Having been in the real estate industry for more than 40 years, I have learnt a lot of lessons about building property management businesses - many of them difficult lessons with expensive tuition fees.
For nearly six years from 1999-2004 I was the licensee of a leading property management business in Sydney and guided that business through a fast growth phase that saw the rent roll increase from 400 properties to over 2,400 properties.
In 2004, I realised that, although it was a great challenge in building a rent roll, I was building someone else's asset, not my own.
So in early 2005, with a couple of partners, I established True Property in the inner west of Sydney.
We leased a first floor office of some 400 square metres in a back street of Camperdown, with three desks, three telephones, three computers and a whole lot of spare space to play indoor cricket in.
Talk about being "capacity ready"!!
In deciding which business growth model to pursue, we decided to take a three-tiered approach:
1. Organic growth
2. Acquired growth
3. Managing other agencies' rent rolls.
As we were a "start-up" business, i.e. we did not have any clients, plus True Property was a specialist property management business, i.e. we did not have a real estate sales business, we needed to focus on some of the more "non-traditional" methods of growing our rent roll.
We focused primarily on "business to business" relationships rather than "business to client" relationships.
We established referral partnerships with other businesses who in any way dealt with property investors, such as:
· Project marketers
· Financial planners
· Buyer's agents
· Real estate agencies without rent rolls
· Mortgage brokers
· Strata (body corporate) managers
· And the list goes on...
We took the view that we needed a reasonable foundation of properties under management to be able to supplement our organic growth strategies, so we purchased a small rent roll of 120 properties.
That small rent roll, together with our "organically grown" properties formed a strong enough cash flow foundation to be able to cover our overhead costs.
At that time, we were able to accelerate the organic growth by working on our existing client list to obtain more properties to manage, because many clients:
• Had investment properties with other agencies
• Had family members, work mates or colleagues with investment properties.
Managing other agencies' rent rolls
I have long held the view that there were a lot of agencies out there that were owned by "sales focused" agency principals that were either problematic for them, inefficient or unprofitable.
As we were property management specialists and trainers, we developed a service offering to a couple of local agencies for them to "outsource" the management of their rent rolls to us in return for a mutually agreed percentage of their gross annual revenue.
In general terms, the arrangement went like this:
• The parties entered into a detailed conjunction agency agreement
• The rent roll was still owned by the outsourcing agency but managed by True's staff under the brand name of the outsourcing agency
• The outsourcing agency's rent roll asset was protected against losses through a service level agreement with True.
The key drivers of true's growth
1. A written rent roll growth plan
A simple one-pager detailing the goal, the deadline and how we were going to achieve the goal in a step-by-step form.
2. A database
A centrally maintained database of prospective clients and key contact people who are communicated with on a monthly basis.
3. Persuasive, professional marketing materials
We believed that, as a fresh, new specialist property management business, prospective clients would not take us seriously unless we not only presented ourselves professionally, but also had a stylish set of well written, persuasive marketing materials.
Materials such as:
- Colour, glossy brochures
- Detailed, personalised property management proposal documents
- A comprehensive listing presentation kit that provided answers to EVERY question a prospective client was likely to ask us
- A client handbook that explained in detail HOW we operate in all the key areas of our business.
4. A great website (which is always evolving)
We had noticed from our research that most agency websites were largely devoid of information about the property management services provided to landlords and tenants by the agency.
We saw a need to provide extensive information to prospective clients and, importantly, have a "call to action" for prospective landlord clients to provide their information in order to obtain more information or a rental appraisal.
5. A unique service offering
We figured that we needed to find PODs (points of difference) between True and its competitors.
PODs such as:
- The fact that we were property management specialists, and not running our property management business merely as an appendage to a real estate sales business
- We trained other property managers across the country
- We had a procedural system that tightly controlled all the standard processes in property management (that we sold to other agencies)
- Landlords and tenants could access information about their properties 24/7 via our internet portal.
These PODs are continually evolving as competition from other agencies intensifies.
6. A specialist business development manager
Rent roll growth is a SELLING activity. Most property managers are not good at selling. So, we put the SELLING of our services in the hands of a salesperson, who had a good working knowledge of property management.
7. Regular training
We are strong believers that a business is only as strong as the quality of its people. So, we spend a lot of time and money training our team.
Have we got everything right yet?
We are still learning and making mistakes on a regular basis, but we are on our way.