that space. Then, she became Vice President for an after-hours emergency call center and serviced some short term rentals while there. Heather learned that short term guests have more persistent needs than long term tenants. It seemed like a difficult market. As her career evolved and she became a Realtor and opened a brokerage, she began to gather clients who were purchasing investment properties to be used as short term rentals. It made sense to her as she began to manage properties that she would include short term rentals in her property management portfolio. Are Short Term Rentals the Future? When COVID happened, short term rentals were the worst place to be. But, since the pandemic has dissipated, there’s been a surge of binge travel. Now, short term rentals are more popular than ever. As a property manager, you might have heard about other long term property management companies dipping into short term rental management. We asked Heather about the pros and cons of adding these properties to a long term management business. Short term rentals can be lucrative. Anyone renting out a short term home can tell you that there’s money to be made. Everyone wants a piece of the Airbnb market. But, if you’re generally doing long term rentals, you have to wrap your mind around the different business model that’s in place for short term rental homes. Your 15 or 20 years of experience managing long term properties won’t help you. This is a different beast, and trying to offer short term management services through an existing management company can be trouble. Here’s the main difference: In the long term rental space, you’re developing a relationship with tenants over time. Your property owner is your main client. In the short term space, you’re renting out more than a roof. Vacation properties especially require you to rent out an experience. You have to cater to those guests. They’ll want coffee filters in the kitchen when they wake up on their first morning. If they’re checking in at 2:00 a.m. and the lockbox doesn’t work, you can expect a frustrated phone call. Short term guests will want refunds if everything is not perfect. And, everything is an emergency. So, it’s different. But, Heather says that when you can hone in on those differences and create a good experience, you’ll do very well in that space. Educate yourself and understand the industry. Most importantly, separate yourself from what you already know about property management. Short Term vs. Long Term Property Management Mindset Heather worked on the vendor side in a call center, and that demonstrated the difference between long term tenants and short term guests. If someone is in a home for only two days, they’ll expect everything to be perfect for those entire two days, otherwise they’ll want their entire reservation refunded. This requires a mindset change for long term property managers. You’re not dealing with residents. You’re dealing with guests. Two things need to be established if you’re a long term property manager considering short term rentals: Property turns are frequent and fast. With long term properties, you have a couple of days and can take time to renovate. With short term rentals, there’s maybe a four-hour window to do all the cleaning, change the linens, take out the trash, and make sure everything works. You’ll need high expectations for your cleaning crew. Be ready daily for those property turns. With long term rentals, you have a checklist and you have more time. Short term rentals require you to get it right immediately. There’s no second chance. You need to be more available than you are with your long term property management business. There are no 9-5 hours, and you don’t get weekends off. In the short term rental space, you’re on the clock 24 hours a day. People check in early or late and they’ll always have questions. There has to be a communication process built in. There’s no ignoring the tenant until Monday. Technology and Short Term Rentals Most property managers are familiar with the long term rental software. There’s even more tech in the short term space, and it’s completely different from what’s available in the long term space. So, if you have 14 tabs open on your computer screen as a property manager of long term residential leases, you can expect to have at least 14 additional tabs open when you start managing short term properties. Can you handle a lot of new software? Can your team learn it? Heather recommends having part of your team handle long term properties and another, separate part of your team responsible for short term rentals. There’s a lot to learn when it comes to: Guest relations software Noise management systems Key systems Data and metrics checking pricing comps Dynamic pricing tools Rating software If you already don’t love learning new technology, prepare for this because it’s a learning curve. There’s no single platform that takes care of everything. So, you’ll have to go through an evaluation process to decide what works best for you. There’s also some controversy in the technology that’s used. Noise monitoring systems, for example. There’s a sensor you can install that picks up decibels in a rental property. You can be alerted if there might be a party going on. This might seem invasive, but a lot of owners and managers find it’s better to find out this way than to field phone calls from angry neighbors or the police. Cameras are often used in short term rental properties, too. Guests may complain about that; they don’t want to feel watched while they’re in the pool. Property owners may want access to those cameras. Privacy is a big issue with technology and short term rentals. Pricing Short Term Rental Homes Comparables are also much different in this space than in the long term rental space. Property managers will have to look at pricing trends more frequently. If there’s a concert or a festival or a major event one weekend, prices will jump. There’s software that automates this, but it sometimes needs human intervention. In Arizona, the Super Bowl was in town in February. If one owner priced his home at $5,000 a night, it threw off the entire pricing model. Technology is only a