Strategies for Property Management Companies to Target the By-Owner Market
Explore the potential of targeting the by-owner market, specifically Self-Managing Investment Property Owners (SMIPOs), as a blue ocean strategy for property management companies. This approach involves addressing key questions on adding more doors, effective marketing allocation, profitable market targeting, customer acquisition costs reduction, and staying ahead of the competition. Visualize where your business could be in 2020 by focusing on growth, profitability, employee management, technology implementation, and differentiation strategies.
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ADD MORE DOORS BY TARGETING THE BY-OWNER MARKET ARE SMIPOs THE BLUE OCEAN FOR PROPERTY MANAGEMENT COMPANIES? (Self-Managing Investment Property Owners)
WHO AM I? PERSONAL BA, UC Berkeley, Comparative Literature (German, Latin & English) MBA, Cal State Fullerton Married 25 Years, 3 Children PROFESSIONAL Mortgage Banker, Private Banking & Bank Marketing 1987-1997 Real Estate Broker, Real Estate Sales, Escrow & Small Developer 1997-2011 Property Management 2011 2016 ACCOMPLISHMENTS 8 Years on Placentia City Council Past President, Pacific West Association of Realtors Serve as Director for CAR and was a Director at NAR Professor, Azusa Pacific, Business Strategy CURRENT BUSINESES Progressive Property Management, Inc. Partners Real Estate Group Sierra Maintenance Services The Brady Bunch of Realtors Villa Picea, LLC Building 10 Townhomes FUN FACTS Rowed for 3 years at Berkeley on the Lightweight Crew Team Uncle Gary Usher wrote in My Room and 409 for the Beach Boys
WHAT KEEPS YOU UP AT NIGHT? How do I add more doors? How do I spend my marketing dollars more effectively? What market should I be targeting? How can I become more profitable? How do I reduce my customer acquisition costs? How do I get better reviews? How do I expand in my marketplace? How do I differentiate myself from the competition? How do I compare to the competition? Is there a new business model coming in the market? Where will I be in 2020?
WHERE WILL YOU BE IN 2020? How many doors will you be managing? How profitable will you be? How many employees will you have? What will you be charging your clients? Are you prepared for the competition? How do you compare to the competition? Are your reviews good and getting better? Do you have a technology strategy? How much will your per door acquisition cost be? How will you swim in the blue ocean of SMIPOs?
WHERE WE WILL BE IN 2020. We will have 14 branches covering all of Southern California. We will be managing 3,000 doors (up from 500 right now). Management income will be $300,000 a month with a $35,000 net profit. Our customer acquisition cost will be $200 a door. We will have over 100 Yelp reviews that are 4 stars and above. We will have 14 operations staff and 16 Branch/Property Managers. We will implement off the shelf technology to be more efficient and profitable. We will be lower in the cost, match the service and exceed the perceived value of our competitors. We are pricing for the future, not the past.
WHY BOTHER WITH THE 3 TS? COLOSSAL 43 million rentals in the US 6 million in California 1,500,000 in Los Angeles 400,000 in Orange County 70% 10 units or less Does not include commercial, retail or HOAs IMMUTABLE Technology not a threat Difficult tenants and owners mean job security crazy is our best marketing Laws will not loosen for owners Investment property owners time too valuable for management PROFITABLE Creates additional revenue sources Real estate sales Escrow Maintenance services Analyzed bank accounts SCALABLE A branch office every 60 mile radius A Property Manager every 175 doors An Operations Assistant every 400 doors ENJOYABLE We help owners from harming themselves. We are the good cop/bad cop but provide needed contract enforcement. We help tenants with quiet enjoyment of their rental. Vendors love us. PREDICTABLE Dependable - Subscription business Average term of 7 years Income increase of 3% per year 3% attrition rate Forecastable It s a number business Marketing drive eyeballs to website Sales converts leads to clients Operations retain the clients
