Triple Win Property Management Blog

Security Deposit Alternatives for Property Managers and Residents

A security deposit is a one-time, refundable payment made by a tenant before moving into your single-family rental home. It acts as financial insurance against potential damages, unpaid rent, or cleaning fees incurred during their tenancy. Security deposits are large sums of money, and constantly change hands in the single-family rental (SFR) community. Traditional security deposits are standard in the industry but aren’t ideal for everyone. They can typically cost over the first month’s rent for residents and can be a hassle to manage for property managers and investors. If you’re familiar with our Triple Win approach and resident benefits, you won’t be surprised to learn there’s a different way. Security deposit alternatives typically allow tenants to pay their security deposit in installment payments instead of a lump sum before their occupancy of a rental property. Continue reading to find out more about the different types of security deposit alternatives, their cost, and their pros and cons to help you choose the one that works best for you. Related: How to Write a Security Deposit Return Letter + Free Template Types of Security Deposit Alternatives Security deposit alternatives can be achieved through pure insurance, surety bonds, ACH authorization, or an in-house program. Property managers may choose these types of alternatives because they aim to lower the barrier to rental for residents. As a result, this lower barrier increases the ROI for the owner and boosts the PMC’s bottom line. These options, however, are not a one-size strategy. They can vary based on the business size, strategy, and state and local laws. In addition, there are several different ways to apply. For example, insurance, surety bonds through a bond company, and ACH authorization are all available through third-party vendors, which are increasing in popularity. Next, we’ll walk through each of these security deposit alternatives. Pure insurance This is exactly what it sounds like. Instead of a deposit covering potential damages, the resident takes out a policy with an insurance company to cover any damages. The resident pays a small premium, and on move-out, the policy covers any damage to the property up to a certain amount. Pure insurance is great for the resident, who pays a premium and then bears no financial responsibility for damages after move-out. Inherent in that approach, however, is a flaw that makes the pure insurance play tough to buy into as the industry's future. It doesn't incentivize the resident to take care of the property, as they won't owe any additional money for any damage they cause. This flaw leads to higher premiums, leaving insurance as a less effective way to keep costs down. Surety bond The surety bond business model is not new. Still, it's become more popular as vendors have modernized the enrollment experience thanks to over $150M of VC investment into the category. Surety bonds are agreements between two parties managed by a third party, known as the surety. In the case of property management, the contract is between you as the property manager and the resident. It states that the resident agrees not to damage the property and agrees to cover damages should they be responsible. In case of a contract breach at the end of the lease, the surety pays out the sum required to the property manager, then bills the resident the cost of the damages. Surety bonds attempt to incentivize the resident to take care of the property, which is more than a pure insurance program will do, but there's not a definitive set of evidence yet that this is highly effective. It's still a challenge to educate some residents that this isn't an installment plan or insurance product. In many cases, that falls on the property management team. Another concern with the surety bond model is the post-move-out collection results. The majority of damages due from the resident never get collected, which leaves the model with potential recourse ahead: Vendors figure out how to collect a higher percentage Vendors increase monthly pricing Vendors expand into other, more profitable products Less reliable claims payouts Layoffs or other financial controls More investment was requested for more runway The jury is still out on whether surety bonds have the unit economics to win the category. ACH authorization The ACH (Automatic Clearing House) authorization is a popular alternative. It mirrors the method hotels have used for years to compensate for incidentals and applies it to long-term rentals. Residents permit a financial institution to directly draft money up to a certain amount to cover damages and draw from your bank account. The ACH authorization does check the box of incentivizing proper treatment of the home, and the vast majority of money due from claims is collected. So far, this method seems to be getting the best results in post-move-out collections. A fair critique is not 100% of residents qualify for this, and the ones that don't must pay a traditional deposit, so it isn’t a complete solution in some people’s minds. In-house program Todd Ortscheid, CEO of Revolution Rental Management, built his alternative program in-house. Ortscheid spoke on this topic in an episode of Triple Win LIVE in February. “We offer the resident two different options. You can either pay the security deposit amount based on your [application] score, or the alternative is you can pay a monthly security deposit waiver fee,” says Ortscheid. “What the waiver fee is doing is buying you the privilege of not having to pay a security deposit upfront.” Ortscheid clarifies that his implementation of this program is neither insurance nor a refundable installment towards a security deposit. However, there is debate among other PMs and their attorneys about what compliance risks there could be here. Some property managers also struggle to get comfortable with the financial liability. Related: Benefits of Property Management Outsourcing Services When deciding to outsource or DIY, we recommend considering three things: How much of a difference can scale make now? Over time? How large is the skill or expertise gap here? Over time? Is this the best investment of my time? Will it be later? Security Deposit Alternative Companies and What They Offer The traditional security deposit is the OG of rental insurance, a reliable one-time payment typically equal to one month's rent. It works like a financial handshake between the resident and property manager/owner, acting as a safety net for unpaid rent or damages beyond normal wear and tear. While it carries no monthly cost for residents and offers full refunds for responsible renters, it also doesn't offer revenue sharing for investors or the flexibility of newer alternatives. Here's what to expect from a traditional security deposit product, and the baseline we'll be comparing alternatives to: Model: Traditional Up-front cost to resident: Equal to established cash deposit Monthly cost to resident: None Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? N/A Payments refundable to resident? Yes Resident held accountable for funds? N/A We reached out to Peter Lohmann, co-founder and CEO of RL Property Management, to get the rundown on security dispositive alternative products. Here are some of the most popular security deposit alternative services, the type of product they offer, and the pros and cons of each. Note: The major downside for most of these security deposit alternative products is that they focus on multi-family rental (MFR) communities rather than single-family rentals (SFR). Most also have nonrefundable fees. 1. LeaseLock LeaseLock is a popular security deposit alternative program. Here’s how they stack up: Model: Lease Insurance Up-front cost to resident: None Monthly cost to resident: $29 for standard plan Unpaid rent & damage coverage: $5,000 for standard plan Revenue share with property investor? No Payments refundable to resident? No Resident held accountable for funds? Yes but Lease Lock says they don’t pursue 2. Obligo Obligo is a billing authorization alternative to security deposits. Here’s how they stack up: Model: Bill Authorization Up-front cost to resident: First year’s total fee (variable) Monthly cost to resident: None Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? No Payments refundable to resident? No Resident held accountable for funds? Yes 3. Rhino Rhino offers the surety bond model for security deposit alternatives. Here’s how they stack up: Model: Surety Bond (non-pooled) Up-front cost to resident: None Monthly cost to resident: Variable Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? Yes, if over 10K units Payments refundable to resident? No Resident held accountable for funds? Yes, but Rhino says they don’t always pursue 4. TheGuarantors, Jetty, and SureDeposit These three companies – The Guarantors, Jetty, and SureDeposit – all offer an alternative to security deposits in the form of a surety bond. Here’s how they stack up: Model: Surety Bond (pooled) Up-front cost to resident: 17.5% of month’s rent Monthly cost to resident: None Unpaid rent & damage coverage: Equal to established cash deposit Revenue share with property investor? No Payments refundable to resident? No Resident held accountable for funds? Yes The Cost of a Security Deposit Alternative Security deposit alternatives costs don’t necessarily save money for the resident, but they offer a choice that many residents prefer – not giving up a big chunk of cash right at the start. In general, the cost structure for security deposit alternative companies is either a low monthly fee or an annual fee. For most PMs, you can include the cost in a Resident Benefits Package, or it’s billed directly to them by a vendor. The cost can depend on the property's value, the rent and deposit amount, the resident’s credit, etc. Fees are calculated based on the amount of rent, amount of deposit, credit score of the renter, and the value of the client. Security deposit alternative fees can often be as low as 5% of rent. So, for a rent of $1500 a month, a resident might pay: $75 per month (5%). In some larger apartment communities, residents may pay even less – typically $8-$30 per month. Advantages of Security Deposit Alternatives The concept of a security deposit alternative is that it helps lower the barrier of entry for residents who may not want to put down a massive one-time chunk of cash – and it helps protect the investor by filling vacancies more quickly, and incentivizing good care of the property. Here’s a breakdown of more specific advantages. 1. Avoid large deposits for residents Ortscheid says: “When I first started doing this, my assumption was the only people who will take this are the people with the worst scores. “What we actually found was our very first person who signed up for it was someone with an 800+ credit score. He was the CEO of a publicly traded company and had millions in the bank. So I asked why he took the waiver option, and he said, ‘I would rather pay monthly than give you a big chunk of my money.'” 2. Get more options All of these programs can be relatively simple to administer and offer choice to the resident. They can choose options and payment methods like credit cards, ACH, etc. According to Ortscheid: “About 70% of the people we rent to now select the security deposit waiver option.” Giving residents more options helps them feel more secure and in control and boosts their satisfaction overall. 3. Reduce vacancies Perhaps the investor sees the most significant win from security deposit alternatives. And, given the PM’s fiduciary responsibility to the investor, an investor win is usually a win for you. The biggest thing here is the attractiveness of the program to the resident. A security deposit alternative is something you can and should advertise in your listings. It adds a differentiating factor to your listing that moves the needle for many prospective residents, which helps keep your days-on-market low. Revolution Rental Management has been sitting at an average of about ten days on the market over the last year. And as we all know, minimal vacancy equals increased ROI for investors. 4. Get fewer damage claims at move-out Additionally, some property managers claim the lack of a deposit drives fewer damage claims at move-out. This reduction in claims helps to protect the investor’s assets more than a deposit does. Again, this may seem counterintuitive, but Birdy Properties reports this scenario playing out since they moved away from security deposits two and a half years ago. “There is this philosophy out there from residents. Most people believe ‘you’re not going to give me my money back. And since I’m not getting my money back, I’m not going to clean up too well because if I do all that work, you’ll still keep my money anyway. Well, now, you were nice enough to let me move in and not have to give you all this money. Everything has gone well, and now it’s time for me to leave and I can recognize that if I don’t leave the property in good shape, I’m going to have to pay for it.’” “We’ve watched the numbers,” continued Birdy. “We have seen a reduction in overall move-out claims. What it’s costing to turn a property over has gone dramatically down, and we have almost eliminated the turnover cost to the owner. That is the most vulnerable time for us as property managers because that’s when the investor decides if they want to keep this asset any longer.” The speed with which Birdy Properties can roll in another resident with minimal costs keeps the property investors happy, which prevents the PM from losing inventory while maintaining great service and relationships with the client. This great relationship comes from a service residents love, so it all works together to benefit every party. Best practices are developing that will drive triple-win experiences. Disadvantages of Security Deposit Alternatives Of course, there are also disadvantages to security deposit alternative services. These issues may affect your residents' overall experience or your investor's satisfaction with their margins. Before signing up for any alternative security deposit product, you need to be sure you know what you’re getting into. Do your research and ask questions to evaluate things like: what happens if a resident ends their lease early; what damages are owed after move-out and who pays them; how to dispute charges; monthly or yearly fee obligations; etc. Here are a few disadvantages to keep in mind. 1. Payments are not refundable While the advantage to residents is that they don't have to pay it all right away, the disadvantage is that they won't be refunded for their payments. 2. Disputes may be more difficult to resolve Since security deposit alternative programs involve a third party, you must involve another agreement with the lease and contracting stage. If there is an eventual dispute, it may be tough to get it resolved. Residents may not be held accountable in the way you and your investor need. Or, from the resident side, they may not get the service they want. 3. Security deposit alternatives don't save money Some products may seem like they're advertising dollars saved. But ultimately, these alternatives aren't intended to save money. They simply help residents keep money in their savings for a longer period of time, rather than making one big deposit all at once. Despite these disadvantages, we've seen security deposit alternatives pick up in popularity recently. As long as residents, investors, and PMCs know exactly what is and isn't promised, it can be a benefit to everyone involved. ‍ How 1,000+ Professional Management Companies Create Triple Win Experiences Security deposit alternatives are an innovative solution that solves problems for residents, investors, and property managers. For residents: A quality alternative lowers the barrier for residents and gives them more choice and agency in the rental process. For investors: A quality alternative can boost your listings’ marketability and reduce vacancy costs. For property managers: A quality alternative with more relevance for residents and investors – creates new value with an opportunity to monetize and eliminate the administrative pains of traditional deposits. That’s what we call a triple win! Learn more about how we create resident experiences that people pay and stay for – and share your trips and tricks in our Facebook Group!

December 1, 2023

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Property manager meeting with future tenants