tool, and to be successful and keep your property occupied, you have to watch the market all the time. It’s a lot of work and a different type of property management. So, is the juice worth the squeeze? Heather says yes, as long as you go into the space with a lot of knowledge and your eyes wide open. There’s a lot of money in the industry, but the work won’t be easy. The people who do well already have systems in place to effectively run long term rentals. They’re dialed in and they have a team. Don’t try to just tack this on as another income stream. You’re opening a second business. It needs to be treated as a separate entity. You’ll have to learn about things you never considered before, like the importance of having separate linens for makeup removal. If you’re struggling to make things work as a long term property manager, you’ll probably have some tough challenges as a short term property manager. Marketing and Reputation Long term property managers are often inundated with negative reviews because no one can really avoid those crazy tenants with a list of complaints. The guest experience with short term rentals is different. But, there’s less negativity and more positivity, generally. Airbnb asks automatically for reviews from guests. There are a lot of positive stars and reviews on that platform. Most managers in the short term space are review-driven. You want to get five stars on every booking. You’ll be able to show off good reviews, and you can turn them into testimonials. It’s not so much that your reviews will show up on Google or Yelp. They’ll be on Airbnb and Vrbo and similar rental sites. But, if you’re trying to get direct bookings off those sites, you’ll have to ask your guests for reviews. Build your reputation by asking. Licensing and Regulation Most states do not yet have clear licensing requirements for short term management companies. Maybe you own three units and rent them out and then you manage your friend’s two rentals and then a rental for your doctor. That makes you a company. In Arizona, Heather does not need a license to rent out properties for fewer than 30 days. Other states are different. Or, there are no requirements in place at all. This might seem crazy, especially since you are dealing with other people’s money and the activities are so similar to long term rental management. Legislation is always changing and there’s no standard way to define a property manager. Start with your own company and define who is a property host, who is a co-host, and who is responsible for the management of the property. It can feel a bit like the Wild West. Everyone is rushing to it, but the legislation and the regulation cannot seem to keep up. On the long term management side, there’s plenty of regulation. Short term rentals have far more transactions, but a lot of people worry about government overreach. Different groups have their own agendas and priorities when it comes to regulation. People locally get mad when HOAs feel like they have a say in who you can rent to and for how long. Then, there’s the city dealing with noise complaints and traffic issues and parking capacity, and it becomes an issue for them as well. This feels like a new industry, and there’s not a lot of consistency yet. The laws and rules are very local, if they exist at all. That’s a lot of information from Heather so far, and we want to save the rest of what she says for Part Two. On the next show, we’ll go into the current state of the short term rental market and how you as a property manager can serve your owners better. If you have any questions before then, please contact us at Fourandhalf. InstagramThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY The post Pros and Cons of Adding Short Term Rentals to a Long Term Rental Management Business with Heather Nicely – Part 1 appeared first on Fourandhalf Marketing Agency for Property Managers.

Hello to all our loyal listeners and property management enthusiasts! You must be wondering about what’s going on with The Property Management Show podcast. We’re here to give you the scoop! We’ve been busy with pre-production for our upcoming season. After a brief hiatus, Brittany is back with a bang! Yes, that’s right! Our beloved co-host will be making her return next season, much to the delight of our listeners (and Marie 😉). We have already recorded interviews on the following topics: Managing investment properties in urban real estate markets (Guest is Byron Thompson – published author and Broker/Owner of Monument Real Estate Services) Adding Short Term Rentals to an existing Long Term property management operation (Guest is Heather Nicely – REALTOR/Designated Broker/ Sr Loan Officer/ NARPM AZ Chapter President, and co-founder of Rent My VR) Maintenance Analytics and its impact on the industry (Guest is Ray Hespen – CEO and co-founder of Property Meld) Understanding and avoiding online payment fraud (Guest is Jordan Bennett – Senior Director of Network Risk at Nacha, former Risk Analyst at the Federal Reserve) We’re also examining some lesser-known blue ocean strategies from real-life property managers. If you or anyone you know is doing something unique with your business, reach out to us and you could be featured as one of our guests next season! To add some spice to the podast, we’ll also have discussions around Data, Decisions, and what Marie intriguingly labels the “Death of the Human Touch.” If you’re as intrigued as we are, make sure you stay tuned for the next season of The Property Management Show. We aim to launch the new season this fall, so keep your eyes open and until then, have a not-so-crazy summer to our dear property managers! Remember, this podcast is brought to you by the marketing mavens at Fourandhalf Marketing Agency, your partner in getting more owner leads for your property management business. As always, we greatly value your feedback. Feel free to share your thoughts by filling out the form below or by emailing us at marketing@fourandhalf.com. URLThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY The post State of the Podcast Address by Marie and Brittany appeared first on Fourandhalf Marketing Agency for Property Managers.