YOU ARE IN A REAL BUSINESS THIS IS A REAL BUSINESS, NOT THE REAL ESTATE BUSINESS IT S A TECHNLOGY BUSINESS This Is A Technology Business Drive Folks to Your Site Know Your Analytics Website traffic Penetration rates A/B Testing IT S A NUMBERS BUSINESS Know Your Numbers Operating Expenses Cost Accounting Expected Margins IT S A CAPITAL INTENSIVE BUSINESS Expect to Lose Money This is your McDonalds Know Your Fully Loaded Breakeven Overstaff for Growth Forgo Profit to Build Your Company IT S A PEOPLE BUSINESS People, Product & then Profit This is a people business Look for the dinged & dented Hire slowly, fire quickly Product Differentiate Profit This comes last, not first
WHY GROW YOUR BUSINESS ? SAFETY IN NUMBERS No one client should comprise more than 5% of your income A diversified portfolio is a safe one THE BUSY RESTAURANT People like to eat where others are eating. People won t spend a dollar of their money or a minute of their day for a bad experience. SAFETY IN MORE STAFF No one is indispensable. Cross train & keep them on their toes. MORE MARKETING DOLLARS If 10% of your gross dollar goes to marketing, more is better. SPECIALIZED LABOR Have people do a few things well. Let staff focus on fewer moving parts. BETTER RESALE Many company value your business on gross income not net profit. More ancillary income. STACK EM DEEP AND SELL EM CHEAP Smaller margins but bigger volume Profit a little on a lot. IF YOU ARE NOT GROWING, YOU ARE CONTRACTING Attrition rate of 2 to 3% of your properties - it is inevitable. ECONOMIES OF SCALE More properties means better scale Price to the future scale
WE ARE A GROWTH STORY PROGRESSIVE PROPERTY MANAGEMENT, INC. started 2011 36 doors in 2011 76 doors in 2012 132 doors in 2013 272 doors in 2014 444 doors in 2015 800 door goal in 2016 3,000 BY 2020 ALL ORGANIC GROWTH No acquisitions of other companies They come, and stay, for our story 75% SMIPOs Self-Managed Investment Property Owners 6 BRANCHES 3 Types JVs Corporate Branches Broker Branches Centralized Operations Decentralized Sales and Management
1 DOOR EQUALS 5 FIGURES MANAGEMENT INCOME Average rent of $2,000 Average fee of 5% Average monthly fee of $100 Total monthly management income of $8,000 TOTAL INCOME Management income of $8,000 Sales income of $1,080 Leasing income of $800 Late fee income of $200 Total income of $10,800 If profit margin 20%, $2,160 net profit SALES INCOME 3% of your portfolio sell annually 50% will use the management company as the listing agent Average sales price of $600,000 2.5% average commission 1 sale every 8 years $1,080 gross commission (80/20) THE TRUE VALUE OF A DOOR Monthly management income of $100 Annual income of $1,200 Average duration of contract of 7 years Gross income of $8,400 Average sales income of $1,080 Average leasing income of $800 Late fee/posting income $200 Resale of door value of $1,800 TOTAL DOOR VALUE OF $12,280 PROFIT PLUS RESALE VALUE OF $3,960 LEASING INCOME 25% of tenants churn each year Tenant acquisition fee of 35% of the first month s rent Average rent of $2,000 ($700) 20% of acquisition fee offered as compensation 75% of tenants use the listing agent directly 2 leases every 8 years equals $800
GROWTH IN DOORS 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 3,500 3,000 2,500 2,000 1,500 1,000 500 0 # of Doors
THE TRENDS 15-Nov 15-Oct 15-Sep 15-Aug 15-Jul 15-Jun 15-May 15-Apr 15-Mar 15-Feb 15-Jan 2.5 Thousands 2.3 2.1 1.9 1.7 1.5 1.3 1.1 0.9 0.7 0.5 0.3 0.1 14- Dec 14- Nov 15- Sep 14- Sep 15- Aug 14- Aug 15- May 14- May 15- Mar 15-Oct 14-Oct 15-Jul 14-Jul 15-Jun 14-Jun 15-Apr 14-Apr 15-Feb 15-Jan #REF! Yelp Views Google Views 1 682 682 360 716 875 1030 666 916 919 946 668 965 810 1021 698 985 725 1436 664 878 594 1664 682 1031 544 1319 486 822 840 943 491 643 950 1128 919 673 1275 891 Google Views Yelp Views #REF!