10 Strategies to Become a Successful Single-Family Property Management Business

Navigating the world of Single-Family Property Management requires a blend of industry know-how, proactive strategies, and a keen understanding of both investors and residents. What is a single-family property management business? At its core, the business revolves around managing standalone properties for individual property investors, ensuring the rental property is maintained, tenanted, and profitable. But how do you optimize for success in this space? In this post, we'll uncover 10 pivotal strategies to elevate your single-family property management business, from staying updated on industry trends to streamlining your operations for maximum efficiency. Related: Best Property Management Podcasts 1. Keep up with the trends in Single-Family Property Management The dynamic landscape of single-family property management is constantly innovating and growing in response to various economic, technological, and societal factors. Property managers in the single-family space (vs. multifamily properties or even commercial real estate) also tend to be entrepreneurial, innovative, and adaptive. It’s what we love about this community! But some "trends" have staying power, and the key to long-term success is identifying those and adapting your services to the modern consumer. Over the past decade or so, the way we do commerce and services has been upended by technology and the convenience economy. The same is true in property management. In the words of Jonathan Cook at Revolution Rental Management: “I think ten years ago, property managers were only concerned with collecting rent and keeping tenants from doing damage to properties. It was a much more adversarial relationship than it is today. Today, the best PMs know that resident experience is vital to minimizing vacancy and creating a resident that strives to be a higher quality tenant.” So, let’s look at several trends that have emerged that are shaping the industry’s direction. The Convenience Economy: Sometimes we call this "the Amazon effect." Consumers and residents alike are looking for the easy button. They're looking for everything from online rental listings they can scroll from their couch to online rent payment services that make paying as easy as the click of a button. Technological Advancements: Today, property managers are leveraging technology more than ever. From smart home systems that enhance resident experience to advanced, AI property management software that streamlines operations, staying abreast with technological trends is crucial. The key to staying on top of these transformations is to ask the right questions. Pay attention to general business trends. What are consumers demanding? What is new in technology that you could adapt to your business strategy? Running a property management business is just that: a business endeavor. Keep your eyes sharp on trends in commerce and get involved in the conversation of how that affects good property management. 2. Understand your ideal investors in single-family property management When diving into professional property management, just like any other business, it's essential to identify your ideal customer profile (ICP) early on. You will get so much further by "niche-ing down" than spreading your company too thin. What kind of property and client are you ideally set up for or prepared to work with? Once you define your target audience, you can then be ruthless in saying no to anyone who falls outside that definition. Here are a few ways to explore the various dimensions of property investor clients: Level of Experience: Property investors are not all created equal. Individuals get into property ownership for different reasons. You can see experiences ranging from an accidental landlord who never intended to be an investor all the way to a sophisticated or institutional investor, and every shade of the spectrum in between. It's very difficult to build a business that serves all customers across all levels of sophistication. They'll have different needs for how much education they need, how they want you to handle things, and how they want pricing to work. Property Types: You should also define what type of property you want to manage, which will help you assess if a new investor is a fit or not. We're assuming since you're reading this that you're interested in single-family rentals. But within that category, there is still so much variation. Are you looking to manage luxury homes with higher rent, lower demand, and longer vacancies? Are you more interested in workforce housing with more demand and lower rents? Or maybe you're a specialist in Section 8 housing. Whether Class A, B, or C housing, it's very hard to specialize in all property types. Sure, all SFR homes are unique, but it's key to identify the general characteristics of the homes you'd like to manage (or already excel in managing). Then, you and your team are dealing with more consistent situations. Compatibility Fit: You also need to make sure the investor as an investor fits with your approach. And we don't just mean personalities. Have a list of questions that help define what type of investor you can work with. In his podcast Owner Occupied, Peter Lohmann (co-founder & CEO of RL Property Management) talks to Marc Cunningham (President and Owner of Grace Property Management & Real Estate) about their lists, which include questions like: 1) Is the investor financially stable? 2) Is the investor emotionally stable? 3) Are they realistic in expectations? 4) Are they willing to trust us as the expert? Cunningham says his company can manage any property if the owner is right. Define what's important to you and stick to your guns. As Lohmann says in the podcast, "The easiest way to deal with a horrible owner client is to never onboard them in the first place." The goal is to filter out the people who are not a fit before you get into a contract with them. "When you're first starting out in this business, you chase everything," Cunningham says. "But as you grow and become successful, you need to slide that bar on your 'yes' and 'no' and start saying no." In short, nailing the definition of what type of investor and property you want to work with will help you find the right clients and ultimately succeed with them. You're not saying yes to every person who is looking for property management; you're looking for a specific type of customer. 3. Make sure your rental application requirements are clear Are you getting applicants who don't end up being a fit for your properties? It's possible the requirements are not clear on the listing or application. Is your advertising penetrating where it's going to reach qualified residents? Do potential applicants know what credit score they need, income requirements, and more? Of course, how you advertise and where varies widely by the market in your area. Some property managers say they would never use Craigslist, and others swear by it. Understand the market in your area and make it clear from your listings what is required to be accepted as a renter. You'll save everyone frustration with transparency and clarity. 4. Simplify rent collection and accounting processes You know the old saying, "Time is money.” It's particularly true in the rental property management game. Think about it: Every hour you spend chasing down a rent check or struggling with complex accounting software is an hour taken away from growing your business, networking, or improving other operational aspects. Simplifying your rent collection means introducing online payments, setting up auto-pay options, and even mobile payment methods. Modern residents love the ease of digital transactions. Making their lives easier often equates to faster, on-time payments and a heightened sense of trust. One way to simplify rent collection is to incentivize on-time rent payments. Second Nature’s Resident Benefits Package does just that by offering credit reporting and rental rewards to ensure that residents receive value for paying on time. As the property manager, it’s work off your plate! It's also a good idea to standardize your rent collection and use tools to support your team. New tech services like Colleen.ai and EliseAI can fully automate your rent collection communications. As for accounting, streamlined property management software solutions can auto-generate reports, offer real-time financial insights, and make tax season a breeze. By embracing these upgrades, you’re not just benefiting internally by saving time and resources – you’re showing current and potential residents that you value efficiency and are in tune with modern conveniences. The result? Higher resident satisfaction, a more enticing pitch to potential property investors, and an overall smoother business operation poised for growth. 5. Prevent vacancies with effective resident communication and engagement activities Remember when you first fell in love with your favorite coffee shop or that little bookstore around the corner? It wasn't just about the coffee or the books—it was the overall experience, the atmosphere, and the feeling of being recognized and valued. The same principle applies to a residential property management company. Resident communication isn't just about sending rent reminders or maintenance updates. It's about cultivating a relationship. Providing resident benefits, gifts, support services, and timely communication go a long way to showing residents you care about their home. Engagement programs like loyalty rewards or recognizing special occasions can also be game-changers. Looking for more inspiration on resident retention? Dive deeper into our resident retention ideas article to explore various strategies that will help keep your properties filled and your community thriving. 6. Automate single-family property management workflows Ever find yourself drowning in spreadsheets, buried under a to-do list a mile long, or juggling multiple software platforms? Surely we all have! The solution? Breathe easier with property management automation. The beauty of running a full-service property management firm in the 2020s is that there's likely a tool or system for nearly every task in property management, from rent collection to resident communication. Our best single family property management software article is a treasure trove of tools and platforms designed specifically for property managers. By implementing these solutions, you can automate repetitive tasks, reduce human errors, and free up time to focus on more value-driven aspects of your business. Think about it: a streamlined application and screening process, automated rent reminders, and digital maintenance requests—all working like clockwork without your constant intervention. Beyond the tools themselves, consider the integration possibilities. When your property management company software talks seamlessly with your accounting system or marketing platform, the result is a cohesive and efficient workflow. Need more insights into the power of automation? Dive into our in-depth automation-related articles to discover how you can revolutionize your day-to-day operations. 7. Invest in regular rental inspections Investing in regular rental property inspections isn't just about ensuring your property is in good shape—it's also a strategic move to bolster the relationship with your residents and maintain the value of your client’s investment. Here's the deal: Consistent inspections offer a proactive approach to property maintenance. They can catch small maintenance issues before they balloon into costly repairs. Got a minor leak? Catch it early, and you're saving both money and potential damage to a resident's belongings. But it's not all about damage control. Regular check-ins also send a clear message to your residents: you care about their well-being and the condition of the property they call home. It's an opportunity to foster open communication, showing residents that their feedback is valued. Moreover, well-maintained properties tend to attract and retain quality residents. Those who know their property manager is on top of things will likely stay longer and treat the property with respect. Plus, when it's time to find a new resident, you've got a spotless track record of upkeep to show off. In short, consider inspections as a small investment now that can yield big returns in resident satisfaction, property value, and overall peace of mind. 8. Create a referral program to increase your portfolio Word of mouth? It's powerful. And in the property management game, it's gold. Imagine this: your current clients, satisfied with your stellar services, singing your praises to friends, family, and colleagues. Now, what if you could incentivize that process? Enter the referral program. Happy real estate investors are your best brand ambassadors. They've experienced firsthand the quality of your management, and their endorsement carries weight. So, why not reward them for bringing in new business? A referral program can do just that. Start by offering incentives. For your investor clients, perhaps it's a discounted management fee for a month. The point is to offer something tangible that'll get folks talking and referring. But there's more to it than just the direct business benefits. A referral program demonstrates that you value the relationships you've built. It tells your clients that their trust and loyalty don't go unnoticed. Lastly, an added bonus: with every successful referral, you not only grow your portfolio but also create a network of investors who are invested in your success. It's a win-win, driving growth for your business while strengthening the bond with your current clientele. 9. Find new investment properties and pitch them to your current clients You're already managing a portfolio of properties for your investors, ensuring they get solid returns and have few hassles. But here's the question: What if you could amplify those returns for them and simultaneously grow your business? Actively seeking out new investment properties is more than just scouting real estate; it's an art of opportunity. By identifying lucrative properties that align with your investors' strategies, you're essentially providing them with golden opportunities on a platter. And guess who they'll want managing these new assets? That's right, you. When you present these potential investments to your current clients, it accomplishes a few things. Firstly, it reinforces your role as a trusted partner in their financial journey, showing them that you're proactive and always on the lookout for ways to amplify their wealth and boost their cash flow. It's not just about maintaining what they have; it's about growing it. Secondly, every new property they acquire based on your pitch naturally expands your management portfolio. This approach helps scale your business, fostering client trust and loyalty along the way. Remember, in the property management world, being static isn't an option. By constantly seeking growth opportunities for your clients, you're also carving out a pathway for your own business's expansion. 10. Invest in marketing activities for short vacancy cycles Imagine a prime property in a stellar location, decked out with all the bells and whistles...sitting vacant. The eerie silence echoing in those empty halls isn't just the sound of missed opportunities – it's also the sound of revenue trickling away. Maybe that was a little dramatic. But the real estate game is as much about visibility and appeal as it is about bricks and mortar. The quicker you can get a property off the market and into the hands of a reliable resident, the better for everyone involved. This is where strategic marketing steps in. Investing in a robust property management marketing strategy does more than just showcase a property; it strategically positions it in front of the right eyes. With targeted campaigns, engaging visuals, and compelling copy, you can ensure your property doesn’t get lost in the sea of listings. Use social media, virtual tours, and local advertising to create a buzz. Moreover, effective marketing helps paint a lifestyle. When potential residents can visualize themselves in a space, they're more likely to take the leap. By consistently shortening vacancy cycles through effective marketing, you not only ensure a steady revenue stream but also enhance your reputation as a go-to property manager who gets results. In essence, marketing isn't an expense; it's a pivotal investment. It's the bridge that connects empty properties with eager residents, ensuring your business always stays on the move. Increase revenue from your SFR property management business with Second Nature Optimizing your single-family property management business is not a one-size-fits-all solution. From engaging with the right investors to fine-tuning marketing endeavors, the path to success is paved with multifaceted, dynamic approaches. But the key to it all is creating a better experience: for residents, investors, and your property management team. That’s why, at Second Nature, we’ve built a Resident Benefits Package that supports SFR property management businesses. Each benefit is designed to meet resident needs and investor priorities while taking work off your team’s plate. In the dynamic world of SFR property management, adaptability and efficiency are kings. With Second Nature by your side, you’re not just keeping pace with the industry; you’re setting the benchmark. So, as you work towards crafting a business that stands tall and resonates in the market, remember: Your success is our second nature.

October 31, 2023

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How Resident Benefits Packages Benefit Owners and Investors

In today's competitive property market, ensuring a standout resident experience isn't just a nicety—it's a necessity. Enter the Resident Benefits Package, an innovative tool embraced by savvy property management companies to elevate the living experience for residents. But the advantages aren't limited to just happy residents. For property owners and investors, these packages can translate into tangible, profitable outcomes. From reducing overall costs to bolstering a property's reputation and value on the market, the strategic deployment of a Resident Benefits Package can directly contribute to a stronger return on investment for owners. In this article, we'll delve into the top ways that a Resident Benefits Program not only benefits residents but also significantly boosts the bottom line for property owners. Why Focusing on Resident Experience is the Key to Success At Second Nature, we’ve seen that when residents win, investors also win. Here’s why: Resident retention is key to winning in real estate investing. And the cost of resident turnover is increasing. In rental management, expenses are up, and the cost of turning a property has almost doubled in four years. Hard materials and labor costs have gone up precipitously. With rent also increasing, it means greater lost revenue while a home sits vacant. At the same time, the market from the owner’s side is getting more competitive. The pandemic days of properties getting snapped up within hours are no longer. The demand has cooled, and it's taking longer to fill properties, and it’s more expensive with each turnover. What does all this mean? Resident retention is increasingly important. Studies continue to show that resident retention and lease renewal is influenced by renter satisfaction. But creating an excellent resident experience is HARD. There are hundreds of experience-critical moments happening over the course of a long-term customer journey, and each of them poses its own unique challenges and opportunities. That’s where the Resident Benefits Package comes in. An RBP is a collection of innovative solutions to some of the most persistent problems in resident experience. A Resident Benefits Package is an answer to the question: How do we make an experience so good that residents never want to leave? By packaging solutions that improve resident satisfaction, the RBP also drives results for investors. The Second Nature RBP includes the following services: Filter Delivery Service Identity Protection Resident Credit Building Renters Insurance Resident Rewards Move-in Concierge On-Demand Pest Control Let’s dive into how each of these services leads to better outcomes for property owners. The Value of a Resident Benefits Package for Property Owners While the Resident Benefits Package is a resident-facing product, the benefits extend beyond residents to generate value for property managers and property owners, too. It’s a Triple Win. Here are six of the top benefits to owners of implementing an RBP. 1. Drives Resident Retention A Resident Benefits Package (RBP) isn’t just a set of perks—it's a holistic approach to improving the living experience of residents, ensuring they stay longer in your property. By focusing on resident experience, property managers can earn better returns on investment for their investor clients – because of resident retention. Here's how each feature of your RBP impacts retention: Air Filter Delivery Service: The National Rental Home Council (NRHC) found that a filter delivery subscription reduced HVAC-related work orders by 38%. Reducing 38% of no-air calls in hot summers and cold winters means reducing 38% of negative experiences that could make residents want to move. Also, average savings of $177 per year on energy bills alone more than pays for the program cost. Clean air being as easy as opening the front door helps residents breathe easy and stay healthy. Happier, healthier residents make for healthy investments, too. Resident Identity Protection: Identity theft actually passed home burglary in 2021 and continues to rise. In an age where identity theft is a pressing concern, offering residents an identity protection service is a critical way to keep them safe. Advanced AI technology actually monitors the dark web and helps prevent issues before they occur. A $1M policy and a team of restoration specialists are there to keep good residents protected from a bad situation turning into delinquency or even eviction. In short, it protects residents’ ability to pay rent and support a long-term lease. Resident Credit Building: This service actively helps residents improve their financial health. Our credit building program is shown to save residents hundreds to thousands per year on car payments and credit cards. Plus, renewing residents can get back reporting up to 24 months at no extra cost, which puts even more incentive on renewing. Renters Insurance Program: OK, so there’s insurance, then there’s triple win-surance. Our purpose-built master policy covers property damage and legal liability but also coverage for residents' personal belongings. There are even unique coverages not often found in retail policies, like rental income loss in the event a covered peril leads to rent concession. And residents get the benefit of bulk pricing, saving a few dollars off the average premium. If residents want to get their own policy, our program monitors any 3rd party policies so there are no lapses in coverage. Closing that compliance gap means eliminating risk and exposure for you and your property. Resident Rewards Program: Second Nature’s rewards program incentivizes positive behavior like timely rent payments. Just by paying rent on time, residents avoid late fees and earn $150+ in gift cards and rewards points. Instead of feeling like rent is a drain, now they are building and earning. Move-In Concierge: Property managers know an important insight: Within the first 60 days of renting, barring a life event, many residents have already decided whether they will renew or not. That’s why move-in and the first few weeks are so critical to retention. By offering a move-in concierge service, you're easing this transition. This service can assist with utilities, internet, TV, and more, making the move smoother and setting a positive tone right from the start. On-Demand Pest Control: A comfortable living space is one free of pests. But preventive sprays are really a luxury, not an ROI. On-Demand Pest Control eliminates disruptive, big expenses – and brings fast, quality service to stop infestations at one-third the cost of preventive sprays. This high-value approach ensures responsibilities are transparent and accounted for so owners don’t get stuck with bills that shouldn’t be their responsibility. In essence, every feature of the RBP is carefully chosen to add value to the resident's experience. When residents perceive value, feel protected, and benefit financially, they're much more likely to renew their lease, underscoring the importance of a comprehensive RBP in property management. 2. Reduces Costs Yep, you heard us correctly! Integrating a resident benefits program is an effective way to reduce investor costs over the long run. For residents, the benefits of the RBP save them money over their alternatives. Here's how it works in terms of cost reduction: Lower turnover costs: With added benefits that cater to residents, turnovers become less frequent. The cost of finding new tenants – think advertising, showings, and screening – can quickly add up, not to mention potential lost revenue from vacant units. An RBP can keep existing residents happy and more likely to renew, thereby minimizing these costs. Maintenance savings: One of the most cost-saving pillars of the Second Nature RBP? Our Filter Delivery Service. The average cost of HVAC repairs has increased by nearly 50% year over year. Preventing emergency maintenance issues has never been more important. An HVAC filter delivery subscription can cut costs up to $300 per property per year and reduce HVAC maintenance requests by nearly 40%. Emergency expense savings: Services like on-demand pest control ensure residents get transparency and cover their lease responsibility, so owners don’t get stuck with a bill they aren’t supposed to. Reduced premiums: With a renters insurance program that ensures 100% compliance, many investors are able to get a discounted rate because there’s less risk of expenses falling on their policy. 3. Increases On-Time Payments On-time and early rent payments are critical to the overall success of your financial investment in property. A Resident Benefits Package is a tool to increase the resident behavior you want to see – starting with consistent, timely payments. For example, by implementing a rewards program for early or on-time rent payments, property managers tap into a powerful motivational tool. While late fees provide an important incentive, a carrot approach helps drive the best outcome for everyone. Everyone appreciates acknowledgment for their timely actions, and residents are no exception. The prospect of earning rewards serves as a tangible incentive for current residents to ensure each month’s rent is paid promptly. Rent day becomes rewards day. Of course, on-time rent payments don't just benefit property investors, they can also bolster the credit profiles of residents. With a credit building program built into an RBP, each punctual payment is reported to credit bureaus, allowing residents to progressively build or enhance their credit scores. Knowing that their timely payments contribute to their financial well-being provides residents with another compelling reason to always pay on schedule. The savings residents get on rewards, auto loans, credit card interest, etc., makes it easier for them to be able to afford rental payments – and increases – over time. Credit reporting protects both the residents and property owners. 4. Protects Your Assets Let’s jump into a story for a minute. A landlord we know onboarded a new resident last year and asked that resident to show proof of insurance before they moved in. All good to go, they signed the lease and moved in. The problem? The policy later lapsed. After that date, there was a house fire. Fortunately, no one was injured, but the home was a total loss. A triple-lose situation of the biggest proportions – for the resident, the property manager, and the property owner. Maybe you know people who have been through similar situations. Or maybe you have yourself. That’s why the Second Nature Benefits Package includes a renters insurance program that ensures 100% compliance. We specifically designed it to generate triple-win protection. The program includes a master policy that residents can opt into or requires them to carry their own insurance policy. 96.3% of Second Nature residents are enrolled in a master policy or the custom HO4 we offer in our program. 3.7% of residents bring their own approved policy. In addition, our renter’s insurance includes protections for the property owner, like Rental Income Loss protection. Another benefit is that you can generally get a discount on your own property insurance if this kind of program is in place. Wins all around. 5. Improves Financial Value Real estate is obviously an asset. But consider this, too: The asset to a rental property owner is your revenue from the property. Sure, real estate itself can appreciate, but you can also look at it a different way – your residents’ income and ability to pay rent is also an asset you want to protect. That’s where identity protection comes in. In 2021, cybersecurity threats passed home burglary in the level of risk it poses to Americans. In 2021, one in eight Americans were victims of identity fraud, equaling up to $52 billion in losses. Identity theft has a massive impact on people’s financial security and their ability to pay rent. Our $1 million identity protection, with proactive dark web monitoring, is there to protect your residents and keep you from having to penalize or even evict a resident who is affected at no fault of their own. Another bonus: Residents at your properties have peace of mind. 6. Increases ROI A Resident Benefits Package focuses on the most streamlined ways to get residents products and services that make leasing rewarding, effortless, and predictable. Bundling services together in a benefits package results in substantial cost and time savings compared to procuring each service individually. A bundled approach minimizes administrative burdens and streamlines processes, further reducing operational costs. The savings generated from this efficient approach can be passed on to the residents, thus boosting the property's value and, consequently, the investor's ROI. An example of this is on-demand pest control. Pest control is often buried in lease agreements and is unclear. Some agreements cover preventive sprays (which are expensive!), but less than 20% of issues are dealt with through those services. It’s a luxury cost that some people will want to pay for, but it’s certainly not an ROI proposition. An RBP with on-demand pest control, on the other hand, protects the investor for 50-70% lower cost. Residents get the kind of pest control they really need – on-demand – so when they have an actual issue, they can immediately file a claim. This prevents issues from escalating into bigger issues and infestations – situations where the cost too often falls on the investor. Costs are lower, residents are happier, and your properties and financials are safer. These services also manage compliance for you. Different states have different laws regarding who is responsible for pests, the resident or the investor. Pest control services through an RBP will ensure you are always in compliance. Why RBPs are Essential to Triple Win Rental Experiences A Resident Benefits Package isn't just a compilation of services – it's a holistic approach to property management services that replaces negative resident experiences with positive ones. For property investors, the advantages are clear: cost savings, increased retention, timely payments, protected assets, and an elevated return on investment. Beyond the numbers, it’s about cultivating a relationship where residents feel valued, supported, and eager to stay. As the landscape of property management evolves, those who prioritize resident experience are looking at long-term returns on those investments. A peek into the future: An innovative and parallel service that property managers can provide is an Investor Benefits Package (IBP)™️. The IBP should provide an investor experience platform™️ that unlocks scalable product and service customization, digitized onboarding, accounting policy automation, and more. Learn more at the link.