Our guest on The Property Management Show today is the legendary Deb Newell, of Real Time Consulting Services.  She has a lot of experience as a consultant and a property management business owner, so we wanted to get her thoughts on the state of the industry and what property management companies need to do to prepare themselves for the future. Deb Newell: A Background Deb began renovating homes as a hobby in 1998. That grew into buying rental properties, which was a matter of wanting to get out of debt. This was the best way for her to do it, so she partnered with someone and they bought property, did all the work to renovate it, and then sold the home. Deb says she learned a lot about maintenance and she made a lot of mistakes.  She kept buying more properties and eventually instead of selling them, she began to hold onto those assets and rent them out.  It escalated, and that’s because she enjoyed the recurring income.  At this point, Deb wasn’t thinking too far ahead. She didn’t even realize there were resources out there that could help her do this more profitably. But, she treasures the mistakes that she did make because they made her a smarter business owner today.  From there, she became a third-party property manager and from the beginning understood the importance of setting boundaries. She took on owners that she probably should not have, but she learned from those experiences, too. And then she kept growing.  Deb managed properties for over 20 years. Then, personal circumstances required her to sell her company. In 2013, she began a consulting company because so many people had been asking her to help with their businesses. She grew organically, went back to school for her MBA, and is now in a Ph.D. program.  Her goal is to keep expanding so she can help others.  Real Estate Recessions and Property Managers Deb was in Minneapolis in 2007 to 2009, when the last recession hit the real estate industry.  She points out that these downturns can sometimes be a win for the property management industry because people always need a place to live. What matters is how you create the narrative.  Recessions are a good time to consider investing in the market. This is the story you need to tell when you’re protecting and building your business. What we learned from the last recession is that markets bounce back. Maybe not to the level that we would want, but it’s an opportunity for property managers.  Owners are not equipped to manage themselves.  Or, they do a poor job of it.  Rising Regulations and the Need for Professional Property Management  Deb believes the industry is in a stronger position now, thanks to the regulations and new laws that have arrived over the last 10 years. This is especially obvious in states like California, Oregon, and Washington. It’s painful for property managers to deal with these laws, but it positions you well. You’re the experts. You’re able to capture new business because dealing with these regulations is a huge headache and a big risk for landlords and investors.  Owners don’t want to make mistakes. They don’t want to make bad decisions. Property managers who are prepared to help them and make sure their needs are met will win new business, especially and even during a recession.  Show these potential clients what you can do to help with licensing and rent control and eviction.  You need to know what’s coming, as a property management business owner. Always be aware of the legislation that’s being proposed. You have to understand what’s going on in order to paint yourself as an expert. Even locally, make sure you can speak intelligently on what new laws mean. Sometimes, inspectors don’t always understand what’s changed when new regulations are passed. Property managers can be a partner instead of an adversary.  Deb talks to a lot of people who are trying to start property management companies, and sometimes they can’t even get started because the licensing rules have become so strict. She always advises them to first make sure they can start a company. You need to know what might prevent you from getting started, and only a handful of states don’t require a real estate license in order to run a property management business.  Property management is not a passive business.  How Disasters (Recessions and Pandemics) Impact Property Management Deb says her business wasn’t big enough to be too impacted by the recession in 2007 – 2009.  She does recognize the damage that was caused by the pandemic, though, and believes that the pandemic was harder on most companies than the recession. During the real estate meltdown, a lot of people lost their homes to foreclosure. It was detrimental, but it was an external factor that impacted businesses. The pandemic, however, did the unthinkable and actually shut things down.  It was always more of an unknown.  But, Deb reminds us, everyone needs a place to live. We recovered from the pandemic and from rent that wasn’t paid and from waiting for rental assistance to kick in. If you can weather these storms, you have a solid business that can withstand such economic struggles.  How NOT to be Vulnerable Deb consults with a lot of property management clients, and the one piece of advice she can give for not falling victim to external emergencies like recessions and pandemics is this: Be involved.  You don’t want to NOT be involved in the operation of your business. Lots of property management owners want to get out of the day to day management of their company. That makes sense. You shouldn’t be in the weeds. But, you shouldn’t not be involved.  At least understand the company’s metrics and where you are at all times.  