WEB LEAD SOURCES 1,100 900 700 500 300 100 15-Jan 15-Feb 15-Mar 15-Apr 15-May 15-Jun 15-Jul 15-Aug 15-Sep 15-Oct 15-Nov -100 Organic Direct Social Referral
A SERIES OF SMALL EPIPHANIES HOW ABOUT THAT RECESSION? The roller coaster real estate business Property management a subscription business Large market Scalable THE MYSTERIOUS MAN FROM SAN DIEGO Whoever gets to the 80% wins. LEAN START-UP & LEAN ANALYTICS This is a technology business instead of a real estate company managing properties. Zappos is not in the shoe business. WHERE IS THE BLUE OCEAN? The Blue Ocean Strategy Is there a blue ocean for property management? Everyone seemed to be in the red ocean. 37 DOORS FOR $60,000 That is 150,000 direct mail pieces and 200 doors. We added 40 doors in December. Property management companies don t know how to grow organically. I DON T LIKE YELP Shoot your customer service strategy and not the messenger. HOW DO YOU GET RICH IN REAL ESTATE? Help others get rich. 200 DOORS IN 20 YEARS If you do a great job, and that person knows another person in the city with a rental that is your growth strategy. WHO IS THE TOM FERRY FOR PROPERTY MANAGERS? Who will give you the keys to the castle? How do you grow your business?
THE TARGET MARKETS NERVOUS OWNERS -Turning Their Home into a Rental 2% of the market Google Yelp SATISFIED OWNERS - Not Aware of Better Property Management Alternatives 10% of the market Direct Mail Referral SAVVY INVESTORS - Buying Another Rental Property 2% of the market Referral Current relationship Google Yelp SMIPOs (Self Managing Investment Property Owners) 80% of the market Direct Mail Google DISSATISFIED OWNERS - Looking for Better Property Management 6% of the market Google Yelp Direct Mail
RENTAL STOCK OF SMALL INVESTORS HOUSING STOCK SFR Detached SFR Attached 2-4 5-9 10+ Mobile Home Only 30% of all rental properties are 10+ Units 28% 30% 7% 19% 12%
WHY SWIM IN THE SMIPO OCEAN? CURRENTLY UNREACHED CURRENTLY UNKNOWN NO WEBSITES TO SERVE THEM Some assistance from associations, but spotty. NO ONE HAS SURVEYED THEM Not CAR s Target Market Apartment Associations target big complexes for dues THEY DON T GOOGLE OR YELP. They are happy and not looking. NO ONE HAS ASKED THEM Why do you manage your own property? What do you think about property management companies? Why did you pick a particular management company? What would it take for you to stop managing your own property and hire a management company? MASSIVE MARKET 500,000 in Southern California alone Growing PERFECT FOR MULTIPLE MARKETING CHANNELS Direct Mail Public Relations SEO SEM Blogs Social Media
WHY TARGET THE SMIPOS? COLOSSAL MARKET 5 million rentals in California 1+ million in Los Angeles, Riverside, San Diego, San Bernardino & Orange County No one knows for certain what % are SMIPOs GETTING MORE COMPLICATED Fair housing laws Pro-tenant legislature Tenants want better technology Savvy tenants know how to play the system GETTING COLOSSAL-ER More owners converting properties to rentals More tenants happy with the rental lifestyle More cities allowing high density living
WHO ARE THE SMIPOs? OLDER, WEALTHIER & SMARTER Average age of 56 Average income of $150,000 Average of 1.5 investment properties 90% with a college degree Retain the property an average of 10 years Average net worth of $500,000 A lot of new foreign money buying since 2008 Not necessarily technology savvy Not adverse to professional property management, just wary.
WHY ARE THEY SMIPO-ING? SMIPO OBJECTIONS Property management companies like to nickel and dime. They may seem like a good deal, but they have hidden fees. Property management companies have terrible customer service. They are notoriously bad. I care more about my property than they do. They may be good, but they won t take care of my property like I will. Their vendors overcharge and do bad work. I only trust my vendors. I have a personal relationship with the tenants. My tenants are my friends. I can t afford to pay a company. There is no profit to pay a company. Property management companies charge too much. I prefer to save the money and do it myself. I don t trust property management companies. Property management companies will rip you off. I enjoy managing my own properties. I have nothing better to do.