October 10, 2023

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9 Ways to Improve Your Resident Experience

Resident experience is the sum total of interactions and experiences a resident has with their property manager and the rental property itself – from the initial lease signing to the eventual move-out and all the day-to-day living moments in between. It encompasses everything from the quality of services provided, like timely maintenance and communication, to the overall livability and enjoyment of the property. In essence, it's how a resident perceives their rental journey in its entirety. Excellent resident experience management is the mark of a top-tier property management company. It boosts resident retention, satisfaction, and outcomes. In this article, we delve into nine actionable ways to enhance the resident experience in your single-family rental properties, fostering stronger relationships and, ultimately, achieving greater success in property management. Read the full report! If you haven’t already heard, we recently published our first-ever State of Resident Experience Report, which explores resident experience management: the pivotal touchpoints between a resident and a property manager. The report draws fresh insights from the SFR property management industry and explores the three top factors impacting resident experience right now. 1. A Seamless Move-In Experience Ah, the move-in process – the start of a beautiful friendship between the resident and the property manager. It's a bit like a first date – you're setting impressions that could make or break the relationship. A seamless move-in experience is your chance to roll out the red carpet for your new residents, showing them they've made the right choice (and have definitely swiped right on the best property around). And guess what? A resident who's had a great move-in experience is a happier one. Happier residents stay longer, pay on time, take care of the property, and make positive recommendations. Resident experience examples: How to build a perfect resident move-in experience Here's how to ensure your move-in experience hits all the right notes. Clear Communication: Provide detailed information about the new home and move-in process, including key collection, utility setup, and property rules. Who's handling utilities? Where's the best pizza joint nearby? Share all the important details. Welcome Packet: Roll out the resident red carpet with a welcome packet. Not only does it have all the must-know info, but it also says, "Hey, we're glad you're here." Include essential information such as garbage collection days, rules, important contact numbers, and a neighborhood guide. Property Readiness: Nothing dampens spirits like a flickering light on the first day. Ensure the property is thoroughly cleaned, all appliances are working, and any previous damages are repaired before the move-in date. Efficient Paperwork: Let's face it, nobody loves paperwork. Make it painless with easy online forms and digital sign-offs. Personal Touch: A little welcome gift can go a long way. It's like saying, "Welcome home, neighbor. We're going to rock this thing." Second Nature’s Resident Benefits Package includes a Move-in Concierge to ensure the process is seamless and personal. 2. Responsive Communication In the symphony of successful property management, responsive communication is your melody. It's the backbone of a harmonious resident experience, and when done right, it can elevate your property management status from “forgettable” to “virtuoso.” The sooner you respond to your resident’s queries or concerns, the more they'll feel valued. And a valued resident is a happier resident. Remember, good communication isn’t just about speed—it’s about clarity too. It's like being a great tour guide in the bustling city of property management—clear, informative, and always ready to help. Ways to improve communication with your residents Let's explore some best practices: Multiple Channels: Embrace the digital age! Offer various communication channels like emails, text messages, phone calls, and even a resident portal. Variety is the spice of life, right? Be Proactive: Don’t wait for your residents to reach out with issues. Regularly check in and ask if they need anything. Set Expectations: Be clear about your communication protocols. Let your residents know when and how they can reach you and when they can expect a response. No one likes to be left on read! Listen Actively: When your residents speak, lend them your ears! Show understanding and work collaboratively towards solutions. It's a two-way street, after all. Be Respectful: Always communicate with respect and professionalism. Treat your residents the way you’d want to be treated – it’s the golden rule, even in property management! 3. Better Maintenance Services with Quick Response Times Think of maintenance services as the superheroes of the property management world. When done right, they swoop in to save the day, ensuring minor issues don't escalate into supervillain-sized problems. Quick response times? That's your superhero's super speed. The quicker the response, the happier your resident, and the safer the day. How to improve maintenance services and response times Here's how to get your property management cape (sorry) flapping in the wind: 24/7 Maintenance Line: Offer a dedicated line for maintenance requests. To belabor our superhero analogy, it’s like having a bat signal for your tenants – they know help is just a call away. Online Reporting: Make it easy for tenants to report issues. An online system can keep things organized and ensures no request gets lost in the shuffle. Prompt Follow-up: Act swiftly on maintenance requests. Even if you can't fix the issue immediately, acknowledging the request and providing a timeline can ease the resident's mind. Regular Inspections: Regular property inspections can help you catch potential issues before they become major headaches. It's all about that ounce of prevention! Trusted Vendors: Work with reliable and professional vendors who provide quality work in a timely manner. They're your sidekicks in maintaining property harmony. 4. Resident Surveys and Active Feedback Gathering Resident surveys and feedback gathering are your property's annual check-up, a key health indicator for your relationship with residents. These invaluable tools allow you to take the pulse of resident satisfaction, uncover hidden issues, and celebrate what's working well. When residents see their feedback being valued and acted upon, it creates a sense of involvement and community, enhancing their overall living experience and driving resident retention. Importantly, active feedback gathering shows your residents that their voices matter. It instills a sense of ownership and care that can often lead to better property care and longer tenancies. How to turn resident feedback into a better resident experience Here are some ways to champion feedback in your property management: Regular Surveys: Don't just wait for the annual survey. Keep the feedback coming in regularly, like a monthly check-in or a quick poll after a service call. It's like catching up over a virtual cup of coffee – relaxed and informative. Feedback Boxes: Consider setting up a digital feedback box where residents can drop their thoughts, ideas, or concerns anonymously. Think of it as your modern suggestion box. Act on Feedback: Here's the real deal – taking action. Show your residents that their feedback isn't just being heard, it's being actioned. 5. Resident Rewards Resident Rewards are a huge factor in resident retention and satisfaction. Rewards make residents feel appreciated and have proven to incentivize habits like on-time payments and better care for the property. Perks like this can significantly boost resident satisfaction, increase lease renewals, and even stimulate referrals. It's a win-win all around! For multifamily and apartment community managers, that might look like community-focused programs. For single-family property managers, we’ve got some other tips. Second Nature’s Resident Benefits Package includes a robust resident rewards program. How to improve the resident experience with resident rewards Here's how you can sprinkle some rewarding magic into your resident experience: On-Time Rent Rewards: Create a system that rewards residents for consistently paying their rent on time. It could be a small discount or a gift card to a local coffee shop. Longevity Rewards: Celebrate lease renewals or long-term residents. A gift, a discount, or even a personalized note can make your residents feel valued for their loyalty. Referral Rewards: Turn your residents into ambassadors! Offer a discount or a bonus for any referral they make that signs a lease. Surprise Rewards: Keep the excitement alive with occasional surprise rewards. It could be as simple as a movie ticket or a voucher for a free car wash. 6. Incentive Programs Incentive programs are the next level of resident engagement that professional PMs offer. They can positively influence resident behavior, promote a sense of belonging, and even enhance your property's appeal to prospective residents. When residents feel that their good habits (like timely rent payments) are being recognized or they're being offered valuable services (like credit reporting or identity protection), it builds loyalty and satisfaction. It's like saying, "We're in this together, and we've got your back!" How incentive programs can boost the resident experience Here's how to serve up a great menu of incentives for your residents: Credit Reporting: Offer a program that reports timely rent payments to credit bureaus. It's a win-win: they pay their rent on time, and they build their credit! Identity Protection: In a world where digital safety is paramount, offering identity protection services can be a powerful incentive. It's like providing an invisible, protective bubble around your residents. Rent Discount for Referrals: Encourage residents to become your ambassadors. Offer a rent discount or a gift for successful referrals. It's like having your very own fan club. Early Payment Incentives: Reward residents who pay their rent well before the due date. It could be a small discount or a token gift, but it makes them feel appreciated. Rewards for Green Habits: Encourage residents to adopt environmentally friendly habits, like recycling or energy conservation, and offer incentives for their green efforts. This can really help in SFR when you don’t have the same level of control as PMs managing an apartment building. 7. Support Tools Support services work behind the scenes, often unnoticed, but they play a crucial role in streamlining the resident experience. From filter delivery subscriptions to online payments, these services add a layer of convenience and assurance for your residents. Integrating support services into your property management strategy can not only elevate resident satisfaction but also reduce your workload. It's like having a friendly assistant who's always ready to lend a hand, both to you and your residents. How to create support services that add convenience to your resident experience Here are a few ways you can amplify your resident experience through support services: Filter Delivery Subscription: Offering a filter delivery service for your residents ensures their HVAC system is always protected. It reduces your maintenance issues and costs and ensures they have a safe living environment. Second Nature’s filter delivery reduces resident and PM costs by hundreds of dollars a year. Online Rent Payment: Providing an easy-to-use online portal to process and automate rent payments and lease renewals adds a layer of convenience for you and your residents. Maintenance Request Portal: An online system for maintenance requests helps keep track of issues and ensures timely response. It's like having a 24/7 maintenance desk at their fingertips. Digital Notifications: Use email or SMS notifications to keep residents updated about important things like maintenance schedules, community events, or changes in property rules. Proptech solutions can help with digital support. Resident Portal: A comprehensive resident experience platform where tenants can access services, find information, and connect with management can significantly enhance the overall resident experience. 8. Concierge Services Concierge services are the above-and-beyond offerings that can truly set your property apart from the rest. This personalized attention can transform the often stressful processes into a smooth and enjoyable experience. How concierge services help with resident experience Here are some other examples of concierge services: Move-in Concierge: Who doesn’t want a personal assistant during the often chaotic time of moving? A move-in concierge helps with utility setup and pricing comparisons and provides local area information. Learn more about Second Nature’s Move-in Concierge in our Resident Benefits Package. Cleaning Services: Offering access to trusted cleaning services, whether for regular use or during the move-out process, can be a huge convenience. Maintenance Scheduling: A service to help residents schedule routine maintenance can keep their homes running smoothly without them having to worry about coordination. 9. Insurance While, as a property manager, you carry insurance for the physical property, it's equally important for your residents to have renter's insurance. Your coverage protects your owners' real estate investment. Renter’s insurance protects residents’ personal belongings and covers them for liability, and it's a small investment for significant protection. Plus, in case of a mishap, it can help the recovery process go much more smoothly. Resident experience examples: How to leverage a renter’s insurance program Here's how you can integrate insurance into your resident experience: Educate Residents: Make sure your residents understand the importance of renter's insurance, what it covers, and what it doesn't. This is critical information that every renter should know. Insurance Requirements in Lease: Include a clause about renter's insurance in your lease agreement. This helps to set the expectation right from the start. Annual Reminders: Send out annual reminders for policy renewals. It's a small step, but it ensures continuous protection for your residents. Renter’s Insurance Program: While most property managers require insurance, less than half of renters maintain coverage. Second Nature has developed a renter’s insurance program that has 100% compliance and leaves residents – and you – with the coverage they need. How SecondNature Improves Resident Experience Resident experience – those pivotal touchpoints between a resident and a property manager – can significantly shape the success of a single-family rental home. At Second Nature, we’ve built our entire company on the idea that resident experience can change the game in property management. Our Resident Benefits Package wraps up each of these strategies into an all-in-one resource for property management companies. It saves money for you and your residents and delivers the best in convenience and resident experience. Learn more about the Resident Benefits Package or read our State of Resident Experience Report.

July 18, 2023

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Property Management Profitability: FAQs on Profit Margin

Property Management profitability is, of course, how much money a property management company keeps of their revenue after their expenses. But Daniel Craig, the CEO of ProfitCoach, wants PMCs to think of profitability far more expansively. “We recommend that you think about profit as the opportunity to reinvest in the business,” Daniel says. “Your business isn’t just a machine that makes a profit; it's a machine that turns profit reinvested into more profit.” In other words, profit is a virtuous cycle that, once started, can deliver increasing ROI, better value, and better business. The big question is: How do property management companies increase profitability? That’s what we connected with Daniel to talk about. We’re sharing some of Daniel’s insights on property management profits and experiences we’ve gathered over years of working with property management companies across the country. Key Learning Objectives: How property management companies increase profit How long it usually takes to become profitable Common mistakes property management companies make when trying to build profit How to optimize operating costs How to find the right residents and property investors Tools for helping to increase profitability Meet the Expert: Daniel Craig Daniel Craig is the CEO of ProfitCoach, which provides property management entrepreneurs with financial knowledge, tools, and strategies to drive greater profits. How do Property Management Companies Make Money? In the most basic terms, property management companies make money through real estate investors paying for the services they offer. The more value a PMC can drive for its property investors and residents, the more revenue they generate. The profit, of course, is how much is left over after paying all your expenses. “We've worked with hundreds of residential property management companies and seen a wide variety of profitability levels,” Daniel says. ProfitCoach and NARPM started benchmarking profits with the NARPM Financial Performance Guide and Daniel says they’ve seen a significant shift in the past few years. In 2017, the average profitability in the property management space was 6%, and the top 25% of performers’ profitability was 25%. In 2021, the average profitability was 11%, and the top performers were 32%. The important nugget in these benchmarks? Seeing what’s possible. Many rental property managers may not realize they could strive for anywhere from 25% to 32% profitability. But if the target is that high, how do you get there with your business? At ProfitCoach, Daniel and his team have outlined the “Three Steps to 3X Profitability.” 3 Steps to 3X Profitability Here’s what Daniel has to say about the three steps to 3X your profitability. 1. Get Clear PMs need to get clear on where they are, where they want to be, and what they can achieve. It’s important to know: What’s possible across the industry Trends in your local market How you compare If you're not clear on the potential, then you're not going to be clear on what you should strive towards. If you're not clear on where you are today, you're not going to be clear on whether you need to change. 2. Define Your Target Compare your performance to the latest NARPM numbers and benchmarks and determine your target for each of the six Do-or-Die metrics. Maybe the benchmark isn't your target, and that's fine, but you need to know what's possible. Many people go through their business lives without engaging the possibilities. They operate within certain boxes, and those boxes need to be compared to what other people are doing. Then you can adjust your perspective of what's possible and set realistic targets. Next, build a realistic financial forecast that helps you chart the course from where you are to where you want to go based on your financial goals. 3. Stay on track Now it’s time to bring the team into the conversation and basically say, “Here’s our roadmap. What specific tactics and strategies will we enact to accomplish the financial shift we need in each of these six areas of our business?” And once you have those defined, measure your progress against your goals monthly or quarterly. Engage your whole team in the conversation and engage a coach to help you define a financial performance improvement action plan and hold you accountable. How Long Does it Take for a PMC to Increase Profitability? According to Daniel, businesses should give themselves between one to three years. “We've seen companies make massive changes in 12 months, and we've seen companies make massive changes across several years,” Daniel says. “But generally speaking, I would say to give yourself one to three years to make a major shift – if you want to go from an average company to a benchmark company.” How to Set Up a Property Management Business For Profitability Setting up your business for profitability is often about avoiding the most common mistakes other businesses make. We asked Daniel about where he sees professional property managers most often go wrong. Daniel says three major mistakes affect how profitable your business is. 1. Financial Fog Daniel defines financial fog as “Not having clarity on where you are, where you want to go, or what's possible in the industry.” “One of the cool things about this industry is that it's such a unique opportunity,” Daniel says. “I don't think that many property management owners realize the extent to which they can drive profit in this industry. They often don’t have a clear sense of what the real opportunity is.” 2. Financial Isolation “At ProfitCoach, we believe that finance should be done in community,” Daniel says. “We are advocates of what we call community-driven finance, which is essentially engaging with community-based benchmarks, community-based best practices, and community-based scoring.” Community-driven finance helps individual rental property managers and businesses know how they’re stacking up against top performers. It also helps generate value for everyone, where each PMC can benefit from best practices from those top performers. “One of the wonderful things about the property management space is that it truly is a community space in which there is a lot of idea sharing,” says Daniel. “We think that when you bring that idea sharing into a conversation that is also numbers-based, you can begin to see the strategies and tactics that will be most effective as indicated by the data.” “Staying in financial isolation is a huge mistake,” he says. 3. Not Being Mission-Driven Being mission-driven is all about thinking in terms of customer lifetime value. Sure, it’s possible to get a quick win on pricing, but it may cost you in the long run if you’re not thinking about lifetime value. Rather, Daniel says, “you want to make sure that your approach to pricing, marketing, everything in your business is values- and mission-driven.” “What is your mission as it relates to your employees? What is your mission as it relates to your stakeholders? What is your mission as it relates to your owners/investors? What is your mission as it relates to your tenants/residents?” How to Reduce Operating Costs to Increase Profitability So, once you’ve considered the three steps to 3X your profit and evaluated the pitfalls of profitability – what next? How do you actually optimize your operating costs and increase profitability? Daniel advises every PMC to adopt the NARPM Accounting Standards Chart of Accounts for their bookkeeping. He says the best part of using the NARPM Chart of Accounts to optimize your profit is the six “Do-or-Die” metrics. These property management KPIs are critical to business success: Profitability Direct Labor Efficiency Ratio Revenue Per Unit Unit Acquisition Costs Churn Expenses as a Percent of Revenue “It’s critical that property managers get a clear line of sight on how they stack up in terms of specific rental property management metrics that have an operational connection.” For example, an income statement will tell you how much revenue you have but won’t tell you how much revenue per unit you have. By building off your income statement with the PM-specific metrics, you’ll be able to tie it to a more operational connection. For example: From profitability to profit per unit From revenue to revenue per unit From sales and marketing spend to unit acquisition costs In this way, you can understand on a per-unit basis how your business is performing operationally. Daniel says: “The problem with the standard income statement is that it doesn't often give property management owners and entrepreneurs a lot of clarity on specific operational shifts that they need to make in your business. When you implement the NARPM Chart of Accounts, you can then implement a whole suite of metrics that does give you that operational clarity and insight to drive action and improvement in your business.” How to Increase Profitability in Property Management Increasing profitability takes time and should be done in a few different steps across your business model. These steps are the same whether you are a large or small business. Daniel breaks down the work between developing your pricing, labor, expense, and growth models. Look at Your Pricing Model Your pricing model is a significant driver of profitability. Getting your pricing right is one of the pillars of profitability. A few things to consider as you are managing properties: How does your pricing compare to the local market in your area? Are you offering any property management services that you should charge management fees for? What are you doing beyond rent collection that you should charge a flat fee for? Are there more services you could offer and charge for their value? How is your cash flow? Daniel cautions that it can take time. “If you roll out a new pricing model to tenants and owners, it takes time to implement. You should give yourself about a year to get that fully implemented.” Look at Your Labor Model Your labor model is the next big thing, as labor is your biggest expense and could also be a driver of inefficiency if you don’t have it right. Daniel recommends asking: Do we have all the right people in the right seats on the bus? Do we have the right mix of U.S. talent versus global talent? Do we have retention strategies in place? Do we have the right systems in place to enable each team member to be maximizing their productivity and their effectiveness in the organization? Again, these questions may lead to significant strategic shifts that you should give yourself time to implement. Look at Your Expense Model This one is a little bit easier but just as important. You can trim expenses fairly quickly once you identify where to cut back. Are you spending too much on overhead? Could you engage property management software to help with bandwidth? In some cases, changing your expense model may take some time – for example, if you need to renegotiate a long-term lease. Look at Your Growth Model Evaluating and updating your growth model is another opportunity for maximizing profitability. Once you’ve identified and set your targets, here are some potential next steps for growth: Finding and hiring a high-performing business development manager Get a new sales process in line Dial in your lead generation strategies so that you have enough leads for that BDM Etc. Again, this shift may take several months or years to integrate into your business processes fully. Launch a Residents Benefit Package Ultimately, one of the best ways to increase profit and influence your bottom line is by considering where you can add more value for your residents and residential property investors. Daniel recommends starting small tweaks to your Revenue Per Unit. “We have seen repeatedly that a 10% improvement to revenue per unit can easily result in a 100% increase in profit per unit. So, look for ways to get small wins on value creation, value communication, and value realization.” Daniel says one of the quickest and most practical ways to adjust Revenue Per Unit is to implement a Resident Benefits Package. (And we didn’t even put him up to it!) “A resident benefits package alone can result in that 10% bump to revenue per unit, which can result in that 100% increase to profit per unit. This profitability can result in more fuel to your freedom, more fuel to your mission, and realizing all the things you went into business for in the first place.” How to Find Profitable Residents & Investors and Keep Them Happy Daniel says they’ve seen significant profitability gains when a company identifies the right-fit and wrong-fit clients. “We have seen significant profitability gains come about for those who are looking through the client list, finding the misfits accelerating, and then getting those misfits out of their portfolio so that they can bring in the right-fit clients who are going to be a better fit from a value proposition perspective. Getting rid of low-performing clients and then backfilling those with the right kind of clients is a great way to improve profitability.” Daniel says that this goes back to being mission-driven. By identifying your point of view on your industry, your values, etc., you can build a “why” for your company that can help you define the right new clients for your business. Daniel uses his own company as an example: “At ProfitCoach, we believe in community-driven finance. If we come into contact with a potential client who's all about financial isolation – they don't want to share their numbers with anybody, they don't want to engage in a community conversation, they don't wanna learn from the best practices in the industry – that's not a good fit for us.” So, the two questions to define are: What is your point of view? What is the value proposition that comes out of that? Based on that value proposition, there will be a certain set of criteria that will define what a right-fit client is and what a wrong-fit client is. Learn more about SecondNature’s Resident Benefits Package, which is designed to generate revenue and “Triple Win” conditions that benefit residents, investors, and property managers alike.