A lot of people don’t know where they are with profitability. They don’t know what their acquisition costs are or what their profit margins are. They don’t know how many people they should hire and what those people should do.  KPIs and metrics have been buzzwords for a while. But, they’re important.  The way you operate your business and the company culture you establish will make a difference in how you’re able to respond to something like a recession.  Always have your pulse on how things are running. If the right people aren’t in place, you’re going to have to stay over-involved more than you expect. Sometimes, business owners are afraid of people quitting. But, if the wrong people are in place, having them stay on is far more dangerous than having them quit.  Most companies have a version of a strong foundation, but not the whole foundation.  People don’t always know what they need to know, and there can be a disconnect between the thing that needs to be done and the way you interpret how to do that thing.  Deb’s advice is to work backwards. Figure out what you want and work backwards to get it. If want a particular profit margin overall, start there and figure out what you need to do to make that happen. It gives you a starting benchmark, and then you can build out the rest.  Growth and the Future of the Property Management Industry  Growth will happen.  People are focused on growing the business, and according to Deb, sustainable growth will happen when you fix the internal operations piece.  What about the future of the industry? Will big mergers swallow up the small property management companies who say they refuse to sell?  Deb says no. She thinks there’s still a need for small companies.  Owners want service. They understand that larger companies cannot pivot as quickly as smaller companies to deliver what they need.  A.I. and automation won’t solve all the industry’s problems. Some things can be done that way, but in the end, people want to see a face and they want service.  People are trusting you with a large and valuable asset. They don’t want to hand that investment over to an iPad. They want a person to manage it, and that’s the difference between a transactional experience and a recurring experience.  A recurring experience is happening all the time. You’re managing someone’s property every month. You’re charging that fee every month. When you become more of an asset manager for your clients, you’re more like a partner.  Look at financial advisors. With all the retirement calculators and online tools available, A.I. could have taken over financial management years ago. But, people like the relationship they have with their financial planners. It’s meaningful.  If you’d like to reach out to Deb to talk more about this, please contact her at propertymanagementconsulting.com. And, if you have any questions about property management marketing or The Property Management Show, get in touch with us at Fourandhalf. X/TwitterThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY ABOUT MARIE LIAMZON-TEPMAN: As the Director of Marketing for Fourandhalf Marketing Agency, Marie considers herself as a problem solver and storyteller at her core. She’s passionate about giving people the knowledge they need to succeed. She has been in property management marketing since early 2015, and has authored many blogs about the subject. She also hosts the longest running property management podcast called “The Property Management Show” where she and Brittany Stephens have fun examining all the nooks and crannies of running a successful property management business. When she’s out of the podcast spotlight, she works with the wonderful Fourandhalf team helping property managers grow their business and juggles that with being a new mom. The post Building a Rock Solid Property Management Company: Advice from Business Consultant Deb Newell appeared first on Fourandhalf Marketing Agency for Property Managers.

The Property Management Show is pleased to welcome Matthew Kaddatz onto the podcast. He’s the senior director of product at Appfolio, and before joining Appfolio, he co-founded a property management company in 2006, right before a major recession. We’ve been talking to property management experts about how they moved through that recession and what they’re planning for the potential new recession that is coming for the real estate industry. We asked Matt to tell us about his property management company and what things were like when he got started. Remembering Real Estate and Property Management 2006 – 2008 Matt was just getting out of college in 2006, and real estate was red hot. His degree was in computer science, but he knew he didn’t want to be a programmer. So, he found an opportunity to grab a management agreement from family friends who were developing a property. He managed the properties they developed for them. Admitting he was a bit naïve just out of school, Matt says he imagined he was going to be a millionaire making money in real estate. But, about a year and a half in, he realized he had no idea what he was doing. He spent some time learning the business. Those first couple of years were not about growing a business but about learning how to do property management. Then, the 2008 recession arrived, and the housing industry fell apart. Identifying the Signs of Trouble Something weird was going on in 2008, Matt knew. He wasn’t as connected to the industry as he is now, but Matt knew something was wrong when his dad was laid off. Matt’s father had his own business and then sold that business and began working for the company that bought it. It was an insurance company he worked for, and they were in front of the rest of the recession. He had never seen his father without work – ever. Matt realized that things were going to get a lot worse before they got