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Boosting your business through property management
While the sales sides of many real estate businesses suffered during the downturn of the past few years, what has become apparent is the positive contribution that property management can make to business profit and growth. Often not afforded the same level of investment and focus as sales, property management has proven itself critical as a reliable source of regular cashflow, keeping businesses buoyant during the tough times and often building profits.
As the market picks up and businesses plan for a brighter future, a focus on property management should be core to business growth strategy, whether you’re looking to acquire a rent roll or grow organically. Whichever path you choose, there are a number of factors that should be top of mind to ensure your business grows successfully.
Rent roll acquisition
Rent rolls are a stable asset with a transferrable value. Acquiring a rent roll has many advantages, providing immediate scale and therefore efficiencies, and building your listings database which can drive sales. But while a rent roll purchase may be a quick win delivering an immediate boost to revenue, it needs to be funded through debt or equity which will have an impact on your profit. Balancing growth and profit can be a fine line and before you choose acquisition as a means to growth, you should carefully consider a number of factors:
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Terms of the deal
While it’s important to focus on the number of properties being acquired and the multiple it is being valued on, it is just as important to agree on strong commercial terms, in particular a retention period and if appropriate a restraint of trade on the vendor. These important points are often overlooked but should really be a crucial aspect in valuing the rent roll and deciding whether it is a sensible purchase in the first place.
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Integration strategy
The completion of a rent roll purchase is only the first step in a successful acquisition. An integration strategy requires a clear picture of how the vendor managed the rent roll, identifying the areas where your management processes and policies differ and how your new clients like to work. You can then ensure as smooth and transparent a transition experience as possible for your new landlords and properties, minimising the chance of losing any of the rent roll.
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Productivity benchmarks
Consider the capacity of your property management team and make sure they’re handling the right number of properties . The revenue versus cost impact of too few properties per manager is clear and ingrained in most businesses, but bringing on too many properties per manager puts your service levels and therefore your reputation at threat, and risks serious disengagement from staff who can feel commoditised. Always consider your current and future staffing needs as part of your acquisition plan and costs.
Organic growth
While acquisition can deliver immediate growth, it also increases debt exposure. Organic growth may be slower to demonstrate the same results, but it has many advantages in that you have complete control over the type of properties, tenants and landlords you bring on, and it has lower associated costs, focusing on the skills of your team to bring in the new business.
In an industry where attrition rates of up to 10 per cent per year are not uncommon, organic growth is critical to your growth strategy. There are a number of key factors to consider when planning the organic element of your growth strategy:
1. Database management
Your database is your number one sales tool for property management growth so use it wisely. Not everyone on your database has the same needs or expectations, so focus on segmenting your contacts and developing a tailored communications strategy. This demonstrates to your clients that you have taken the time to get to know them and their needs and wants. Effective targeted and tailored communications will resonate with your clients, building your relationships and reputation and minimising disengagement.
2. Specialist staff
Property managers are not sales people, and by asking them to focus on new business you risk impacting your existing business. Consider employing a Business Development Manager or retraining a member of your existing property management team. This is a simple division of labour, freeing up your property managers to focus on what they do best, providing a high level of service to your existing clients, while a specialist can invest the time and effort needed to both identify and more importantly to follow up on new business leads.
3. Incentivise staff to bring in new leads
It is quite likely that your sales team meets more potential landlords than anyone else in your business, and if not captured and passed to your Business Development Manager for follow up, this is a wasted new business opportunity. Think about what you can do to keep new business front of mind for your sales team.
The past few years have demonstrated that rent rolls, with their reliable, regular cashflow, should feature prominently in your business growth strategy. Whichever you choose as your core focus, be it a combination of rent roll acquisition and organic growth, or organic growth on its own, with property management at the heart of your strategy you are building a sustainable business that will be best placed to weather all stages of the property cycle.
Macquarie Relationship Banking Division, providing Banking and Financial solutions to residential and commercial agencies. For more information, please visit our website or call 1800 441 736 to be connected with one our real estate specialists in your region. macquarie.com.au/realestate