June 28, 2023

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How to Create Property Management Business Plan [Free Template]

There are as many different perspectives on property management business plans as there are different PM businesses. But one thing holds true – in the classic adage usually attributed to Dwight D. Eisenhower – it’s not the plan that matters so much as the planning. Outlining a detailed business plan isn’t just important for defining your own goals, it’s key to communicating those to potential clients and investors. It also requires deep insight into what residents want and are willing to pay for. Whether you’re new to property management, have been managing properties for years and are ready to start your own business, or own property management business but are looking for greater investment, we’ll cover important topics to address business plan creation. We’ll explain why business planning can be so important, as well as who to target with your plan. We’ll also share a free template to get you started. Key Learning Objectives: How to identify and find your ideal clients How to articulate your value proposition What to include in your business plan How to outline your business plan A free property management business plan template Meet the Expert: Peter Lohmann, CEO RL Property Management What to Know before Creating a Property Management Business Plan Not to get too deep down the rabbit hole, but the first step to creating a high-quality business plan is – you guessed it – to make a plan for the plan. For entrepreneurs, planning is the key to success. Going through the following steps first will make the process much easier and more effective in the long run. Here’s what you need to get clear at the outset. State Laws governing property management business As you know, each property management company’s approach is very dependent on regional or state regulations. Before taking any steps to either start or change your business, you need to have a clear understanding of the local laws governing your business venture. We highly recommend hiring an attorney who can help you navigate those laws and regulations. Who are your ideal clients Lohmann lays out three critical steps to crystalizing a successful business plan: Identify your ideal clients. Articulate your unique value proposition for those clients. Go out and find leads. So, first: Who are your ideal new clients? “Get really clear on who your ideal customer is,” Lohmann says. “Are you managing associations, office buildings, big apartments, single-family rentals, etc.? The narrower and more specific you can be, the better your life is going to be and the more money you’re going to make.” In other words, anything outside of this target market is going to be a waste of your time. That’s why this is the first step. “The more narrow and specific you can be here, the more directly you can speak to your prospects in a way that’s compelling,” Lohmann says. “Everything becomes easier – content strategy, sales conversations, even operations become easier – if you know who you want to manage for and what types of properties you want to manage.” What type of property management company you are The next step is to identify your unique value proposition. There are tons of property management companies out there. Why should your ideal client choose you? In Lohmann’s words: “Your second step is to ask, ‘Why should anyone care?’ Property management isn’t a new concept; there are tons of property managers. So, identify what your unique value proposition is.” This is key to figuring out not just who to pitch to but how to pitch to them. “What are you going to talk about?” Lohmann says. “You can’t just say, ‘Oh, hire us, we’re the best!’ You need clear examples that say, ‘Our company does something a little different.’” For RL Property Management, that started as a promise that they would never charge a leasing fee. “Sure, it’s kind of crazy, and I don’t know anyone else who doesn’t charge that, but it worked,” Lohmann says. “We were trying to figure out why everyone hated their property manager. And we decided that it might be an incentive problem where the property manager’s incentive is to fill the unit as quickly as possible so they can get that big leasing fee, and that was creating bad outcomes for property owners. So we decided that we weren't going to charge a leasing fee, and we've stuck with it ever since.” How to find your ideal clients The third and final step of preparation is to identify where you need to go out and find leads and engage property management marketing. “Given what you know about how you defined your ideal prospect and your company and what they offer, the next question is where you go and get these leads,” Lohmann says. “A lot of property managers start with this third step. They just say, ‘How can I get more leads?’ But that’s the wrong question. Why do you deserve those leads? Answer that first. Downstream of that is ‘Where are those people hanging out, and how can I get this to them?’” Getting this step right involves researching property management and real estate property in your area and getting familiar with industry news, conferences, and listings. What should a property management business plan include? Now, let’s talk about the actual outline of your PM business plan. If you’re starting a new business and aiming to present a business plan to investors, or even business partners, you should outline each section below as a presentation deck. The information presented in this section needs to read like it is designed for investors and should highlight key terms and concepts they care about. Here’s a sample property management business plan outline, followed by a detailed explanation: Executive Summary Company Overview Market Analysis (Industry, Customer, and Competitive Analysis) Services Marketing Plan & Sales Strategy Operations Management Management Team Financial Plan Growth Opportunities Executive Summary This is a high-level overview of your entire presentation. As such, it should be the last section that you write. You want to be concise but interesting and hook the reader quickly. Outline the following in broad strokes: The type of property management company you are operating Your target market Your objectives Your plan for meeting these objectives Company Overview The company overview will dive deeper into your property management niche and business model. Explain what types of properties you manage and how you operate. Options include single-family residential property management (SFR), multi-family property management (MFR) or residential apartments, HOA management, and commercial property management. Give a brief history of your company and your legal business structure. Other important information might include: Your key competitive differentiators and core competencies Your metrics for success Your management team Financial details Mission and vision statements Market Analysis (Industry, Customer, and Competitive Analysis) This section benefits you almost as much as it does your audience. Researching for this section will help you more deeply understand the industry, customers, and competition. Industry analysis should include details on the trajectory of the market, its size, and key trends, along with challenges and opportunities. Customer analysis should include details about your target customers, their wants and needs, etc. Competitive analysis should outline direct competitors (PMCs in your area) and indirect competitors like in-house managers, automated tools, etc. Explain why your value proposition is unique. Ideally, present a thorough SWOT (strengths, weaknesses, opportunities, threats) analysis. Services This section should describe the property management services the company plans to offer, such as leasing, maintenance, and rent collection. Depending on the jurisdiction, legal compliance and documentation services may be relevant as well. This section should also discuss the pricing strategy for these services. Marketing Plan & Sales Strategy This section should describe the company's marketing plan and sales strategy, including how it plans to attract and retain clients. It should also discuss any advertising or promotional campaigns the company plans to undertake. Promotions could include paid advertising in print and on websites, social media marketing, radio advertising, SEO marketing, and more. Here, it’s important to document your marketing channels (organic online, targeted online, print advertising, professional networking) as well as ongoing sales and marketing programs. Related: 10 Property Management Goals to Set for the Year (with examples) Operations Management Outline your short-term processes and long-term business goals, as well as estimate day-to-day operations. What property management software are you using in the business? What bottlenecks slow down work that’s moving through the organization? How will you structure your company and your teams? It may also be helpful to include details on critical process workflows, risk mitigation strategies, and technology integrations and updates. Management Team Outline your management structure and the skills and experience of your management team. You’ll particularly want to highlight property management and real estate experience. This is a key moment for you to consider who you have in the company, who is a right fit, and who needs to be looked at as not a great fit. Financial Plan This is where you give your financial projections and approach. Outline your major cost centers and revenue drivers. What management fees are you going to charge? You should include a profit and loss statement, balance sheets, and a cash flow statement. Growth Opportunities Identify and outline the most targeted growth opportunities for your business right now and over the next five and ten years. Knowing your long-term goals requires you to gain a deep understanding of the real estate and property management market in your area and to understand clearly where you fit in and how you can generate growth and value for years to come. Typically, in this section you might include: Expansion plans Strategic alliances Technology upgrades Emerging market trends Property Management Business Plan Free Template Although you may prefer to draft your own property management business plan from scratch, there are a couple of options for short-cutting the process. You can use the checklist below to organize your plan, or else simply download our free PMC business plan template to customize as you see fit. Executive Summary The type of property management company you are operating Your target market Your objectives Your plan for meeting these objectives Company Overview Mission and vision statements Your property management niche and business model How you operate Company history Your legal business structure Your key competitive differentiators and core competencies Your metrics for success Your management team Financial overview Market Analysis Industry assessment Customer analysis Competitive analysis Services Marketing Plan & Sales Strategy Outline of sales and marketing plans Marketing channels Ongoing sales and marketing programs Operations Management Long-term business goals Current processes Critical process workflows Risk mitigation strategies Technology integrations and updates Management Team Management structure Skills and experience Financial Plan Financial projections Cost centers and revenue drivers P&L statement Balance sheet Cash flow statement Growth Opportunities Targeted growth opportunities Expansion plans Strategic alliances Technology upgrades Emerging market trends ‍ Get your free PMC business plan template here. Beyond the business plan: Focus on retention with the Second Nature RBP At Second Nature, we work with property managers around the country to develop better resident experiences that will generate more value for their clients and more profit for their companies. The product we have found most helpful to property managers at every stage of their company’s growth is a fully managed resident benefits package or RBP. Each product in this package aims to deliver something residents want or need and a service that helps set your PMC apart. We want to help make running your business as easy as second nature. Related: Property Management Startup Checklist

June 28, 2023

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How to Create Self-Service Tenant Onboarding Workflows

A tenant self-service onboarding workflow is a system that enables new residents to complete the onboarding process by themselves using online portals, automated communication workflows, and chatbots, with minimal involvement from property management teams. Why automate? Automation can provide smaller property management companies with an edge by streamlining processes, improving communication with residents, and reducing manual workloads. By leveraging tech tools such as single-family property management software, online portals, and automated workflows, smaller companies can increase efficiency, provide better customer experiences, and compete with larger players in the industry. Implementing tech is especially important – let’s actually say it’s imperative – in today's digital age, where residents expect instant communication and online access to property information. By embracing tech solutions, smaller property management companies can not only keep up with industry trends but also stay ahead of the competition. Today we are talking with a leader in property management who has also been an early adopter of some of the most innovative new AI and tech solutions for the property management industry – Wolfgang Croskey. Wolfgang shares some of the best ways to automate your resident onboarding process and how to avoid pitfalls along the way. Key Learning Objectives: Do I need to implement self-service workflows for resident onboarding? What are the greatest benefits of implementing this automated process? What are the pitfalls of tech and automation in resident onboarding? How do I create self-service onboarding workflows? Meet the Expert: Wolfgang Croskey, Founder & President of How’s My Rental Wolfgang Croskey has been working in real estate since he was a little kid. From stuffing envelopes, unclogging toilets, and serving notices to creating leases, he has touched on all aspects of property management. He is a well-respected member of NARPM, a servant leader to his community, and, to top it all off, a father of 6. Wolf has been a board member and president of the Pittsburg Chamber of Commerce, where he is currently the CEO, providing leadership and direction to the Chamber in their daily activities. He is also the Founder of How's My Rental, a site-awareness servicing California landlords as well as the founder of The Perfect Tenant, a Master Leasing Company. A Note on Language: At Second Nature, we prefer the term “residents” over “tenants.” It’s our belief that focusing on the people in every interaction helps us to create better, more valuable, and more profitable business strategies in the long run. Property management is all about focusing on what residents and investors – human beings – want and need! But through this article, you’ll see us use both “tenants” and “residents” due to the fact that many parts of our industry are very technical and require accurate terminology. Why should you implement tenant self-service onboarding workflows? Tenant, or – as we prefer to say here at Second Nature – resident onboarding is an essential aspect of property management. But as any PM will tell you, it can be time-consuming and resource-intensive. That's why a resident self-service onboarding workflow can be a game-changer for property managers. By providing residents with online self-service portals, automated communication workflows, and chatbots, self-service onboarding workflows can reduce the need for manual work, streamline the onboarding process, and improve tenant experiences. According to Croskey, property managers across the country are adopting self-service workflows and automation – but there’s still a lot of room for growth. “There is a growing trend towards adopting self-service onboarding workflows in the property management industry, driven by the numerous benefits they provide, such as reduced manual work, faster lease execution, and improved resident experience,” Croskey says. “However, there may be some pushback from property managers who are hesitant to adopt new technology or concerned about potential security risks. Addressing these concerns through education and demonstrating the benefits of automation can help encourage wider adoption.” As we’ve mentioned before, Croskey has called automation the “great equalizer.” How? According to Croskey, “It allows us to compete with these nationwide companies and to provide not only the same level of service but to be able to pivot and adapt much quicker than those larger companies can. So for me, you're a smaller company, AI and Automation Tech is that equalizer that's going to allow you to shine just as well as these larger companies.” Are there disadvantages to adopting more automation? Croskey says there are areas of vulnerability for PMCs looking to automate their processes more deeply. The issue? Not having those processes right in the first place. Croskey says he’s seen many property managers assume that AI is going to fix their problems. “The reality is, if you don't have your policies, procedures, and processes in place, there is no tool on earth that's going to be able to save your bacon,” says Croskey. “Look at McDonald’s: At one point, some team had to roll up their sleeves and make the process of how to build the Big Mac. And it probably took quite a while to do that. But now that it's done, they haven't changed the Big Mac for at least 40 years. It's still the same nasty hamburger.” With a chuckle, Croskey continues: “A lot of times, myself included, we try to find technologies that can help us avoid that initial work. You’ve got to roll up your sleeves, and you’ve got to get through that.” How to create tenant self-service onboarding workflows So, let’s say you’ve accepted that building self-service workflows gives massive advantages to your PMC. And let’s say you’ve established your processes in a way you’re confident is efficient, legal, etc. Now how do you create the automation to help new residents help themselves? Here’s what Croskey advises, in his own words. To create a resident self-service onboarding workflow, property managers should consider the following steps: Select Software: “To optimize your property management process, it's crucial to select software that offers robust onboarding automation features such as online applications, tenant screening, and digital lease signing.” Integrate Workflows: “Ensure the workflow is tailored to your needs and seamlessly integrates with your existing accounting, maintenance, and communication platforms.” Implement Data Security: “It's equally important to implement stringent data security protocols to safeguard resident information during the onboarding process.” Equip Resident with Resources: “Finally, equip residents with the necessary resources to familiarize themselves with the self-service workflow and provide comprehensive training to your team to ensure a smooth transition.” With those steps in place, let’s look at some of the specific aspects of the onboarding process that property managers can start with when building self-service tools. Virtual tours Croskey explains that AI-powered chatbots can provide virtual property tours – answering questions, and offering additional information to potential residents in real-time. Here’s how it works: Prospective tenants can access an online customer portal or chatbot that offers virtual tours of the property. They can interact with the chatbot to select a specific unit or area of the property they want to tour. The chatbot or other AI tech can then use VR or AR technology to provide a 360-degree view of the selected area. Prospective tenants can move around and explore the space as if they were physically there. The chatbot can also provide additional information about the property, such as floor plans, rental rates, and amenities. Rental application Nearly all automated property management solutions can provide automated rental applications. Here are some tips on how to ensure you’re deploying it effectively: Provide residents with an online portal where they can submit their rental applications and supporting documents electronically. This can include personal information, employment history, rental history, and financial statements. Use automated workflows to guide residents through the application process and send notifications when additional information or documents are required. Implement electronic signature software to enable residents to sign and submit rental agreements and other legal documents online. Integrate the rental application process into your property management software to streamline the process and reduce manual workloads. Beyond that, Croskey explains that “Chatbots can guide residents through the online application process, answering questions and providing support as needed.” Tenant verification Property managers can make tenant verification self-service by implementing tenant verification software into their property management system. These software solutions will help by: Leveraging an online portal where residents can submit their information and documents for verification, including rental history, employment verification, and credit checks. Using chatbots or automated workflows to guide residents through the process, answer questions, and provide them with updates on the status of their applications. Implementing secure authentication measures to ensure only authorized individuals can access and submit sensitive information. Lease negotiation Here are some steps to make lease negotiation automated or self-service: Property managers can create an online lease agreement platform accessible to residents via a unique login and password. The platform can provide residents with the ability to view and select available properties and rental units, along with the associated lease terms and rental rates. Residents can submit a lease application online, which can include information such as their employment history, income, and rental history. The platform can automatically screen the application, verifying information such as credit score, employment status, and income. Once the application is approved, the resident can negotiate lease terms such as the lease duration, rental rate, and security deposit directly with the property manager via the online platform. The online platform can use AI to generate a lease agreement that reflects the negotiated terms, which can be reviewed and signed by the tenant and property manager online. Property services onboarding Getting residents set up with all the services, utility connections, etc. that they need can be a hassle for everyone. You can end up answering several calls and questions, while they may spend hours on the phone trying to identify what they need and how to get it. Self-service onboarding can make a huge difference. One example is Second Nature’s Movie-In Concierge, part of our full-service Resident Benefits Package. In one phone call, residents find out what their best options are and can even get help simplifying setup. An experienced concierge confidently guides multiple people every day to properly set up their utilities. We’ve also automated filter delivery to ensure residents replace filters on time, which saves them roughly $15 per month in HVAC fees. Document management Property managers can make document management self-service by providing tenants with an online portal where they can access, upload, and sign documents. Here are some steps to make document management self-service: Property managers can create an online portal accessible to residents via a unique login and password. Set up permissions so residents can upload documents such as lease agreements, rental applications, and move-in checklists to the online portal. Property managers can upload documents such as rental payment receipts, notices, and lease addendums to the online portal. The online portal can provide residents with the ability to digitally sign documents, eliminating the need for paper-based signatures. Property managers can use automated workflows to track document submissions, ensure that all documents are complete, and send reminders to tenants who have outstanding documents. The online portal can be integrated with the property management software, ensuring all documents are properly filed and easily accessible. Croskey adds that “AI can help organize, store, and retrieve documents related to the onboarding process, streamlining the experience for both property managers and residents.” Resident communication Here are some steps to automate resident communication and ensure residents can help themselves to the info they need. Property managers can create an online portal that can provide residents with information about their lease, rent payments, and property services, as well as the ability to submit service requests and communicate with the property manager. Chatbots or other AI tools can provide instant communication to residents during the onboarding process, answering questions and addressing concerns efficiently. Property managers can use automated workflows to send reminders to residents about rent payments, lease renewals, and move-in/move-out procedures. The portal can provide residents with the ability to report maintenance issues, request repairs, and track the status of their requests. Property managers can use automated workflows to manage and track service requests, assign tasks to maintenance staff, and ensure the timely completion of service requests. The portal can provide residents with access to a knowledge base or FAQs, where they can find answers to common questions about their lease and the property. Maintenance coordination AI and chatbots can help coordinate move-in inspections, maintenance requests, and repairs, ensuring a smooth transition for new residents. The best way to do this is to implement a maintenance management system that integrates via an API with the resident communication platform. Property managers can provide new residents with access to the online portal, where they can submit maintenance requests and track the status of their requests. The portal can include a list of frequently requested maintenance tasks and allow residents to select the task and provide details about the issue. You can use an automated workflow to assign maintenance tasks to the appropriate staff member, schedule the task, and notify the resident of the scheduled date and time. The maintenance staff can update the status of the task on the portal, allowing the resident to track the progress of the repair. You can use data analytics to identify recurring maintenance issues and proactively address them before they become larger problems. Finally, you can provide residents with the ability to rate and provide feedback on the maintenance staff's performance, allowing property managers to continuously improve their service. What are some of the best tools for implementing self-service onboarding workflows? Several automation tools have emerged as industry leaders in resident onboarding. The best tool for your property management business will depend on your specific needs and requirements, says Croskey. He recommends looking into some of the more popular options online, including: AppFolio: AppFolio is a comprehensive property management software that offers automated tenant onboarding, including online applications, screening, and lease signing. Buildium: Buildium provides an end-to-end resident onboarding solution, including application management, tenant screening, and electronic lease signing. LeadSimple: LeadSimple provides a process-oriented solution to onboarding a tenant. By using reactive templated emails, tenants have the ability to select options and then drive the process along. What does the future of self-service onboarding look like? We asked Croskey, and he answered: As technology advances, self-service onboarding workflows can become even smarter by: Personalized onboarding experiences: AI can analyze resident data to tailor the onboarding process based on individual preferences and requirements. Integration with IoT devices: The onboarding process can be integrated with smart home devices, enabling residents to set up utilities, internet, or other services through voice assistants or other IoT interfaces. Enhanced data security: Advanced encryption and AI-driven security measures can better protect resident data during the onboarding process. Automated compliance checks: AI can automatically verify that leases and other documents comply with local, state, and federal regulations, reducing the risk of legal issues. Final thoughts: Just get started! Croskey says the key is to start learning how to use automation and AI now – and make sure you provide your team with the training and support they need. “My recommendation is just to get started and try these new tools,” he says. “And as you grow more confident, make sure to do your team justice by providing them training and providing them opportunities to learn how to use these tools as well. It’s not fair to say, ‘Okay, starting tomorrow, we're using this brand new tool, have a nice day.’ Really focus on some training.” You can learn more by listening to our podcast with Wolfgang: Everything You Need to Know about Practical AI for Property Management. We’re keeping our fingers on the pulse of this space – stay tuned for more!