better. His dad being laid off was the canary in the coal mine. Soon, there were foreclosures and an astonishing number of people simply abandoning their houses. They just disappeared. Matt lived in a second-home community. There weren’t a lot of permanent residents in the neighborhood, and a lot of people were willing to give up their second home in order to save their primary home. Around 20 percent of the homes were simply left, and the home values in the area were cut in half within 12 months. This was a scary time to be in real estate. Matt was managing properties right over the border with Mexico, in Rosarito Beach. The drive from San Diego was about 45 minutes. It was a high growth market in 2006, but in 2008, construction crews had stopped building and sales teams had stopped selling. Everything changed substantially. The property management industry is resilient, and Matt had plenty of business with community associations as well as property management contracts. And, he was running a maintenance business, too. While the market stopped growing as aggressively as it had been, the business model they were working with was sound. They got through the recession. Making Difficult Decisions During Real Estate Recessions The business Matt was running was built with a partner, and around 2008, it became clear that growth and expansion was not going to happen. They had been banking on a lot of new construction, and that wasn’t going to happen. Matt’s partner left the business to pursue other opportunities. This was challenging for Matt because the partner had been leaned on as a fluent Spanish speaker. He had also been running most of the maintenance activities. It was a hard decision, but for the business partner, it was the right one. There was enough recurring revenue coming in that the business could still support itself. Anyone who was in foreclosure was hesitant to make any kind of move with their homes, whether it was going to be to rent them out or try to sell. Matt survived and then exited the business himself. Going through the recession as an entrepreneur didn’t necessarily drive him out. He loved building the business, and it was fun to learn how to run a property management company. Matt liked solving complicated logistical problems. But, he missed working with a larger group of people. He missed collaboration and colleagues. The company was small; they worked about 450 units and had 30 employees, most of whom were on the maintenance team. Matt wanted to be part of something bigger, so he joined a large firm out of Texas. They had done a great job building a business, and Matt was happy to be offered an opportunity with them. They had more resources and a lot of colleagues. Matt felt like he could continue to grow. He was also happy to utilize his software engineering background. The software he had used in his property management company was what he had cobbled together. Some of it he built from the ground up and some of it was integrated with Quickbooks and other existing programs. Property management software is much different now than it was 10 years ago. Working with Appfolio Now, Matt is on the vendor side for one of the biggest property management software companies in the country. He’s a product leader, and he likes being in a position where he can deliver products that his clients really need. He enjoys finding the product that’s most successful for his customers. Matt knew he had grown his company as much as he could. He was looking for something outside of property management. And then, he ended up at Appfolio. The company resonated with him because they’re customer-centric and trying to build really good products. It’s rewarding to impact small business owners. How to Prepare for a New Recession We may be at the cusp of new recession. What is Matt’s advice? Matt says this is different from the 2008 recession. In 2008, no one knew what was happening. However, we’ve been talking about the coming recession for over 12 months. It’s unlikely this one will be as bad as the last one. The fundamentals are also different. The housing market is intentionally being slowed down by the Fed to ease inflation. If you can hold on, Matt says, it will be a different world at the end of this. There’s lots of cash on the sidelines waiting to see what happens. Some people, he says, are excited about the recession. They know it will be a good opportunity to buy. Don’t put all of your eggs in one basket, Matt advises. For example, running a maintenance operation with your property management company can be profitable. Homes will always need maintenance. Thanks for listening to the podcast. If you have any questions about Matt or his stories, please contact us at Fourandhalf by filling out the form below. InstagramThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY ABOUT MARIE LIAMZON-TEPMAN: As the Director of Marketing for Fourandhalf Marketing Agency, Marie considers herself as a problem solver and storyteller at her core. She’s passionate about giving people the knowledge they need to succeed. She has been in property management marketing since early 2015, and has authored many blogs about the subject. She also hosts the longest running property management podcast called “The Property Management Show” where she and Brittany Stephens have fun examining all the nooks and crannies of running a successful property management business. When she’s out of the podcast spotlight, she works with the wonderful Fourandhalf team helping property managers grow their business and juggles that with being a new mom. The post What Matthew Kaddatz Learned Running a Property Management Company Through the ’08 Recession appeared first on Fourandhalf Marketing Agency for Property Managers.