WHY ARE THEY SMIPO-ING? 5 4 3 2 1 RATING 0
WHY DO THEY STOP BEING SMIPOS ? 4 3 2 1 RATING 0
WHAT DO THEY THINK OF US? 5 4 3 2 1 RATING 0
WHAT WOULD IT TAKE TO USE US? 5 4 3 2 1 RATING 0
WHEN DO THEY FEEL THE PAIN? WHEN DO OWNERS TIRE OF MANAGING THEIR OWN PROPERTIES? THE PAIN POINTS: Assessing potential tenants Acquiring quality tenants Coordinating vendors for repairs Finding quality vendors to do those repairs Lease up cleaning, showing, screening and contract execution Breach of contract for non-payment Breach of contract for violation of terms The eviction process Lock-outs & abandoned property Effective marketing of vacant rentals (creepy Craigslist) Move-ins Move-outs Keeping in compliance with tenant laws Going to small claims for security deposit disputes At times of emergencies
THE ONLY 2 REASONS TO CALL YOU THE OWNER WON T DO IT. THE OWNER CAN T DO IT. When an owner decides they don t have the skill, temperament, time or technology to do it themselves, they hire a property management company. When an owner decides their time is more valuable than the time is takes to manage their own properties, they hire a property management company. If an owner makes $120,000 a year, or $62.50 an hour, and it takes 2 hours a month to manage their property, they are better off hiring a company. That s why most people don t wash their car they do it better, faster and at a lower cost. People skills Legal skills Out of area Technology Patience
ADDMOREDOORS.COM HOW TO ADD MORE DOORS WITH SMIPOS THEY MUST TRUST YOU. You must offer Value Propositions to the SMIPOs. Easy Exit Contracts, Better Tenant Systems, Performance Guarantees Company Story, Slogan, Logo & Mission Statement They must see value in what you offer. THEY WANT TO BELIEVE YOU. You must make your business Transparent to them. Rates, Fees, Contracts & Comparison Charts They must believe you will do as you say you will do. THEY WANT TO PAY LESS. You should price for what the market will bear at the Lowest Cost possible. Variable Pricing, Economies of Scale, Ancillary Income They are paying nothing now so they are price sensitive. THEY EXPECT EXCELLENCE. You need to provide Stellar Customer Service at every level. Owners, Tenants, Vendors & Staff. The only way to gauge their future experience, is to evaluate your current relations with owners and tenants.
WHAT BAIT DO YOU NEED? EFFECTIVE MARKETING Direct Mail SEO PPC UNDERSTANDABLE MANAGEMENT FEES AND CONTRACTS Price to the Future Variable Pricing No Hidden Fees Easy Exit Contract ENGAGING WEBSITE Topical Transparent Easy to Navigate VALUE PROPOSITIONS Property Certification Performance Guarantees Better Tenant System REPUTATION MANAGEMENT Excellent Reviews Continual Surveys TERRIFIC TECHNOLOGY Management Software Communication RENTPLATZ.com Be their information resource Offer a la carte service
THE ONE-STOP SHOP WEBSITE TRANSPARENT USEFUL Management Contract Lease Contract & Addendums Fees and Charges Show the Properties You Manage Comparison Charts Blogs & Videos Reviews Properties for Lease Online Application Online Credit Fee Online Brochure FAQs & SAQs SCALABLE & MODIFIABLE Offices Staff Properties Blogs STICKY Lead Generation Easy to Navigate User Friendly
TESTING THE FUNNEL PROPERTY MANAGEMENT A TECHNOLOGY BUSINESS TRAPPED IN THE REAL ESTATE INDUSTRY. Track Income Types of services requested A la carte revenue Full service property management income Leads to vetted vendors and the value of the lead Track Traffic Which marketing is working? Direct mail direct SEO organic search PPC - social The number of unique visitors The number of captured emails The number of a la carte users The number of users who opt for property management Track Penetration Our Current Situation 8,000 direct mail pieces 800 Unique Visitors/Month 3% Penetration Goal 1,200 Unique Visitors 4% Penetration No Additional Spending More Effective Marketing Cost Per Door Declines 50% 24 Doors/month Track Behavior Where are they visiting? How often do they visit? How often do they respond to emails? What type of services are they buying? How long until they tire of the 3 t s? 48 Doors/month