June 28, 2023

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Property Management Fees: Opportunities for Growth

If you’re familiar with Second Nature, you know that supporting SFR property managers in building triple win experiences is our focus. So today, we’re taking on the thorny topic of property management fees within SFR property management companies. And we’re turning to one of the leading industry educators on the subject: Todd Ortscheid, owner of PM Assist. Here’s what we’ll cover in this article. Key Learning Objectives: How to structure your property management fees for growth The benefits and challenges of charging property management fees How you can use fees to add value for yourself, your clients, and your residents How to introduce fees without turning clients off Examples of property management fees you might not be employing (yet) Meet the Expert: Todd Ortscheid Todd spent 14 years as an airline pilot – an industry known for capitalizing on fee structures as a growth strategy. He took over his father’s property management company after the 2008 real estate crash and eventually tripled the company’s number of doors. As the co-owner of PM Assist, he offers training and counsel on finding new ways to increase company revenue, process automation, and profit per unit. Todd is a true entrepreneur and creative thinker, with ideas that challenge the status quo and may even ruffle some feathers. But Todd’s strategies have proven to help grow property management companies, and we’re thrilled to share his insights. Related: State of Resident Experience Study What Property Management Fees Are Standard? You should be seeing income on anything you’re spending money on as well. Anything you want to do to create more value for residents or investors? You should charge a fee for that so your company can stay competitive and your employees can get paid. Here are a few examples to get you started. Inspection & Maintenance Fees How much time are you spending on periodic property inspections? How much money are you spending on maintenance costs? How valuable is your staff's time? Todd says, “You have to be charging for this. Don't just include maintenance requests and inspections as part of your monthly management fee.” Marketing Fees Todd says, “I'm sure a lot of you are probably in markets where Zillow started charging you to put your listings on their website. And I've heard a lot of property managers say it's just a cost we're absorbing. Don't do that. Pass on that cost. Call it a marketing fee or the Zillow fee or whatever you want to make sure you're making money on that. Never pay for your own property management costs – come up with some way to cover all of these costs that you have for your business.” Insurance Risk Mitigation Fees If your investor doesn’t have insurance, you are often the one who will suffer. Todd advises charging a fee if your investor doesn’t send a policy within 30 days. “Tell them, ‘This new fee will be charged as a mitigation fee for the additional risk we have.’ You will not believe how quickly people will send you their insurance policies if you do this. We only charged a nominal fee. But a flood of emails came in after I sent out that notice to owners. So this isn't about making more money. For the most part, it's about influencing behavior and ensuring you get the insurance policies you need.” Account Creation Fees As a property manager, you can charge a set fee to investors to create an account with your company. This fee may or may not cover various other costs such as any related property inspection requirements or tenant communications. Recurring Management Fees Recurring (typically monthly) property management fees are extremely common in the industry, and will be built into the initial contract signed between the investor and the property management company. The amount can be based on a flat fee structure, or tied to a percentage of the monthly rent collected. Vendor Screening Fees It’s a hassle to use vendors outside your usual network. “If you have property owners who want to use their vendor instead of your preferred vendors, that creates more work for you.” If you charge a flat fee, they’ll likely drop it, and you’ve saved yourself that extra work. If they want to keep their vendors and pay the fee, at least you’re getting paid for that extra work.” Rent Protection Fees or Eviction Fee A huge area of value for investors is protecting them from unwanted risk. Investors have to deal with concerns about evictions, lost rental income, and more. Property management companies can take on that risk for a fee. You can say you’ll cover missed rent if the investor pays a monthly fee. The win for PMCs is that the risk is often low, and you can often control it (controlling for on-time rent due by charging late rent fees, for example). You get the fee, and you will rarely have to take the hit on the month’s rent. The win for investors is they don’t have to worry about it at all. Contract resiliation fees For investors that terminate the property management contract prematurely, you can charge an early termination fee, the amount of which will vary depending on the contract's terms. The fee may cover a month or more of management fees. Resident Fees Todd emphasizes that the real moneymaker is resident fees. Plus, charging fees for unwanted behaviors – like late rent, paper leases, failure to change HVAC filters, etc. – can help drive better behavior. Todd uses examples like Security deposit processing fee Leasing fee or a lease amendment fee Paper lease setup fee Lease renewal fee Late fee Special programs fee “Of course, the resident benefit package is the big one. This is a way for you to provide additional services to your residents and make some money off of it.” What Are the Factors that Influence Property Management Fees? Ultimately, the fees you charge should reflect your operational reality, and can vary depending on a range of factors: Property location: Properties located in areas with higher operational expenses may incur higher management fees compared to those in other regions. Property condition: The condition of the property, and whether it is new or renovated, affects maintenance requirements and thus can influence management costs. Property size: The size of the rental property directly influences the workload of the property manager, with larger properties typically incurring higher fees. Scope of services: The range of services provided by the property management company significantly impacts the fees charged. Basic services like rent collection command lower fees, while comprehensive management services covering rent collection, vacancy filling, repairs, evictions, and financial record-keeping for taxes entail higher costs. How Should Property Managers Structure Fees? Real estate investors often focus on determining what fair or typical property management pricing should be. A general rental property management fee includes collecting the month’s rent, following up on arrears, organizing property maintenance and repairs, and keeping abreast of legal requirements. That’s the baseline. But the growth is in what you do on top of that baseline. Todd breaks down pricing like this: “Only 40% of your revenue should come from your property management fee. 60% of our revenue is not management-fee related. If most of your money comes from your management fee, you're doing it wrong. That's not going to last very long.” And here’s the difference those added fees can make to your bottom line: “According to recent numbers from Profit Coach, the average PM company gets about $170 a month in revenue. $170 per door per month. I just looked at the profit coach dashboard for my company, and over the last 12 months, we have averaged $320 per unit per month.” The nugget in there is that the market should determine your base property management fee. But that often cheats PMCs, giving property managers extra work without fairly compensating them for the additional time, effort and cost. You can – and, according to Todd, you should – be charging for that extra work and extra value that you provide as a professional. Note: Todd emphasizes that ALL fees should be communicated upfront during the onboarding process and lease agreement. Fees aren’t about tricky pricing or hidden markups. They’re about charging for value and driving behavior. What Are the Benefits and Challenges of Charging Property Management Fees? Let’s look at some of the pros and cons of charging additional fees for your additional property management services. Benefit 1: More Revenue = Better Service Todd points out that you can't really provide the level of service that you want if you don't have enough revenue coming in. “We've got to be able to provide fantastic service, and the only way you can do that is with revenue. You have to start looking at this as something that you have to do. Your clients and your residents are suffering if you don't.” It’s a fantasy to think we can offer premium service without paying for the resources they cost us. Benefit 2: More Revenue = Happier Employees Your team deserves to be paid for their work, especially if it’s extra work caused by a difficult resident or investor. Fees help reduce workload because they discourage behaviors that add to busy work. But more on that in the next section. Todd says: “Property management company owners talk to me all the time about how they can't afford to pay higher wages in the current market. The reason you can't take better care of your employees is that you're struggling to get by just on a basic management fee. Charging fees for what your services are worth is the only way you’re going to be able to provide competitive wages and benefits.” Benefit 3: Charging for Service Drives Better Habits According to Todd, fees drive behavior. Your investors and residents will respond to fees in a way they may not respond to anything else. For example, home warranties are a huge hassle for everyone. If you want to discourage investors from using a warranty company, simply charge a fee for anyone that does. On the resident side, an example is late payment fees. If you communicate from the start that late payments will draw a fee – you’ll notice how payments come in on time much more often. Benefit 4: Greater Profits This one speaks for itself. But here’s what Todd says: “Never pay for your own cost of running your business. This isn't a charity. Every single expense in your company should be tied to some income you're going to make.” Challenge 1: Will Investors Be Turned Off by Fees? In the long run, if you’re charging fees for premium services, you can provide a better outcome for investors. But how can you get them on board with this concept? Todd says it’s all in the language we use. “People don't understand that the management fee is really a rent collection fee. We shouldn't call it a management fee because it makes it sound like everything we do is included, which is of course, crazy. There's so much that can't be looped into that one thing. We should call it a rent collection fee because that's really what it is. You've got to get your mindset right on this stuff. Don't be afraid of it.” Challenge 2: Regulations (AKA: Always Talk to Your Attorney First) Regulations vary across regions, so rental property managers must be familiar with local laws. You may not be allowed to charge fees for certain types of services. But you can almost always categorize a service within an administrative fee. But discussing any fees and contracts with your attorney before implementing them in the real world is key. Oh, and you should charge for your legal fees! How Do Fees Help Property Managers Add Value and Create a Positive Resident Experience? The additional fees generated by delivering new and higher service levels are a reflection of a positive, resident-focused experience. In fact, such additional services are exactly what can set professionals apart from amateurs. Instead of letting increasing competition cut your legs from under you, Todd advises finding ways to generate value that the amateur property managers or real estate agents-turned-property-managers can’t compete with. And, of course, charge for that value. “I always tell people that I don't like to say no to clients or residents,” Todd says. “Instead, I like to say, ‘Sure, we're happy to do that. And this is how much that costs.’ You just want to be careful and ensure you’re actually doing things that the owners will find valuable. Charging fees allows a property management company to offer premium services and benefits they couldn’t if they didn’t have that extra revenue. It’s a perspective shift, but Todd believes we need to start viewing fees as a generative, value-driving approach to property management. How Can I Use Fees to Generate Ancillary Income? In the end, you might think of fees as a burden that will drive away investors, but the truth is the exact opposite. Fees help you drive more premium value for both your investors and your residents – and support your business and employees at the same time. At Second Nature, that’s what we call a Triple Win. We aim to help property management companies drive Triple Wins like this all the time. We do it through the value proposition of a Resident Benefits Package. An RBP offers value to investors by delivering a full-service resident experience. And, yes, that’s something property managers charge a fee for! Since it’s fully managed by our team, you can basically plug it in and let it drive value for you, your investors, and your residents. Fee FAQs Q: What is included in the property management fee? Property management fees typically cover a range of services, which vary from company to company. Sample inclusions: inspection & maintenance fees marketing fees insurance risk mitigation fees account creation fees recurring management fees vendor screening fees rent protection fees or eviction fee contract resiliation fees security deposit processing fee leasing fee or a lease amendment fee paper lease setup fee lease renewal fee late fee special programs fee Q: What is the average property management fee? The average property management fee varies according to region and state, as well as from company to company. In addition, these fees are largely dependent on the value, responsibilities, and services the property manager brings to the table. Generally, they amount to a fixed percentage of collected rent, as opposed to a flat fee.

June 28, 2023

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How to Design An Effective And Adopted Ancillary Revenue Program

Ancillary revenue programs like resident benefits packages have really hit their stride in the property management industry. Many property managers get into the industry in the first place because it’s a great way to start building secondary income. The work rewards creativity and innovation in terms of revenue streams and value-generating services. And that’s exactly what ancillary revenue is all about. We sat down with some of the best innovators in the business to talk about what makes an ancillary revenue program effective, how to make them sustainable in the long-term, how to incorporate revenue management, and how to know which ones can work for your business. What is Ancillary Revenue? First, let’s get down to brass tacks. Ancillary revenue is any additional source of income generated by a property that is not directly related to its primary function or purpose. In property management, property managers offer additional services to generate additional income for themselves and their client investors beyond the rent or lease payments they receive from residents. Most of us are familiar with ancillary revenue streams like those used in the airline industry or hotel industry. Companies may charge for early check-in, late check-out, in-flight entertainment, wifi etc. But what many of these programs miss is the opportunity to generate value without nickel-and-diming people. Examples of ancillary revenue in property management can include things like pet fees, renter’s insurance programs, management fees, and more. These compound to boost your total revenue alongside adding value for residents and investors. In some ways, you can think of it like an upsell, but it's really about value generation and finding a way to diversify revenue streams. By diversifying their revenue streams, property managers can increase their income and offset some of the costs associated with maintaining the property. How to Design an Effect Ancillary Revenue Stream “There is one characteristic that is the most important, and that is that you have to believe in it,” says Steve Pardon, Head Broker at JMAX Property Management. “If you believe that there is a benefit to doing it, then you’re good. If you don’t, then it’s hard to sell.” Pardon hits on the most important question any time you’re adding cost to your residents: Does it really create a benefit? All ancillary income programs are theoretically beneficial to the PM, as it directly affects the bottom line, but add-on services that don’t create a benefit for the resident can have long-term consequences as a result of dissatisfaction. Most ancillary revenue opportunities today are operated as part of a resident benefits package built into your business model. Pardon has rolled out an RBP to his residents, but took a very measured and analytical approach to ensure that everything his residents were paying for created value for them. Pardon summarizes his thorough process for determining value with "you have to believe in what you're charging people for." JMAX operates in the Roanoke, Virginia area, and Pardon considers the nature of his specific area when deciding what he believes in charing people for, noting that he feels certain programs work better or worse in his rural market than they would in an more dense market like an Atlanta Residents rarely object to paying for services they find value in, which is why an RBP built with the principles Pardon describes above can be so successful. “You can make anything mandatory, but if it doesn’t create value for the residents, you’re going to pay the price down the line,” says Paul Mauk of Invitation Homes. You can read about resident pushback to RBP here. Good ancillary services can come in many different shapes and sizes, and not all are part of a third-party managed RBP, although that certainly is a proven way of adding them. HomeRiver Group, for example, sends each and every resident in a HomeRiver group managed home a holiday gift. “One thing that we're getting ready to do right now is our holiday gift to the residents, which is another win-win,” says HomeRiver Group CDO Andrew Propst. “We find local companies like restaurants or movie theaters, or the year movie theaters were closed, we were looking at maybe doing some bowling alleys. We buy a bunch of gift cards at a discount. We put it in a nice little letter and we send it out to the tenants. They get $50 in value, we paid $25 for that. And you know we make a pretty good spread, and we spread Christmas and holiday cheer. And, you know, we get good Google reviews. It makes some money. We help local businesses. It's a big one.” Paul Mauk of Invitation Homes notes that ancillary services that don’t directly drive profit can still be hyper-effective as long term initiatives if they contribute to asset protection and low turnover rates in properties. “I think the type of initiatives that we're having success with are those things that provide for enhanced leasing lifestyle for our tenants or residents,” says Mauk. “And that's all often driven via survey and input from residents. So instead of us pretending that we know every potential amenity they would like, we’re actually reaching out to them and asking them what the value proposition would be from their perspective.” “And then one of the additional things would be, you know, items that aren’t necessarily potentially revenue drivers for us, but items that help us relative to asset preservation. So things that may be very specific and required within the lease, if we can find ways in which to make it an easier process for our residents, we can enhance our offering, enhance the experience for them, and increase the length of stay that we see from our residents.” This is a point that can’t be made enough, that minimizing turnover is the most important thing for property management companies. Your client is the investor and your product to the investor is the resident who lives in the property. The more time a resident lives there, the better ROI for the owner, which means better client retention for you and more potential for referrals. That’s why the resident experience aspect of ancillary services is so critical, even more so than the additional funds they can procure. We can talk about ancillary services for days but the successful adoption of your program will always hinge primarily on one question: Does it create value for the resident? Hence why JMAX Head Broker Steve Pardon weighs so heavily whether or not he believes he can offer a service in good faith. Ancillary Revenue Examples Let’s look at some examples of the best ancillary revenue ideas in property management right now. The services with an asterisk (*) are all available in Second Nature’s fully-managed Resident Benefits Package. Filter Delivery Service* Air filters delivery is a premium service for residents that automates air filter delivery to all your properties on a set schedule. Filter delivery simplifies the process for residents and ensures timely replacement at a low cost. HVAC repair costs have increased by 48.7% year over year, and an air filter delivery subscription can cut costs up to $300 per year. At Second Nature, we’ve seen our filter delivery service result in a 38% reduction fo total HVAC ticket requests, and save residents $14.82 per month in energy costs. Resident Rewards Program* Rewards aren’t just a perk for residents – they’re a powerful way to incentivize on-time rent payments. Talk about a win! Residents receive rewards such as discounts to local businesses when they pay rent on time. You and your investors see an increase in on-time payments, and residents now see rent day as rewards day. Credit-Building* Rent is one of the most significant regular payments any of us make. Why not report that to build credit? That’s what property managers are doing as a benefit to residents and another innovative incentive to on-time rent payments. A study by TransUnion found that 67% of residents would choose homes with rent reporting over other equivalent homes. Credit building supports your residents, helps attract financially responsible applicants, and encourages residents to pay rent on time. Move-In Concierge* Any time we move, one of the biggest headaches is setting up utilities. One great ancillary revenue stream is to provide a move-in concierge. At Second Nature, we manage this for you. Our move-in concierge helps residents with their best options int he area and can help simplify setup. In one phone call, residents get what they need. Identity Protection* Did you know that identify theft is a larger security risk today than home burglary? One in eight Americans were victims of identity fraud in 2021, equaling up to $52 billion in losses. Identity protection gives residents peace of mine and protects them finacially – which also protects their abilty to pay rent. Related: How to Help Residents Use Their Identity Protection Services During a Data Breach Renters Insurance* A quality renters insurance program will allow residents to keep current coverage if they wish, but be automatically enrolled in the PMs program if they don't/don't have insurance. Good renter’s insurance will cover risks like all breeds of dogs, making renting from you a very attractive option. Did you know that 90% of professional property managers require residents to carry insurance on their lease? And yet only 41% maintain compliant coverage. At Second Nature, our renters insurance program has 100% compliance, protecting residents, investors, and the PMCs. Holiday Gift Program A holiday gift program helps residents feel seen, known, and remembered. Residents receive coupons or gift cards to local establishments as a wish of good cheer during the holiday season. Who doesn’t love a holiday gift? Security Deposit Alternatives We’ve seen security deposit alternatives proliferate in the last few years. Property management companies are choosing to offer other ways to cover financial liabilities for damages that do not require a huge payment at move-in, such as a surety bond or ACH authorization. Pest Control Many PMCs offer pest control services to residents to keep cockroaches, ants, etc., out of the property. PMs generate extra revenue while offering a massive benefit to residents, and asset protection for them and their investor. Pet Fees & Services With pet fees, you can because a universally pet-friendly company while still protecting yourself and your investor from risk. You offer the investor a guarantee that their property will be safe from pet damage and the resident pays you for this service. Home-Buying Assistance Programs Home-buying assistance helps boost resident experience and trust, while also investing in resident retention. Learn more about assistance programs for long-term residents looking to purchase a home. How Second Nature Helps Create Ancillary Revenue At Second Nature, we work with property management companies around the country to help them generate more value for their residents and additional revenue for their business through a Resident Benefits Package (RBP). The Second Nature RBP is a custom suite of benefits that elevates the resident experience while adding profit to your bottom line. An RBP is a powerful ancillary revenue strategy – and having one fully managed means that it doesn’t add any burden to your team. Generate more value for your investors, ease for your residents, and profit for your PMC with an RBP.

