can almost hear the collective sigh of relief at either option.
get stiffed when revenue suffers from a decrease in clients. Consolidating means the owner of a small firm could become a paid em- ployee of a larger one. For many owners who are tired of a paycheck resembling a rollercoaster ride, sacrificing the stressful leadership role is a no-brainer. Not to mention, that steady paycheck probably requires a lot less work. 3 A CHANGE OF PACE If the idea of leaving the property man- agement business has you giddy with ex- citement, a larger firm can give you cash for your current operation. It will look at your revenue, property portfolio, books, and EBITDA (earnings before interest, taxes, depreciation, and amortization) and then come up with an offer. Not ready to move on? Instead, a larg- er firm can opt to pay you in company shares and bring you on as a salaried upper-level employee. If you’re in the right position for negotiating, you can even choose your role and compensa- tion based on your specialties and ideal degree of involvement. Property management can be a stress- ful industry, especially for small firms whose clients are hoping to profit from the current housing market. Wearing all the hats required to run a small firm often leaves little time for finding new clients. Also, focusing only on future business can lead to a disappointing ex- perience for current tenants. For many smaller property managers experiencing a similar conundrum, consolidation could be the best way to move forward in the real estate world. •
THE PERKS OF CONSOLIDATION
If you reflexively think of consol- idation as a dirty word, you should reconsider. The decision to join a larger firm can drastically improve a tough situation for both you and your tenants. Here are three reasons to consider: 1 ENHANCED CUSTOMER EXPERIENCE AND RETENTION Small property management firms typically have fewer than five employees, which means everyone is constantly on call to deal with the barrage of phone calls, evictions, and collections. When the team is just trying to keep its head above water, juggling the items on the to-do list often leads to dropping all of them. Even worse than never getting ahead financially is the lousy experience your team may deliver to clients. Think of consolidating with a larger firm as a recipe for improved custom- er service. Larger firms have more incoming revenue, which means they can afford to hire specialized employees who are available to provide rapid solu- tions and individual attention. When boutique managers are simultaneously responsible for countless duties that can leave the customer experience subpar, large firms can help alleviate the stress and bring balance back to the workday. 2 MORE PROFIT IN YOUR POCKET Small firms generally have tighter profit margins because they can only manage a certain number of proper- ties. While a portfolio containing 150 units may bring in $15,000 each month, dividing that among five hard-working employees doesn’t leave much for the firm’s owner. Especially when the owner pays employees before taking a share, he or she is often the first person to
Is It Time to ConsolidateYour PropertyManagement Business? A DIFFERENT TAKE ON SMALL PROPERTY MANAGEMENT.
property managers sprang up to help individuals manage their properties. Today, however, housing prices across the country have risen to a level where accidental landlords can sell off extra properties for a decent price. As a re- sult, the smaller property management firms are left behind. For firms that built themselves around catering to the accidental land- lord, there are limited options. Shifting specialization toward more permanent management services is one, but it would require a complete overhaul of branding and marketing strategies. In a sticky industry, it’s also no easy task to woo existing investors away from their current property managers. The other option, and what I believe is the more attractive of the two, is to consolidate a small firm into a larger one. This option could either lead to a new lucrative role in the purchasing company or the option to leave the business entirely, and in some cases you
by Mike Kalis
he life of a small property manager is no cake walk. With a skeleton staff, you’re constantly running around trying to put out fires faster than they start. And what do you get for it? There are emotional bruises from tenants attacking your reputation online, evicting tenants when they don’t pay, and being forced to hold your team account- able because you alone just can’t do it all. We all go to work each day and try to make life better for people, but a lot of smaller property managers are burning out. It can be a thankless job, and the T
continuous time and effort can take a tremendous toll. For example, I recently spoke with a married couple in California who run a small firm. The wife is genuinely worried about her aging husband. At 72 years old, he is constantly working as fast as possible to keep properties in good condition for tenants. All the stress and exertion have his wife wor- ried about his heart. This is just one story, but many others feel the ruthless stress of trying to stay afloat in a changing market.
STORM CLOUDS AHEAD Back when the real estate market crashed in 2008, many homeowners became accidental landlords. They couldn’t afford their mortgages, but they also didn’t want to sell their homes in the middle of a downturn. A com- mon solution was to keep the original home and rent it out. This movement created a new problem that many probably didn't anticipate: Being a landlord requires a lot of work. To capitalize on the influx of inexperienced landlords, boutique
Mike Kalis leads the team at De- troit-based brokerage Marketplace Homes. The company specializes in new construction sales and property man-
agement, has 3,000 homes under management, and is acquiring properties in 28 markets. Learn more at www.MarketplaceHomes.com.
104 | think realty magazine :: march 2018
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