WHATS YOUR VALUE (PROPOSITION)? VALUE PROPOSITIONS Definition - A value proposition is a promise of value to be delivered and acknowledged and a belief from the customer that value will be delivered and experienced. 6 Performance Guarantees 1) Service, 2) Fee, 3) Satisfaction, 4) Happiness, 5) Response, & 6) Payment Better Tenant System A proven system to secure better quality tenants 5-Step Property Certification 1) Market evaluation, 2) property assessment, 3) clean & show, 4) vendor coordination and 5) quality inspection We Manage Happiness at No Extra Fee/Progressively Better Company slogan, logo Pillars, Mission, Principles Company Differentiation Local Experts Family Owned Length of Time in Business Technology Experts
YOUR REPUTATION MATTERS AGGRESSIVE SURVEYING OF OWNERS & TENANTS For Owners At tenant acquisition Randomly once a year For Tenants After a scheduled repair After lease renewal AGGRESSIVE CONVERSION TO REPUTATION SITES IF POSITIVE Yelp Goolge+ Thumbtack Company website AGGRESSIVE INVOLVEMENT IF NEGATIVE Mitigate the damage Talk to the reviewer Correct the situation Respond online
MARKETING THAT MATTERS ANALYTICS DIRECT MAIL Cumulative Effect Track Traffic Source Direct, Organic, Social or Referral Out of State Owners 35% SMIPOs Out of County Owners 60% SMIPOs In County Owners 90% SMIPOs Number of Visitors Per day, per month, per year New sessions, new users, pages, time on site GOOGLE SEO/PPC Instant Gratification Long term strategy Add content continually Maximize the PPC Lead Generators AllPropertyManagment /Thumbtack The Race to the Bottom Yelp The Virtuous Cycle of Yelp Google Test Your Ads Penetration 2.5% of visitors become doors LEAD TRACKING LeadSimple/CRM Software Leads Conversion rate Source Cost per lead ROI Passive marketing
RENTPLATZ.COM Making Properties More Manageable A Website Providing Tools, Resources, Tips and Training to Owners Who Manage Their Own Properties. Management Assistance A La Carte Tenant Acquisition A La Carte Monthly Management A La Carte Contract Enforcement A La Carte Property Marketing Vetted Vendros About RentPlatz Making Better SMIPOs One-Stop Shop Free Services & Information Low Cost A La cCrte tools SMIPOs Only Email grab Legal Legislative Updates Owner rights Tenant rights The SMIPO bible Links to Associations Contact Us Every vendor vetted for insurance, reviews & guaranteed work What s the Buzz Blog Monthly blog Free Forms Pre-Move In Forms During Tenancy At Breach of Contract The SMIPO Quiz Do you have what it takes to manage your own property? Property Management Tips & Tools FAQs (Tricks of the Trade As An Expert What the Buzz Blog Compare 8 Property Management Companies in Your Area www.ComparePropertyManagement.com
ARE YOU READY FOR 2020? If you are not growing, you are contracting. If you are not improving, you are falling behind the competition. If you are not targeting SMIPOs, you are missing at least 70% or more of the market. If you are not implementing technology to increase profits, reduce costs, improve efficiencies and provide stellar customer service; others are. If you cannot compare your company side-by-side to your biggest and best competitor, the public will. If you cannot communicate your value propositions to prospective clients, you may not be of value to them. If you are not ready for 2020, you stand to lose business to property management companies that are.
IMPLEMENTATION OF VERSION 2020 Module 11 Lead Conversion & Drip Campaign Module 1 Company Analysis/Initial Consultation Module 12 Analytics Module 2 Value Proposition/ Company Differentiation Module 13 Website Improvement Module 3 Variable Pricing/Pricing Strategy Module 14 Operations Module 15 - Accounting/Systems Module 4 Comparison Charts/Positioning Cost: $2,950 for access to AddMoreDoors.com Module 5 Database Build Plus a per door growth fee of $100 per door added less than 100 doors $90 for 101 - 200 doors $80 for 201 - 300 doors $70 for 301 - 400 doors $60 for 401 - 500 doors $50 for 501+ Includes use of our Value Propositions, Marketing, RentPlatz, Checklists & Quarterly Coaching Module 6 Direct Mail Marketing Module 7 SEO, PPC & Analytics Module 8 RentPlatz.com Module 9 Technology Implementation Module 10 Reputation Management
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