May 23, 2023

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5 Property Management Mistakes that make you a Bad Property Manager

We all make mistakes. But when in comes to property management mistakes, the consequences can be tremendous. Property managers balance so many moving pieces, and fixing even the smallest mistakes or bad habits can make a huge difference to your resident experience and your business growth. From hiring people who aren’t a good fit to letting tenant screenings slide, there are plenty of predictable characteristics of what some might call a bad property manager. But it’s not always as straightforward as it seems. So, we decided to seek out an expert on property management who could talk to us about how property managers can avoid the most common property management mistakes. Meet the Expert: Michael Catalano Michael Catalano is a lifer in the industry and has unique insights as a founding partner of PURE Property Management. We asked him for the five most common mistakes made by property managers are and he delivered. ‍Michael Catalano is co-founder and general partner of Silicon Valley-based PURE Property Management, the fastest growing profitable residential property management and technology company in the U.S. As a second-generation property manager with over 25 years of experience running, growing, and acquiring property management companies, Catalano is an industry insider looking to transform the traditionally cumbersome and complex process of managing properties. PURE acquires hyperlocal property management companies and invests in their people, processes, and technology to achieve market leadership in their location. 1. Mismanaging Trust Accounting “One of the biggest mistakes I see newer property owners make is not actively managing and understanding their trust accounting,” says Catalano. “Trust accounting discrepancies can do more than jeopardize your bottom line. Depending on the state you live in, big shortages can put you out of business or even in jail.” The key to avoiding any discrepancies is to have the right people in place. Trust accounting in rental property management requires a more specialized understanding of the industry than a traditional CPA often has. The accountant you hire needs to have a deep knowledge of how money fluidly moves through all stakeholders, specifically in the property management industry - residents, property investors, and vendors. They need to keep accurate and up-to-date accounting so that you always know what your resources are. While shortages do come up occasionally, even with the most well-run companies, knowing and troubleshooting to find the problem right away will help avoid bigger discrepancies later. “Every owner should be monitoring trust accounts with their CPA at least monthly, and for some states, it is a licensing requirement. In these states, if you have a negative in a trust account, you will lose your license and can also be fined or jailed. Shortages in a trust account usually occur when money from a client has been placed in the wrong client account, commingling funds. As soon as you commingle, you break the law in most states.” Catalano really stresses the importance of getting this right the first time and offers two important suggestions: “Number one, put someone in place that understands this. Fortunately, there are now many accountants and firms that specialize in trust accounting. You can find the best for you by talking to your colleagues and checking references before hiring. The second is to conduct a self-audit every other year. Take the time and spend the money to hire a professional auditor to audit your trust accounting and make sure that all the accounts are balanced and in order. It may cost about $5,000, but that is considerably less expensive than having it wrong,” emphasizes Catalano. ‍ 2. Dropping the Ball on Forecasting and Financial Analysis “It is very important to have a sufficient understanding of your everyday and future finances by budgeting and forecasting, which is critical to running any successful business. I’ve seen some property management companies miss this important step,” says Catalano. Underdeveloped financial analysis can leave a lot of money on the table and become a costly mistake in property management services. Catalano is quick to note how some basic budgeting and bookkeeping refinement have quickly increased the margins and cash flow of many of the companies that have joined the PURE Property Management family, and this modification is generally something that every company can very easily do on their own. “In addition to budgeting and forecasting, it is important to have an understanding of your KPIs and metrics as well. I feel like a lot of companies in our industry could do a better job of tracking so that every day they can answer critical questions about the financial position of their business – ‘What’s my revenue per door?’ and ‘Who is bringing in revenue and why and what am I paying them?’” Catalano offers this advice to help ensure you’re keeping up with finances appropriately: “You should always be prepared to sell your company, even if you have absolutely no plans whatsoever. Because when you operate at that level, you will have the best control and understanding of your overall finances. By watching your revenue and expenses on a daily basis, you will always have a pulse on the health of your business.” 3. Failing to Complete Workflow Implementation “While property management is not a particularly tech-savvy industry, we’ve seen more changes over the last three or so years than in the previous 30. There are now single-point technology solutions for the most time-intensive tasks within the workflow process innovated to increase efficiency. But the implementation remains challenging,” says Catalano. “I’ve noticed that in this industry, when you decide on a new process or workflow that you would like to implement, I see a lot of incomplete implementation. Every new process requires employee training, which means extra time away from daily responsibilities, but it helps, in the end, to actually sit down and hold a class on how to operate the new technology or workflow. The technology only delivers optimal efficiencies if the users know how to wield them appropriately. So you need to think critically about how much technology to implement and what it means to your current and future workflows.” Catalano says that as the industry has embraced technology at an increasing rate, the companies that have leveraged that change most successfully are the ones that made the proper investment in educating their teams. Technology can help with communication, streamlining workflow around property maintenance issues, leasing, move in, renewals, rent payments, tracking late rent or other late fees, security deposit, etc. Part of the challenge of technology implementation, according to Catalano, is the lack of an end-to-end technology solution that completes the entire workflow process within one system. “Right now, company owners are trying to piece together too many technology platforms on their own,” adds the professional property management veteran. “That’s the hard part because, in this industry, the different technologies do not truly connect. While some property management tech solutions are labeled as APIs, generally they aren’t true APIs because they don’t talk to each other.” The lack of integration Catalano touches on here makes heavy reliance on a large amount of software a hazardous venture. Not only do employees need to learn to be efficient with all of them, especially in smaller companies, but because they are not interconnected, there’s a lot of manual data transfer. “Right now, a property management API is like a CSV file, where you're downloading and then importing that CSV file in the new platform. In order to implement an entire workflow process, property managers use seven to 10 different platforms for all the different processes. Moving from one tech process to the next, we’re asking our property managers or leasing agents or maintenance coordinators to remember what they did in one platform and literally hand type that information in the next platform. As you can imagine, things get lost in translation, and then you have a problem.” 4. Falling Out of Compliance with Laws and Regulations & Screening Tenants “I live and operate in California, and it seems like California has a new law every day for resident rights,” says Catalano.”Property managers have an obligation to themselves, their teams, their clients, and their residents to stay up to date with the ever-evolving laws and industry regulations in their state.” And unfortunately, as everyone knows, rapidly changing fair housing laws get complicated really fast. “To make this situation even more complicated, in addition to the statewide ordinances, there are local ordinances as well that supersede the state ones,” says Catalano. “So, for example, you have to stay on top of knowing that while there is a statewide rent control in California, certain areas in Silicon Valley have a different rent control.” Knowing that lease and eviction law changes are fluid, Catalano believes it helps to think of them as living, breathing organisms that are continually changing and growing. In addition, Catalano recommends that you should review all state and local laws and regulations on at least a monthly basis. And while leases and property management agreements don’t need to be updated monthly, they should be combed through on a regular basis to be sure they are all compliant. Understand the laws around background checks, credit checks, and discrimination when screening tenants, etc. “Updating your lease agreements is tedious and can sometimes be monetarily expensive. You may even have to pay an attorney to do it. But at the end of the day, you really have to do it. Believe it or not, we’ve had a few situations, especially in California, when we have acquired a company and when we have looked at the leases have found as many as four items in there that are actually illegal.”’ “It’s not easy to be perfectly compliant with how many laws and regulations there are, how quickly they change, and how different they are from place to place, but it is important if you don’t want to get sued. While lawsuits from renters are generally frivolous, they’re happening more and more, and it’s not something you want to open yourself up to.” Related: Property Management Startup Checklist 5. Making or Keeping a Bad Hire “Right now, hiring is probably one of the most difficult aspects of this business, and can be one of the biggest mistakes property managers make. There are a lot of hurdles to finding and placing the right people for every job.” “In California, if you want to be a property manager, you have to be licensed, which is also the case in other states as well. With a lack of viable candidates, however, many unlicensed people are doing property management duties that require licensing. As a company owner hiring unlicensed employees, you could get in some serious trouble with the Real Estate Commission,” says Catalano. “So have a strategy for finding the right employees for your company. Start by confirming that they have the required licensing. Next, make sure that they have the right personality for the job that they're hired to do. We use a company called Culture Index to help us determine if there is a good fit. The company uses personality analytics to determine if the job candidate will be in the right position, whether or not they have the skills to be a leader, and answers personality trait questions like ‘are they ambitious and will they follow directions accurately?’ This Culture Index has really helped us with hiring and making sure that we have the best person in the right position for them. In addition to implementing a hiring strategy, Catalano says that it is important to understand your end goals for each department and the overall company structure to hire the right workers correctly. “You should have an org chart, even if you only have six employees. The chart should visually outline, ‘Who's doing what?’, ‘Who reports to who?’ and ‘Are they in the right position?’ When you are hiring, you need to know if the position is departmental, portfolio, or hybrid. Both you and new hires will want to know the plan moving forward to attain more growth, and I think that’s a big pitfall. Having this org chart will keep you from hiring the wrong person or guide you on how you want to run the business,” says Catalano. “Having an org chart and hiring strategy really ties back to knowing your financials and metrics. Understanding how many doors are being managed per full-time employee and how to structure around the best servicing that door count is the best way to optimize your business for success. I know that these strategies work because I think the average in the industry right now is about 50-60 doors per FTE and at PURE, we're sitting at about 115. You can get to well over 100 iIf you're more efficient, maybe 150 iIf the technology gets a little bit better. We think we can get to 200 eventually. So that's how we look at it. How are you structuring your business to get the best and most efficient organization?”

May 17, 2023

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10 Hiring Tips For Recruiters in Property Management Companies

It’s not always so easy to build a property management team, and property management hiring tips can be hard to come by. Professional property management is a complex industry with endless responsibilities, nuanced roles, and lots of stakeholders’ priorities to balance. Putting together a dream team – the kind of team that just makes things work, delivers happy residents, and makes workflows feel seamless – it’s hard! So, we sat down with an expert in just this subject. He’s perfected the art of finding and hiring the right people – the kind of people who can become your property management dream team. An organization is its people, and few companies in the property management industry have internalized this idea more than Evernest. Whitaker sat down with Second Nature to talk through some of the key things he wants in an employee and how he goes about identifying which candidates have them and which do not. Ready to hire the best property management team? Let’s dive into Whitaker’s top property management hiring tips. Meet the Expert: Matthew Whitaker, CEO of Evernest Matthew Whitaker has developed and refined his hiring process over years of experience in real estate as a property management firm CEO. Evernest is a nationwide SFR company based out of Birmingham, Alabama. Evernest manages around 6,000 doors and continues to scale its business and grow its team at an impressive rate. CEO and founder Matthew Whitaker has been constantly adjusting and reevaluating his hiring process, and it has resulted in one of the most comprehensive talent acquisition procedures in the property management game. 1. Hire Based On Characteristics Over “Qualifications” Whitaker’s biggest insight, which he’s developed over years in the property management industry, is that there is a lot more to hiring the right people than simply hiring qualified people. The concept of hiring the most qualified candidate seems like it’s pretty straightforward. But if you start to pull it apart, many of us have hired candidates who seem “qualified” on paper but who end up being a poor fit with the company. “Who you are matters almost as much as what you’ve done,” Whitaker says. “And as employees rise up through your business, you need to be confident you’ve hired someone who is bought in and is wired for the challenges that come with that.” Whitaker says their investment in identifying personal characteristics has helped separate their best candidates from the rest of the pack. Be clear with property management recruiters about all the characteristics you’re looking for. 2. Define What a Qualified Candidate Looks Like for You Evernest hires with a well-rounded definition of “most qualified” – with defined characteristics and experiences they’re looking for. Those descriptions might not be the first things you think of, but it’s helped them with resident retention and growth. For example, instead of just seeking candidates with “property management experience,” they’re looking for candidates who can handle failure well, who have shown resilience, and who match their company culture. (More on each of those later!) As a heavily scaled company, Whitaker recognizes that you’re not going to hit on 100% of hires, but going a little deeper than just career experience can up that number as much as reasonably possible. Clearly defining your ideal candidate can help with referrals, as well, since you can describe to others who you’re looking for. 3. Develop Interview Questions that Reveal Important Traits The next step is to outline interview questions in your screening process that can identify the qualifications and characteristics you defined in Step 1. What does that type of person look like? What kind of life experience would they have that built their skills? How have they exhibited the traits that you need in the past? Give them a scenario they might experience while on your team and ask how they would respond. Carefully evaluate if their responses align with the candidate profile you created. 4. Look For Resilient People Resiliency is the trait that really stands out to Whitaker for the property management space. After all, single-family property management, in particular, requires people who can stick with it when things get tough. SFR property management is tricky because properties are spread out over larger regions, residents may have very diverse needs, and the properties themselves may have very diverse problems or requirements. Evernest always looks to hire resilient people who can handle the ups and downs and surprises of the job. Look for any red flags of people who aren’t willing to go the extra mile. Whitaker is adamant that resilience is among the most important traits a property manager can have and a great indicator of their potential success in the company. “One of the things about a property manager is the fact that all you do is deal in the world of problems,” Whitaker says. “If you didn’t have problems, there wouldn't be a role for property managers. So they have to get used to dealing with problems all day and being able to bounce from problem to problem.” 5. Consider Candidates’ Personal Experiences, Even Beyond Real Estate Whitaker says that resiliency is legitimately a skill you can identify in the interview process and one that you can design interview questions around. While it may be challenging to uncover in a conversational setting, Whitaker likes to work through the personal experience of a candidate. The key is asking the right questions. He asks about potential major life events that have challenged their resolve, which he believes can forge resiliency in a person. “Sometimes [people who have had major life events] make the best team members because they realize that things aren’t unicorns and rainbows,” Whitaker says. 6. Find Out How They Deal With Failure Another key part of the interview process – and identifying resilient people – is to find out how they’ve historically dealt with failure in their life. Whitaker believes that someone who has dealt with adversity and failures and come out the other side is automatically going to be better suited to rental property management. He says, “Whether it’s a huge disappointment they’ve had, a business failure, or a failure in maybe a job, [those experiences] sometimes turn them into somebody that’s very resilient. Some of our best team members actually meet that profile, and I’ve thought that for a long time.” 7. Use a Culture Index to Find a Fit for Your Team Whitaker and Evernest have proven how important cultural fit can be in such a demanding industry. They use a tool called the Culture Index to test for traits like resiliency, and Whitaker says the tool has really gone a long way for Evernest and the success rate of its hiring process. With Evernest hiring at scale, Whitaker believes it has helped them get the right people in the right seats at a higher rate, which results in losing fewer people out the back door. “We buy into the idea that Culture Index can help us identify someone’s unique personality or wiring and that. As a result, they have more success when they are put into the right positions on the team,” Whitaker says. Culture Index is a data-driven personality testing tool and the weapon of choice for Evernest. It’s part of their refined hiring process that they refer to as “The Grinder,” which features four interviews, the third of which assesses cultural fit. It’s one of the keys to finding the right property manager. 8. Use a Personality-Testing Tool The Culture Index is just one example of hiring procedures that help to identify personality traits. Companies can use any kind of personality-testing tool to ensure not just that someone is a culture fit but that they’re being hired for the right role on the team. Whitaker shares: One of our biggest "aha" moments around personality and natural wiring is when we moved a team member out of accounting here in Alabama and moved him to Little Rock to run our market there. This guy was an excellent operator in Birmingham. He had all the "i's" dotted and "t's" crossed. No stone unturned. When he moved to Little Rock, we expected him to grow the business. We kept waiting and waiting on it to happen, but it never did. But he was still dang good at executing. Later, when we profiled him, we learned that he is a "Craftsman," which basically means he is a detail-oriented, highly introverted person. So of course he wasn’t out there growing the business. We later moved a "Trailblazer" into the role, which is a highly relational, highly autonomous person, and she KILLED it. She grew the business and it almost doubled in size. The Craftsman came back to Birmingham to run our accounting department and has been incredibly successful. He continues: “Since we’ve gotten into personality profiling, we’ve certainly gotten a lot more intentional about putting the right people in the right places, and I feel like we’ve been a lot more successful doing that.” Failing to invest in a more refined hiring process that features components such as personality testing is cited by Whitaker as one of the mistakes he made early on that other PMs have the opportunity to avoid. 9. Be Smart About Promotions Whitaker notes that early on, a less refined and consistent approach opened Evernest up to being a victim of the Peter Principle. The Peter Principle is the all-too-common practice of promoting employees into jobs they aren’t cut out for – based on their success in their previous role. “We would use our hiring process to hire middle-level and upper-level management,” Whitaker says. “But then when we would go to hire frontline people, we would just basically skip through the process and hire people. These are the people that are going to move up into the middle management, so not being consistent at the frontline level led to people getting into the company that probably should not have been there.” From the very start, you need to think about hiring people you can eventually promote. 10. Don’t Assume You Can Hire from Multi-Family Property Management Whitaker says that perhaps the biggest hiring mistake he sees in single-family rental management is poorly-vetted cross-hiring between property management industries, from residential to commercial properties, or SFR and MFR. He specifically points to single-family homes and property management companies hiring multi-family managers who are unprepared for the transition. And it’s a much tougher transition than it may seem, with differences in property owners, property types, maintenance issues, rent collection practices, property management services, etc. “The skillset doesn’t easily translate because a full-time multifamily manager has been working on-site at a property,” says Whitaker. The communication and logistical demands of single-family are quite a bit different than multifamily complexes, where every issue that arises is right in front of you. “When you add multiple real estate investments and then the logistics of single-family, it becomes a much more complicated business,” says Whitaker. “If you’re going to pull from the multifamily industry, you’re going to have to make sure that you’re hiring some of the best and brightest from that industry because, again, dealing with 300 homes and 50 investors is way more complicated than a 300-unit apartment community all together with one investor.” Transitioning a property manager from a multifamily business to a single-family has a number of logistical roadblocks. You need to know more about a candidate than how successful they were to feel confident they're up to the challenge. ‍ That doesn’t mean that cross-hiring is impossible, and Whitaker clarifies that Evernest has done so successfully. But the bottom line is that a diligent and robust hiring approach like Evernest’s is important to identify whether a person is up to the transition. Final Thoughts Building a good property management team is a complex process, but it doesn’t have to be overwhelming. The key to creating your dream team is to outline a robust hiring process and know exactly what makes a candidate successful in SFR property management. At Second Nature, we work with thousands of residential property managers around the country and have helped ensure PMCs have the tools they need to retain their best talent. Get more insights like these from Matt by listening to our Triple Win Podcast, or check out more from our blog.