We’re talking to one of our long-time clients, Jeff Hacker, who runs Bayside Management and Leasing. He was on The Property Management Show three years ago, and we love talking with him because he’s been in the property management industry for 20 years.  He was with Bayside during the great financial meltdown between 2007 and 2009, and we asked him to come back and share with us some of what he learned as that crisis unfolded. We also wanted to know what he’s doing to prepare for another potential crisis in the industry.  Learning from the Past: How the Crisis Unfolded in 2007 Jeff recalls the crisis building slowly the last time.  Interest rates were going up and the news grew more negative over time as he tracked real estate industry trends. People were not able to make their mortgage payments. The default rates were rising. Most people had an inkling that something was going on, but no one expected it to be as severe as it was. People generally try to be optimistic. Everyone remembered the savings and loan debacle, and there was a general sense that whatever crisis was looming, it would pass and not be too significant.  But, as 2007 and 2008 and 2009 wore on, it became clear that this was something truly catastrophic. The significance of this economic event was pretty widespread.  From a property management point of view, the industry was lucky in some respects. While there is no industry that’s truly recession-proof, property management in general can weather a financial storm better than other industries because people always need a place to live. Even if they’re not owning homes, they need a place to rent. So, while not completely insulated from the effects of a huge recession, property management usually does not go to pieces.  Jeff said that what he noticed early is that as the crisis was unfolding, applications were coming in for vacancies from people who had owned homes. They defaulted on their mortgages or their mortgage companies foreclosed on them.  Some of these homeowners purchased a home with an income-only loan. They put five percent down or in some cases, they put zero percent down. So, there was not a lot of skin in the game. They borrowed up to 100 percent of the mortgage, so when the house was suddenly worth less than the mortgage, people walked away.  One of the things that Jeff learned was to be significantly more proactive with landlords and investor clients at Bayside.  A surprise during the last recession was the number of layoffs that came from the financial meltdown. Jeff would have liked to have been more prepared for the number of job losses that impacted the industry. This led to more vacancies.  When a tenant loses a job, they may be okay for a month or two. But then, they’ll vacate because they’ll need to move in with someone else to save money on housing. Or, they’ll move for a new job.  Homes sometimes have to be rented out for less than an owner would like in a business environment such as this. Jeff learned the importance of being proactive with owners; to explain this situation and to let them know what to expect. There may be less rent. There may be multiple vacancies.  Jeff said another thing he would have liked to have done better is to suggest that owners lower their rent in order to keep tenants who were struggling. While no one wants less rent coming in, it’s better than a vacancy during a recession.  Current Layoffs and Recession Fears In the San Francisco Bay area, where Bayside Management is located, there have recently been mass layoffs in the tech industry. Jeff said this has led to layoffs, and proactive steps have been necessary.  Local tenants who have been laid off by a tech company could move out of state. They might take a job Texas, Florida, South Carolina, or one of the areas where companies are relocating. There has been a lot of migration out of California.  On the flip side of that scenario, there are still a lot of start-ups in the area, and tech employees who were laid off from large companies can quickly find new jobs with smaller companies. That allows them to stay in the area and continue paying rent.  Jeff is talking to his owners about these potential issues. He’s discussing ways to prepare for every possibility. Ideas include: Possibly holding rents flat instead of raising rents. Maybe reducing rents in order to keep tenants in place. There has been a positive response from owners, especially after they see the data and understand the numbers. It’s difficult to accept; costs are going up and every owner wants to maximize what they earn. They look for increases every year. This makes sense. While there has been some push back, there has not been a loss of any accounts. Jeff and his staff are talking to owners in order to prepare them. It’s an ongoing conversation.  Owner Outreach during a Potential New Recession Jeff is worried about churn with the real estate industry on the cusp of a potential new recession. In 2008 and 2009, a lot of investors began self-managing just to save some cash every month. All of us know that property management services aren’t expensive, and they’re worth the investment, but some owners feel a need to save that hundred or two hundred dollars every month. At Bayside Management, there’s an outreach program in place to avoid this kind of churn as a new recession approaches.  The objective is to not lose owners to self-management, even if this means reducing their management fees for a little while.  The proactive outreach is important. Getting in touch with owners to talk about the market has become a priority, and they’re feeling out how the owner is likely to respond.  This began for Jeff’s team in August or September of 2022, and there’s been a staff training built around it. They have a script. They have talking points. They have come together as a group to talk about how to handle these conversations.  Each owner is contacted by the person on the team who has the best relationship with that owner. Since Bayside operates within a portfolio system, it’s usually the property manager assigned to an owner who makes the call. In some cases, Jeff gets involved because it’s a larger client.  Lowering Property Management Fees to Keep Business  Jeff isn’t offering lower fees across the board.  It’s a part of their effort to avoid churn when it’s absolutely necessary. He knows which clients are likely to leave when they get nervous about spending money. These are the owners who will invest in the properties as much as they need to in order to keep the property in decent shape. But, they won’t do any remodeling or bring in new amenities and improvements.  After the experience of 2008 and 2009, Jeff knew that those owners most concerned about costs would be the ones to leave if another recession approached.  