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Scaling a real estate business is a huge undertaking. After establishing systems that help you make the most of agent success, lead generation, branding and even your own leadership skills, you could say: “Wow, we’ve really made it!”
But there is, in fact, another level for your team or brokerage. For us, that next level has been made possible by expanding our business to help with every facet of a real estate transaction.
Our goal is to be the Amazon of real estate by creating a one-stop shop. We handle a variety of services, including title, mortgages, movers, storage, new home construction, granite, HVAC and — perhaps most overlooked by other team leaders — property management.
Property management is a sector of the real estate business that few teams or brokerages are talking about in 2021, even though they should be. Why? Most team leads and brokers — unless they’ve really dug into it — don’t really know how lucrative this arm of our business can be.
Real estate is about market share. If you truly want to grow your business by leveraging what you’ve already built, I highly recommend you take a look at property management. Here are six reasons why.
1. There isn’t much competition
What you’ll find in most housing markets are two types of property management services. There are the big national players that typically have hundreds or even thousands of accounts in any given market, usually managing units they also own. And then there are the one-off or mom-and-pop services, which also typically manage units they own.
Such providers don’t manage much third-party business, if any. People who are already good business operators in real estate, however, can take what they’ve learned and go after that middle ground. It’s a niche, but it’s a huge one, and it can bear fruit for a long time.
In fact, your real estate knowledge can give you an edge. Other companies don’t offer the same perspectives, and they don’t have the same client databases. As a broker or team leader, you have the ability to go in and get massive market share by marrying your real estate expertise with the needs of the property management marketplace. It’s a blue ocean, and it’s truly going untapped in most markets.
2. You’re halfway there
If you’re a good operator in real estate, you already have the foundation and building blocks to create a property management company. You have a database. You have market share. You have people you’ve sold houses to for years. You have local marketing expertise.
After we established our property management division, we went to our clients who we had done business with for years and offered our services. We had 200 property management accounts almost overnight.
How can you get into this world? First, for property management to work well, you have to scale it. To make it truly lucrative, you should aim for 100 accounts or more. But before you jump in with both feet, take a property management training course.
Then hire some really good people. You’ll need to master efficient leasing, easy online statements and bill pay for tenants, property maintenance and marketing. (You can find my property management course at eliteopspm.com.)
Model what you have already learned and used in your sales business and duplicate it into property management. Although property management is a different business, there’s a lot of crossover and economies of scale you can pick up from already running a real estate enterprise.
3. It boosts your market share
With property management, you can help your buyers and sellers solve the inevitable problems they’ll encounter with real estate. For example, if one of your clients suddenly has to relocate to California for work, and she doesn’t want to sell or doesn’t have the equity to make a solid profit yet, you can instead keep her as a property management client by offering to turn the property into a successful rental.
You already know what it’s worth, who might be potential renters and how to position it in the marketplace. If you say to that client, “We can’t help you. We don’t handle that,” the person’s business will go to someone else, putting you at risk of losing that client on the future listing or buyer side.
For our team, property management helps us gain new business all the time. New clients will say, “We know you do rentals. We know if you can’t sell it, you can rent it for us.” The more problems you can solve around a real estate transaction, the more customers you can find — and keep.
Once you reach a certain size, you can eventually control the economics around real estate. Amazon was once nothing more than books. Now, it’s everything. Similarly, your agency can sell homes and do much more.
A huge segment of the market is also investors, and we have become the go-to in our market for investors because they know we know the management side and have access to many investment properties. This was a segment of the market we were missing prior to getting into property management.
4. It expands your pipeline
In residential real estate, everybody’s trying to discover those “magic” moments when buyers and sellers get ready to make a move. If you’re managing property, you’re going to know if the tenants are going to renew their lease.
We’ll have conversations with our tenants ahead of time — especially with our renters in single-family homes — asking if they want to buy or how we can help with what’s next.
As a real estate professional, you have data on consumers that other people don’t. You have the ability to get to a buyer before anyone else, too. That’s a real pipeline opportunity.
5. It opens doors to investing
With property management, you’ve also got the inside scoop on portfolios of investment properties you can eventually buy yourself. Before I started investing in real estate, I decided I wanted to learn about the property management side first.
In fact, the first property I bought was a multifamily site I had already been managing. Over time, I became familiar with the property and the owners — and I ended up buying it from them.
Right now, we’re seeing a lot of investors buying more multifamily properties because interest rates are so low. A lot of times those rental properties that go up for sale never touch the market. It’s a bit like a secret club, and we’ve been lucky enough to get on the inside of that by managing property.
Our largest-ever single sale was a $7 million apartment complex. We managed it, got the listing and bought it. That came through another set of investors, who we found by managing one of their properties.
6. It creates passive income
I’m a huge believer in real estate that helps you build wealth. Property management is one of the pathways that not only helps you build wealth, but also creates a cash flow of passive income. Sales commissions can be up and down year over year. But with property management, at a certain level, the income doesn’t fluctuate very much.
Most people who own rentals are in it for the long term. Your average property owner holds property for 7-10 years. And that means you’re going to make consistent income for 7-10 years if you do a good job.
Once you reach 100 units or so that you manage — but not necessarily own — it’s the same amount of money every month. It’s what I call “mailbox money.”
Property management expands your network, your database and ultimately, your business. Brokers and teams of the future will offer more services — and you can be sure property management will be one of them.