May 11, 2023

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What Is a Long-Term Lease? How to Win with Long-Term Property Management

Today we’re diving into all the nuances of the long-term lease, the pros and cons, and why engaging long-term property management can build a win for you, your residents, and your investor clients. Related: State of Resident Experience Study What is a long-term lease? A long-term lease is a lease agreement that lasts longer than the standard in an industry. In commercial real estate, long-term rentals could be ten years or more. In single-family homes, a long-term lease could be anything more than one year. Long-term leases have the benefit of locking in payment for however long the lease lasts. It benefits property managers by guaranteeing cash flow and reducing vacancy, though with less frequent lease renewals, you may not be able to increase the price as often as you feel you need. The concept of a long-term lease agreement may spark some preconceived notions among professional property managers. Locking a new tenant into their rental agreement for two-plus years seems like something of a gamble where you bet on the quality of the resident and the value of the lease remaining high. While it’s true that this type of lease comes with some tradeoffs, many PMs don’t see the positives, which have begun to outweigh the risks in an evolving market. Benefits of a long-term lease A long-term residential lease can offer several benefits for residents, property managers, and owners. Let’s get into the details: Stability With a long-term lease, residents have the security of knowing that they can stay in their home for an extended period, often one or two years, without having to worry about the possibility of the owner deciding to sell the property or not renew their lease. This can be particularly important for families or individuals in single-family residences who want to establish roots in a community and avoid the hassle and expense of moving frequently. Predictable expenses With a long-term lease, residents know exactly what their rent will be for the duration of the lease, which can help them plan their budget and avoid any unexpected rent increases. Similarly, property managers and owners can count on a steady stream of rental income, which can help them plan their expenses and investments. Reduced vacancy rates A long-term lease can help property owners and PMCs reduce the vacancy rate of their properties by providing them with a stable, reliable resident who is committed to staying in the property for an extended period of time. This can save time and money that PMs would otherwise spend trying to find new residents and dealing with turnover. More responsible residents Long-term tenants lease are often more committed to taking care of the property and being responsible “tenants.” This can lead to fewer damages, less maintenance, and a better overall experience for both residents and property managers. Better creditworthiness A long-term lease can also help residents build their credit score by establishing a history of paying rent on time and staying in one place for an extended period. This can be a particularly useful perk for young adults or those who are just starting to build their credit history. With Second Nature’s Resident Benefits Package, they can receive the benefit of getting their on-time payments reported to credit bureaus. Overall, a long-term residential lease can offer a range of benefits and create a Triple Win for property managers, owners, and residents. However, it's essential to establish clear terms of the lease to ensure that it meets everyone’s needs and expectations. Liabilities of a long-term lease Of course, along with benefits, long-term lease liabilities exist as well. The primary drawback of long-term management is that you need to be more certain that the lease – and the resident – are the right fit for you and your investor. A few things to consider before starting with a long-term lease apartment or long-term lease house: Ensure you do a thorough background check and credit check for all renters Ensure the lease clearly outlines behavior that could lead to eviction Be prepared that it may be more difficult to transition a difficult resident out Account for the fact that you won’t be able to raise the rent as easily or quickly as with a short-term rental Long-term lease vs. short-term lease A residential long-term lease and a residential short-term lease differ primarily in their duration, with long-term leases generally lasting for a year or more and short-term leases lasting for less than a year. Below are some of the main differences between the two types of leases. Duration As mentioned above, the primary difference between a long-term and short-term lease is the length of the lease term. A long-term lease typically lasts for one or two years, while a short-term lease can be as short as a few weeks or as long as 11 months. Flexibility Short-term leases are generally more flexible than long-term leases, as they allow residents to move out relatively quickly if they need to. This can be useful for renters who are unsure about their future plans or who need to move frequently for work or other reasons. Long-term leases, on the other hand, provide more stability and predictability but can be less flexible if the resident needs to move out before the lease term is up. Rent amount The cons of short-term leases are they can be more expensive than long-term leases month-to-month, as owners or property managers can charge a premium for the flexibility they offer. Long-term leases generally have lower monthly rental rate, but residents are required to commit to paying that amount for the entire lease term. Renewal Long-term leases typically include a renewal clause, which allows residents to extend the lease term beyond the initial period. Short-term leases may or may not include a renewal option, and residents may need to negotiate with the PM or owner to extend the lease or agree to a new lease. Maintenance Long-term leases often place more responsibility on residents for maintaining the property, as they are expected to stay in the property for an extended period. Short-term leases, on the other hand, may include more maintenance services from the property management company, as they are more likely to have turnover between residents. Long-term lease examples A long-term residential lease typically refers to a lease agreement between a resident and an owner that lasts for a year or more. Below are some examples of long-term residential leases. One-year or two-year lease A one-year lease is the most common type of long-term residential lease. It lasts for a period of one year and requires the tenant to pay rent on a monthly basis. Two-year leases are less common but still fairly standard. Multi-year lease In some cases, owners may offer a lease agreement that lasts for three, four, or even five years. This type of lease provides residents with a high level of stability and predictability, but it may be less flexible than shorter-term lease options. Corporate lease Some companies may lease a property for their employees on a long-term basis, typically for several years. This type of lease often requires the company to pay the rent directly to the owner. Lease-to-own This type of long-term residential lease allows residents to rent a property for an extended period with the option to purchase the property at the end of the lease term. This can be a good option for residents who are not yet ready to purchase a home but want to establish roots in a community. How the long-term lease helps investors Gregg Cohen of PWB Properties is one of the property managers leading the charge on the long-term lease. PWB has positioned itself as a different kind of property management company, one that's focused on helping investors achieve their highest possible return on investment. "As with most things in life, if goals aren’t aligned, one party typically loses. In “normal” property management, this is an unfortunate truth as well. It’s a shame that so many potential investors who see the incredible opportunities for earning above-average risk-adjusted returns on investment passively in rental property investing are so fearful of a poor property manager and resident relationship that they give up on their investing journey before they even start. At JWB, we are not trying to be “better” at property management. We are DIFFERENT." ‍ JWB is successful because they have perfectly understood how to create a Triple Win in an environment that is increasingly demanding of a relationship-focused property management strategy. As a property management company that offers far more than just plain old management of properties, they've built a business model that is extremely attractive to investors, part of which includes the long-term lease. Note their 5-year case study below on the financial results for the investor of signing residents to long-term leases. The key takeaway is the dramatic decrease in fees paid by the investor. These numbers may scare you at first. JWB is willingly forfeiting profit from tenant placement fees, and quite a bit of it. Understanding the context of this decision is critical though, lest you end up playing catch-up with the rest of the industry over the next decade. JWB's commitment to their investors creates so much value that the growth of their business and retention of clients offsets the short-term profit decreases from this strategy. Property management strategies and business models built around short-term profit from things such as tenant placement fees will lose whatever staying power they're clinging to over the upcoming market cycle. Those types of companies will struggle to attract clients and many will eventually go out of business. JWB has proactively avoided being swallowed by the commoditization of the industry by offering something more personalized, relationship-driven, and value-creating. As mentioned, JWB is focused on long-term investors that intend on growing their portfolios, holding properties for at least a full real estate market cycle, which is typically 10 to 20 years, and are intending to create income via real estate investment over a long period of time. The returns for these investors are diminished by property vacancies, so note the vacancy percentage decrease with JWB's long-term model versus the high-turnover model. All of these benefits come together to provide clients with longer-term, goal-focused property management instead of short-term profit-focused property management, which is differentiating JWB right around the time that property management is becoming commoditized. It creates an enormous amount of opportunity to sign a large number of long-term clients by providing something that isn't otherwise available, creating a sustainable business model ready for consistent growth and prepared to sustain threats such as commoditization and do-it-yourself property management technology. The longer lease is just one element of this triple win, but it's a significant one. As the case study notes, the dramatic decrease in costs is very attractive to investors. However, the long-term lease only works if the residents are willing to sign such a lease. So let's make this double win into a Triple Win. How the long-term lease helps residents Uncertainty has been a big theme over the last two years, mostly as a result of the coronavirus pandemic throwing the SFR space into quite a predicament. PMs have certainly taken some hits as a result with eviction moratoriums, residents being furloughed, and other challenges. But residents are experiencing significant challenges of their own as a result of the uncertainty they’ve experienced within their jobs, their ability to pay rent, and the potential of changing rent. These are problems, but problems demand problem-solvers, and problem-solvers create solutions that end up differentiating their business. The long-term lease is proving to be that solution for many PM companies. The stability that it provides is proving to be a welcome sight for residents. Knowing where they will be in three years and exactly what their rent will be is valuable to residents who are fearful of a changing market, and the percentage of residents who see that value is continuing to increase. The result is one of the best resident retention tools out there. For the PM, this doesn’t mean that rent is stuck. Rent adjustments are still possible, but they’re baked into the lease from the start. This allows the PM to plan for a changing market while giving the resident notice of pending changes prior to them signing the lease. Residents are much less likely to react negatively to rent increases if they signed off on them before ever moving in. “Stability starts with helping them understand what their financial responsibilities are going to be years in advance. That’s where it starts and that’s a big reason why residents do like long-term leases.” People find value in knowing where they will be in 3 years. A long-term lease is a commitment for a resident, but it's one that JWB has found that many are willing to make. Implementing a long-term lease program isn’t for everyone, but it’s proving an effective method for creating a Triple Win by creating stability, something everyone is after in these uncertain times.

May 11, 2023

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How Property Managers Can Automate Rent Collection

Automated rent collection is a system that enables property managers to collect rent payments from residents via electronic means such as online portals, direct debit, ACH, direct deposit bank transfers, or debit card/credit card payments. This simplifies the rent collection process, saves time, and minimizes errors associated with manual processes and payment reminders. It also provides residents with a convenient and secure way to make payments, leading to increased satisfaction and retention rates. In this article, we’ll talk about some of the best online rent payment systems, the best strategies to automate rent collection, and how to implement these strategies. We’ve got insights from Wolfgang Croskey, a leader in the industry. Today's Expert: Wolfgang Croskey, Founder & President of How’s My Rental What is automated rent collection? Automated rent collection leverages single-family property management software to streamline the process of receiving rent payments from residents. While traditionally, rent collection might involve paper checks or manual online payments, automated rent collection automates these steps, thus alleviating the issue of late rent payments. Residents can schedule recurring payments or make one-time payments (or partial payments) electronically through the software, allowing the software to automatically debit the designated bank account on the due date, eliminating the need for manual processing and the potential for missed payments or late fees. Best automated rent collection apps for property managers 1. SecondNature At Second Nature, our focus is on improving the lives of both residents and property managers. That's why we've designed digital solutions aimed at adding value and alleviating rent collection challenges for all parties involved. With our Resident Benefits Package, we offer a range of features designed to encourage timely rental payments and assist residents in bolstering their credit, safeguarding their identity, and maintaining financial stability. Learn more now 2. Buildium Buildium is a property management platform that provides a range of features, including online rent payments, payment processing, tenant communication, maintenance tracking, and financial reporting. While Buildium does not publicly disclose specific pricing information, its website indicates pricing is based on the number of units you manage. Learn more about Buildium 3. AppFolio AppFolio is a cloud-based property management software that offers online rent collection, security deposit, tenant screening, property inspections, and accounting/bookkeeping software features. AppFolio’s pricing structure is tiered, with the specific cost depending on the number of units you manage and the features you require. Learn more about AppFolio 4. Avail Avail is a cloud-based rent collection tool that allows PMs to automate rent, send rent reminders, track payments, and manage rental properties. The pricing for Avail depends on the number of units you manage, with increased discounts for larger portfolios. Learn more about Avail 5. Rentec Direct Rentec Direct is a software platform for property managers that offers features such as online rent payments, tenant screening, lease tracking, and maintenance management. Rentex Direct pricing scales with the number of units you manage, with economies of scale for larger portfolios. Learn more about Rentec Direct 6. Latchel Latchel is a cloud-based solution designed specifically for single-family home and small portfolio landlords. It offers functionality that automates and centralizes various aspects of single-family property management, including resident support, maintenance management, online rent collection, video-based troubleshooting, and a resident portal. Specific pricing details are available via a consultative process. Learn more about Latchel 7. DoorLoop DoorLoop is a cloud-based solution designed to cater to a variety of property types, including single-family homes and multi-tenant buildings. It offers tools to streamline property management tasks, including marketing and leasing units, screening and managing tenants, processing rent payments and managing leases, tracking maintenance requests and coordinating repairs, and generating financial reports for property owners. Pricing is tiered based on the features you require. Learn more about DoorLoop 8. YardiBreeze Yardi Breeze is a cloud-based solution offered by Yardi, a venerable company in the real estate and property management industry. The software offers features designed to streamline tasks typically encountered by landlords or property managers, including marketing and leasing vacant properties, screening and managing residents, processing rent payments and rental applications electronically, tracking maintenance requests and repairs, and generating financial reports for owners and real estate investors. For quotes, contact Yardi Breeze directly. Learn more about YardiBreeze 9. RentRedi RentRedi is a mobile-first property management software that allows landlords to collect rent payments online, screen tenants, and manage maintenance requests through a user-friendly app. RentRedi’s pricing structure is subscription-based and ranges from $12/month (paid annually) to 29.95/month (pay-as-you-go). Learn more about RentRedi Benefits of Automated Online Rent Collection Rent collection software offers a variety of benefits that are specific to SFR property management companies. After all, the impact of reducing workload and saving time adds up, especially when you need to devote so much of your energy to operations across a dispersed area. Here's a closer look at the advantages: Reduced workload and time savings Automating rent collection eliminates the need to chase individual payments, freeing up time for tasks that can be time-consuming, such as inspections or maintenance coordination. Fewer late payments With on-time automated payments, rental income (and therefore cash flow) becomes more predictable. This allows for better financial planning and budgeting for property maintenance, repairs, or unexpected expenses. Simplified accounting and record-keeping For property managers, autopay eliminates the need for manual rent collection processes and reduces the risk of late notifications or missed payments. Rent collection features also help streamline accounting processes by providing accurate and up-to-date records of rent payments. And of course, recurring payments can be set up to occur automatically, saving property managers time and reducing the need for follow-up with tenants. No more existential dread around rent time! Reduced risk of errors Manual processing of checks or cash can be error-prone. Automatic rent collection minimizes the risk of human error in recording payments, ensuring accurate financial records and avoiding potential miscommunications or disputes. Improved security Automated rent collection platforms typically use secure payment processing systems to safeguard sensitive financial information. This provides peace of mind for property managers and residents alike, as their payment data is protected from unauthorized access or fraud. Potential for scalability Even for smaller companies managing a few properties, automated rent collection lays a foundation for a more efficient system. As your portfolio grows, the automation remains in place, simplifying rent collection regardless of the number of properties you manage. In fact, Wolfgang Croskey says automation can level the playing field. “Technology is the great equalizer,” he says. “It allows us to compete with these nationwide companies and to provide not only the same level of service but to be able to pivot and adapt much quicker than those larger companies can. So for me, you're a smaller company, AI and Automation Tech is that equalizer that's going to allow you to shine just as well as these larger companies.” Related: 12 Tasks for Property Management Automation Enhanced resident communication and satisfaction For residents, recurring rent payments provide a convenient and hassle-free way to pay rent on time every month. It eliminates the need to remember to make a payment, reducing the risk of late fees and improving their credit score by building a consistent payment history. Property managers who are reporting rent payments to credit bureaus (such as TransUnion) as part of a Resident Benefits Package can use this as a massive incentive for residents to automate payments. Additionally, tenants can set up recurring payment options using their preferred payment method, making it easy and flexible for them to manage their finances. The other component of improving the resident experience is offering mobile app-based automatic payment methods. That’s why allowing residents to pay rent with Apple Pay or Google Pay is gaining popularity across the property management industry. Zelle is another payment service that can help with ACH payments without transaction fees. PayPal and Venmo are other mobile payment platforms. With these mobile payment apps, renters can pay their rent using their mobile devices. It’s a win for residents because they can easily make automatic payments on the go using their smartphones without the need for a physical wallet or a business day visit to a bank or property management office. Additionally, these mobile payment methods are highly secure, as they use biometric authentication to ensure the transaction is authorized by the account owner, minimizing the risk of fraud and identity theft. A note on credit card payments It’s important to note that some property management companies have experienced the rare but profoundly irritating (and costly) phenomenon of chargeback claims in relation to rental payments made by credit card. If you’re in the market for software that supports automated rent payments, this is an important issue that you should raise with the sales representative. Use Second Nature to Automate Rent Collection At Second Nature, we’ve built digital products around creating ease for residents and property managers – adding value and reducing headaches for everyone involved. Our Resident Benefits Package provides services that incentivize on-time rent payments and support residents in building credit, protecting their identity, and remaining financially sound. Rent doesn’t have to be stressful for everyone involved. In fact, using the right tools, rent collection can become as easy as – you guessed it – Second Nature. (We had to.)