Dropping fees for a temporary period of time might save them from self-management.  Jeff said that Fourandhalf has helped him look at the cost of acquisition really well. They know that it takes thousands of dollars to acquire a single client. So, instead of spending that money to find new clients, they’re willing to drop their management fees in an effort to keep the clients they currently have.  The reduction is temporary; no more than a year. It isn’t discounted forever. This is offered as an acknowledgement that there may be a recession coming and that inflation is hurting everyone. It’s a real possibility that rents will remain flat.  Property Management Industry Trends We asked what has changed in the property management industry, and what Jeff believes property managers should be looking out for. He highlighted two specific things: A lot of people were chasing investment properties. Whether they had big pockets or small pockets, everyone was trying to buy investment homes. This drove up property values substantially around the country, and especially in more desirable cities. Home prices kept going up. That’s not sustainable, and there’s only so much inventory. This drive in investment buying kept a lot of first-time homebuyers from getting into the market.  If you’re a property manager in one of the markets that really benefited, you probably brought in a lot of business. But, those market conditions cannot last forever.  Automation. Almost everything is automated in property management, now. Whether we’re talking about showing vacancies or using management platforms for rental accounting and maintenance work orders – it’s all automated. That makes the property management experience better for owners. It’s more transparent. It also provides tenants with new ways to communicate. Property managers can track everything and really show owners all the work that’s being done.   Growth is expected even with a possible recession. Jeff said he likes to focus on growing the company five to 10 percent every year. They’ve been pretty successful in the past, and they’re also very focused on keeping their client base. This year, they want to maintain their base of clients and avoid churn.  Which is another good way to grow.  Retaining your current clients is growth. A lot of property management companies are hyper focused on getting new clients in, but watch that leaky bucket. You don’t want to lose existing clients, otherwise you’re not really growing.  Thanks to Jeff for talking with us. If you have any questions about his work at Bayside Management and Leasing or you’d like to talk to us about your property management marketing plans, please contact us at Fourandhalf via the form below. LinkedInThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY ABOUT MARIE LIAMZON-TEPMAN: As the Director of Marketing for Fourandhalf Marketing Agency, Marie considers herself as a problem solver and storyteller at her core. She’s passionate about giving people the knowledge they need to succeed. She has been in property management marketing since early 2015, and has authored many blogs about the subject. She also hosts the longest running property management podcast called “The Property Management Show” where she and Brittany Stephens have fun examining all the nooks and crannies of running a successful property management business. When she’s out of the podcast spotlight, she works with the wonderful Fourandhalf team helping property managers grow their business and juggles that with being a new mom. The post 2024 Property Management Outlook with Jeff Hacker appeared first on Fourandhalf Marketing Agency for Property Managers.

We’re welcoming MaryAnn Hoffman and Andrew Dougill back on The Property Management Show. They are the couple behind Hoffman Realty in Tampa, Florida, and they were with us on a previous podcast, where they discussed how they got started in the property management industry as a husband and wife team.   One of the things they said during that discussion was how scary it was to have all their eggs in one basket during the Great Recession of 2007 to 2009. We asked them to come back and talk about how they managed that crisis and how it affected their business, especially since there’s talk of another real estate crisis looming.  Business Lesson: Learn to Be Prepared  MaryAnn says she has learned to be prepared. She recommends having some extra money in the bank because it will be tough for a while. During any recession, you’ll be white-knuckled and wondering what’s going to happen next, but always remember that the market comes back.  Last summer was wonderful in the Tampa rental market. They were renting houses easily and the rents were going up. Now, the market is adjusting. Prices are coming back down. You have to be prepared for that, and you have to remember that when things are really good – they’re not always going to stay really good. And, when they’re really bad – they’re not always going to stay really bad. Nothing lasts forever.  Andrew remembers that in 2005, they began working with an older couple who had about a dozen rental properties to be managed. Everyone could see, at that point, that the real estate market was potentially going to tank. Everyone wondered when it would happen, and as Andrew was talking with this couple, he asked for some advice since they had been through three real estate recessions in their lives.  They told him that it would be scary, but that he’d get through it and the market would recover. When it did recover, they said, it would recover better and grow even more than before. They advised him to be prepared and to know his financials.  So, Andrew and MaryAnn took a hard look at their financials. They are real estate investors, too, and they had their own rental properties to evaluate. They decided that they’d probably be fine if the recession did arrive, but they might struggle a bit if rents dropped.  They made the decision to sell three rental properties so they’d have enough cash on hand to keep their business alive. It may be what saved them.  In 2008, rents dropped 10 percent. They dropped again in 2009 and in 2010.  Andrew reminds us that the great thing about getting loans for real estate is the leverage that provides. They increase your yields when things are going well. Cash on cash returns are better with a loan. But, when things go bad, you find yourself with negative leverage, and that can sink you quickly.   The number one lesson, then, is to have enough cash on hand so you can make it through the worst of the recession. Making Recession-Proof Business Moves: Deciding which Properties to Sell One of the properties they sold was actually their dream home. It was a gorgeous house they had just finished remodeling, and the idea had been to move into it themselves. But, knowing what was potentially coming, they sold it instead. This made them a lot of money and helped them get through the economic downturn. They had to give up a dream home, but they kept their business running and they paid their staff. And, they built another dream home after the recession.  The experience of MaryAnn and Andrew is interesting because the negative leverage and dropping rents weren’t just their own concern – it was a concern of their property management customers.  These investors began giving up on their homes. So, they lost some property management business but they were able to make some short sales for those clients. A lot of accidental landlords began to come through the doors of Hoffman Realty. They could not sell their properties for the amount of money they had invested. The logical alternative was to rent until the market improved.  The diversity of the business at Hoffman Realty – having a real estate sales division and a property management division – as well as the surplus of cash from a few key sales helped them stay afloat during some very difficult times.  Educating Property Management Clients on Market Shifts As early as 2005, Andrew and MaryAnn started talking with their clients about the market dropping. This wasn’t just something they had to prepare for. It was also something they had to prepare their clients to manage.   When you own a property management company, you have to see yourself as an advisor to your owners.  Let them know what’s happening.  Even now, Hoffman Realty is telling their owners to be careful using comps from last summer. They’re not accurate anymore. Those owners who are listening are doing fine, but they also lost two management contracts over this message. The summer was a different market, and MaryAnn says she’s committed to being honest. If there are owners who don’t want to hear what she’s saying about where rents are right now, she releases them and wishes them well.  You want to provide your owners with the best information you have. You do not want to waste your time arguing with customers who do not value your expertise.  Worries Around a Potential Recession There’s less worry for Andrew and MaryAnn this time around. They know the market comes back.  They’re also in a stronger financial position with their own investments. They aren’t heavily leveraged anymore, and they understand the cycle of real estate. Investors have a lot of debt when they get started. Then, tenants help pay down the mortgage and before you know it, you’re debt-free.  The Hoffman Realty customers who aren’t in such a strong position are what worry Andrew and MaryAnn. Some of them are completely unaware. Some of them are making aggressive moves right now, despite the advice they’re providing.  They would not have done anything differently the last time, even knowing what they know now.  Neighbors called to complain about the dream house they sold in 2005, because they didn’t believe the price was high enough and it was messing up their comps. This did not bother Andrew and MaryAnn. They knew what was coming, and they didn’t want their property to languish on the market.  Trusting your gut can sometimes feel like an emotional, knee-jerk response. But, if it’s a gut instinct based on what you’re seeing in the market, you’re probably on the right track.  Protecting and Growing Your Property Management Business  While discussing what types of things can be done to protect yourself against the coming shift and potential recession, Andrew and MaryAnn remind everyone to invest in real estate when you can.  They believe Realtors should always invest in real estate. It gives you a good option because if something happens, you can always sell that real estate. Use those properties you own for retirement or for worst case scenarios or a rainy day. They encourage their team to invest in real estate. Several of their staff continue to buy properties. Some will buy and hold and others will buy and flip. MaryAnn uses the analogy of “Are You a Rancher or a Farmer?” Farmers will buy the properties and keep them working. Ranchers will buy the properties, improve them, and then sell for a profit.  Is now the time to grow your property management business, given the warning signs that maybe the market will shift?  For Hoffman Realty, Andrew says the expectation is that they may lose some real estate business during this potential recession, but they’ll grow the property management side of the company by another 25 percent in 2023. That’s just being on cruise control for MaryAnn, who is happy with where the business is right now. They have a business plan and a marketing plan, which they review regularly. MaryAnn is an excellent sales person who manages to bring in new business easily, so they’re not planning to change anything too drastically. Their plan is to continue allowing the real estate business and the property management business to work together and keep them successful.  The expert entrepreneurial advice from Andrew and MaryAnn is this: Don’t worry too much.  Have a plan. Invest in real estate.  There’s a lot of bad news that comes with a real estate recession. One of the good things is that there will be deals coming up. All of that expensive real estate will soon become less expensive. If you can put some money aside, you’ll get a deal when the bargains show up.  If you have any questions about our chat with MaryAnn and Andrew of Hoffman Realty, please contact us at Fourandhalf via the form below. LinkedInThis field is for validation purposes and should be left unchanged.First Name(Required)Last Name(Required)Email(Required) Phone(Required)Company NameComments or QuestionsThis field is hidden when viewing the formDate MM slash DD slash YYYY ABOUT MARIE LIAMZON-TEPMAN: As the Director of Marketing for Fourandhalf Marketing Agency, Marie considers herself as a problem solver and storyteller at her core. She’s passionate about giving people the knowledge they need to succeed. She has been in property management marketing since early 2015, and has authored many blogs about the subject. She also hosts the longest running property management podcast called “The Property Management Show” where she and Brittany Stephens have fun examining all the nooks and crannies of running a successful property management business. When she’s out of the podcast spotlight, she works with the wonderful Fourandhalf team helping property managers grow their business and juggles that with being a new mom. The post Entrepreneurial Lessons from the ’08 Recession with MaryAnn Hoffman & Andrew Dougill appeared first on Fourandhalf Marketing Agency for Property Managers.