May 3, 2023

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How to Structure a Property Management Company

The property management industry is full of entrepreneurs – self-reliant self-starters who got in the game as a side hustle and grew their property management company to be a full-time occupation. But, of course, with growth comes the need to hire a team. And the key to successful team-building? An optimized property management org chart. An organizational chart is a visual representation of a company's structure, showing the roles and relationships between different positions within the organization. Property management companies are no exception, and getting your property management company structure right from the beginning has a massive impact on the quality of experience of your investors, employees, and residents. Example of a property management org chart with 500 rental units In this article, we’re exploring the benefits of having a clear and concise property management company org chart with the help of Kelli Segretto, Founder of K Segretto Consulting. Kelli has helped with the launch of hundreds of property management companies and has tons of insight into how a PMC should be structured for success. Key Learning Objectives: What does an ideal property management organizational chart look like? How should you structure your property management company? What’s the difference between an org chart for a PMC vs. a real estate agency? How can you use your org chart to align employee roles? Who should you hire first? What’s the most important role in a property management company? What are the most common mistakes made in structuring a PMC? Meet the Expert: Kelli Segretto, Founder of K Segretto Consulting Kelli is a sought-after speaker and consultant with over 20 years of experience in the property management industry. Kelli has expertise in single-family, multifamily, and LIHTC property management, having coached across all 50 states and six countries. She has helped launch hundreds of new property management businesses and has developed in-depth knowledge of the types of organizational structures that work best in property management. Example Property Management Org Chart We asked Segretto about the primary areas of responsibility – or key roles – that that are essential to a successful property management business. She outlined six key focus areas regardless of how you end up structuring the company: Operations Management Property Management Leasing Maintenance Bookkeeping Sales According to Segretto: “Different structures will dictate the position titles and responsibilities within these roles, but these are the foundational pillars each property management business needs.” To get started with the cascading structure of the org chart, Segretto explains that in a full property management company structure, you typically see three-deep leadership: owner/broker, manager, and coordinator, each with their own focus area from the list above. “Even if your business is small, it is important to have an organization chart to plan for your future growth,” Segretto says. Here’s how it might break down in your PMC. Tier 1: Owner/Broker The Owner/Broker is the executive leadership or highest role and tier in the org chart. “In most states, you cannot operate a property management company without a licensed broker,” Segretto says. “The requirements to obtain your principal broker license varies by state, but most require a combination of time as a real estate sales agent, experience points, and education.” Of course, the owner of the PMC isn’t always the broker, depending on various circumstances or state laws. “A person with a broker’s license can sign on to be the broker of record or broker in charge for a property management business,” Segretto explains. “We see this when the business owner cannot yet meet the qualifications for their broker license, for example, in franchise property management companies and other organizations that are coming into property management from outside the industry.” Anyone newer to the industry should take note, says Segretto, “This arrangement can be tricky in some states, like New Jersey where you must operate under the same roof as your broker, or Ohio where any brokerages active under a broker must have the same core company name. There are many state and local regulations you have to be aware of when opening a property management company. My recommendation is always to reach out to your local department of real estate for guidance and information or work with a consultant that specializes in property management business startup.” Related: Property Management Startup Checklist Tier 2: Management (Operations, Sales, Finance, Maintenance, and Leasing) Reporting directly to the owner (who is usually also the broker) is a set of management roles. Depending on the size of your company, this may be one or many individuals, depending on the expertise and skills gaps of the owner. Your management level typically includes roles for Operations, Sales, Finance, Maintenance, and/or Leasing. These individuals have a fairly high level of responsibility overseeing their area and any direct reports under them. Related: Best Property Management Maintenance Software Tier 3: Coordinators (Property Management, Maintenance, Leasing, and Bookkeeping) Reporting to the management roles are employees at a coordinator level. You may hire coordinators that focus on property management, maintenance, leasing, and bookkeeping. These roles will fall under the purview of the manager above them. Tier 4: Assistants In large organizations, you may also see assistant roles that support the coordinator or management roles. For each of these tiers of responsibility, Segretto says, “the titles and function will vary depending on the type of structure you are operating under, but the core organizational buckets remain the same. In a small property management business, it isn’t uncommon for the first roles to be 1099. This helps keep costs down for the property management company as long as they are not treating their 1099 partners like employees. For example, scheduling their time, requiring uniforms, etc. As a property management business grows and stabilizes, most of the roles in the business become employees.” (Segretto provides her clients with several org chart templates that walk through the different roles and responsibilities in each configuration.) Types of Property Management Company Structures “Each property management business is unique,” Segretto says. “Some businesses service savvy investor clients, some focus on small multifamily, some are only high-end luxury while others have found their niche in Class C rentals. This means that the best property management business structure can vary for your organization.” Segretto explains that the ideal organizational structure for your business is the one that provides the best user experience for your clients, assigns ownership to the essential tasks, and keeps everyone on the same page. “Too often, I see businesses that have everyone trying to do everything, which ultimately creates chaos and confusion,” Segretto says. “Phone calls don’t get answered, emails get lost, and everyone expects someone else has ‘got it.’” Instead of this chaotic approach, Segretto recommends choosing from three common property management company structures: Portfolio Management, Departmentalized, and Process Driven. “Determining which one is best for your office is dependent on your location, your staffing capabilities, your goals, and your budget,” Segretto says. Here’s how they each work Portfolio Management Structure The portfolio management structure typically involves assigning a dedicated property manager to oversee a set of client accounts. That PM is responsible for all aspects of the portfolio, including property maintenance, resident relations, leasing and marketing, financial management, and other activities related to the management of the real estate assets. The manager is typically supported by a team of administrative and support staff, including accounting and financial specialists, leasing agents, property managers, project management specialists, maintenance technicians, and other professionals who work together to ensure the successful management of the real estate assets. Overall, a portfolio management structure gives clients a premium experience with one point of contact and allows for nimble decision-making. On the downside, portfolio management requires employees to have strong cross-skills, opens the PMC up to risk if that property manager leaves or goes on vacation, and makes it difficult to create operational consistency between portfolios. Related: Best Property Management Podcasts Departmentalized Structure Department-style management organizes the PMC into separate functional categories, grouping employees and teams based on their roles and responsibilities. You might see departments such as accounting and finance, leasing and marketing, property maintenance, resident relations, and other functional areas. Each department is headed by a department manager who would oversee the day-to-day operations and staff within that department. The benefit of a departmental structure is specialization over generalization. Employees are experts in their field and can focus on improving their area’s performance. The downside is that clients and residents may have multiple points of contact, and communication may get repetitive. No single person is keeping an eye on a specific property’s overall performance. Process Driven or “Pod” Structure A pod-style management structure in PMCs is a relatively new management concept that organizes employees into small, cross-functional teams called "pods.” Each pod is responsible for managing a specific portfolio of properties or assets within the company and typically consists of a portfolio manager, a leasing agent, a maintenance technician, and an administrative staff member. The pod-style management structure is designed to bring the benefits of the portfolio and departmentalized structures together – but can also suffer from their weaknesses. Pod-style management encourages collaboration and communication among team members and gives residents and clients an excellent customer experience. The structure also allows for greater flexibility and agility, as the pods can adapt quickly to changing market conditions and resident needs. Pod-style management is ideal for a fast-paced, dynamic environment where rapid response times and a high level of customer service are essential. By working in small, self-managed teams, pod-style management can lead to greater efficiency, productivity, and innovation while also improving employee satisfaction and engagement. The downside is that the pod structure can be expensive until you fully scale up. What is the difference between the structure of a PMC and a real estate agency? We asked Segretto to explain how a PMC org chart differs from that of a real estate agency. Segretto explains: “I had a client that structured their business like a real estate office, and it worked really well for them when they were small. As they started to grow and scale the business, it became limiting. Real estate offices have a very simple structure. Typically you have an owner/broker, and in larger offices, back office services like marketing, bookkeeping, office assistants, and maybe a transaction department. These are support services made available to the sales agents. Sales agents are independent business owners, often with their own LLCs. They are not employees of the company.” She also points out that some companies operate as both a real estate business and a property management company. “In these businesses, you may have a blend of the two org charts. You will still need all the same buckets as a property management business, but often those roles take on double duty to support the sales agents who still remain independent contractors.” FAQ: How to Use Org Chart to Align Employee Roles and Make the Right Hires So, let’s say you have an idea of the property management company structure you want and the types of roles you need. How do you actually get started? How do you make your first hires or align your current employee roles with your planned ideal structure? We asked Segretto some of the most frequently asked questions on this in the property management space. Here’s how she answered. What should I focus on in the hiring process? Segretto: Property management is an industry that can be trained, but human behavior is much harder to adjust. Pick the right personalities and drive for your team rather than the person with the most experience on paper. That doesn’t mean you should pick the person you get along with best or you think you could be friends with. It is important to identify the key personality traits that will be most beneficial in each role. Remember, your employees will be the face of your company. They will be the ones delivering on the promises you make each client. Make sure you have written job descriptions and a deep understanding of the role the person would fill. Setting proper expectations will also aid in finding the right person who will enjoy the work they are hired to do. In the interview process, ask qualifying questions and provide scenarios to see how the individual problem solves. This industry is fast-paced, multifaceted, and complex. It isn’t for everyone. Most of all, be patient. Start hiring before you need to so you don’t feel pressured to pick someone fast rather than ensuring you have the right person in the right seat. Take your time and avoid costly mistakes. Who should I hire first? Segretto: I have had the opportunity to help launch hundreds of brand-new property management businesses in my career, and one of the most common questions is, “Who should I hire first?” Initially, a property management company is typically run by a sole operator. The business owner wears all of the hats. It is beneficial for the owner to go through this phase of start-up as they learn all the ins and outs of the business and discover their strengths and weaknesses. I like to then take my clients through an exercise where we can discover the highest and best use of their skillset and time. From that exercise, you can then determine what role would be your ideal first hire. For many people, this is a business development manager to cover sales or a back office employee, like a bookkeeper. What are the key components of management structure in a PMC? The key components of management structure are customer experience ownership, work specialization, organization, coordination between departments, and continuous training. Property management is a customer service business. The structure you create should focus on the components that will foster internal communication, collaboration, and a culture of learning. What is the most important role in a property management company? Segretto: This is a tricky question! It reminds me of the grade school phrase, “There is no ‘i’ in Team.” Property management is a team sport; there is no one role that is most important or featured in the line-up. Your team will only be as strong as your weakest link, which is why it’s so important to hire talented individuals with the right personality and drive for each role. Once you have your superstar lineup, it’s crucial that you treat them well, trust them, and listen to the valuable feedback and insights they have. It’s more about having the right person in each role than it is about one role being valued higher. What are the most common mistakes you see in a PMC organization structure? Segretto: The two most common issues I see in the property management structure are: Too many points of contact for property owners and residents to keep track of. Keep it simple! Assign a point of contact to every relationship, and if that point of contact needs to shift, arrange a proper handoff. This business is built on trust, and as humans, we inherently don’t trust strangers. Lack of communication between departments. This business is built on a foundation of excellent customer service. It’s critical that you have processes in place that keep everyone in the loop. Most processes require multiple team members' effort, and when communication breaks down, the card house collapses. Final Thoughts Segretto recommends hiring a consultant to help you develop your org chart for both today and your future growth plans. A good org chart should include “job descriptions, KPIs, and personality traits for each role within your chosen structure,” Segretto says. “A consultant can take you through a process to identify your core values, goals, and action plan, which will help set a solid foundation for your business.” Learn more about property management structures, growth, marketing, and more in our Second Nature Community, or get in touch with Segretto via her website.

April 18, 2023

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Property Management Revenue: How Can Managers Increase Ancillary Revenue?

Ancillary revenue is a huge profit driver for property management companies. Today, we're looking at what ancillary revenue is, how it can give you better results, and how to get started building ancillary revenue streams. What is ancillary revenue? Ancillary revenue refers to any additional income not including rent that you derive from the properties you manage. By becoming greater service providers, PMs create opportunities for more revenue streams. There is a lot of money to be made in ancillary income in the property management industry and real estate industry. But many property managers don’t even consider the wealth of opportunities to increase profit, grow your business, and increase the satisfaction of your residents that ancillary income opportunities provide. It may seem counterintuitive to suggest that a practice exists that will simultaneously increase the amount your residents pay and increase their satisfaction with you, but if you provide the right ancillary services, and your residents find value in them, you can build a winning situation for all involved parties. How can property managers generate ancillary revenue? The best way to sustainably drive ancillary income for you and your business is through generating more value that your residents and investors want and charging for what that value is worth. Ancillary charges can apply to your investor clients and your residents. In short, property managers should figure out what’s important to their residents and clients and monetize those things. Ancillary revenue opportunities can come from programs that drive resident satisfaction, such as Resident Benefits Packages, property upgrades, pet insurance, pet rent, etc. You can also drive extra revenue through additional fees such as application fees or pet fees for new residents or for behaviors you want to discourage, such as late payment fees, early termination fees, paper lease fees, vendor screening fees, etc. Ultimately, each of these programs help to achieve what we call a “triple win.” A triple win, as described in this video, is any concept that manages to benefit the renter, you and your team of property managers, and the property owner. ‍ ‍ The importance of the triple win comes from the idea that long-term success that results in long-term profit must correlate with long-term satisfaction. Keeping all involved parties in a transaction satisfied will lead to high rates of re-signing, whereas ancillary income programs that residents don’t find value in can decrease renter satisfaction and hurt your bottom line in the long-term. Ancillary revenue stream examples in property management Let’s look at some of the most common and successful ancillary revenue examples. Ancillary programs work well for both multifamily and single-family rentals. You can break ancillary charges down into two categories: fees vs. special programs. Ancillary Fees First, there’s the ancillary fees approach. Those can include the following. Resident-Focused Security Deposit Processing Fees Leasing or Lease Amendment Fees Paper Lease Setup Fees Lease Renewal Fees Renters Insurance Late Fees Investor-Focused Inspection and Maintenance Monthly Fees Marketing Fees (social media, etc.) Insurance Risk Mitigation Fees Vendor Screening Fees Rent Protection or Eviction Fees Essentially, property managers should be sourcing income on anything they’re spending money on themselves. This ensures that you can continue to grow, add on value, and pay your employees. Ancillary fees also help encourage the kind of behavior you want from your investors and residents. You don’t want residents to pay late? Incentivize on-time payments by adding a fee for late payments. You don’t want investors requiring you to use their vendors instead of yours? Charge a small fee for vendor screening. Then you’re either getting paid for your extra time, or the investor will decide it’s not worth it, and you’re saved the extra burden on your team. Special Programs Of course, property managers can also generate additional revenue by developing programs that boost resident happiness and satisfaction. These programs can also help encourage the behavior you want, but the goal is more driven by a desire to improve the resident experience. The most popular – and effective – form of special program is the Resident Benefits Package. An RBP can include several different benefits for residents, from credit reporting to move-in concierge services to identity protection. And they’re easy to monetize for property managers. Increasing property management revenue The residential real estate market is changing. By finding new ways to generate revenue, property managers can accelerate business growth. Ancillary revenue is one of those ways, and it works by providing real value to the resident. These programs don’t necessarily have to directly create revenue, although many do, but the key is always to create value. Of course, some programs work better than others – and some attempts to drive ancillary income can actually do the opposite: drive investors away, or cause resident complaints. Let’s look at a few examples of what is and isn’t working for property managers. Ancillary revenue streams that are working Here are a few examples of the best drivers of ancillary revenue in property management. Resident Gift Programs One example of a program that creates value for the resident without charging the resident is a Christmas gift program run by the Home River Group based out of Boise, Idaho. Residents at HRG’s properties receive a gift package every holiday season that includes gift cards to local restaurants, movie theaters, bowling alleys, etc. This comes at no charge to the resident, but it does create happy renters, which leads to sustainable revenue in property management. 24/7 Maintenance Another great example is 24/7 maintenance, which is often amenitized. Professional SFR managers have web portals, apps, 24/7 hotlines as part of their operations that enable a more professional and convenient resident experience. And it leads to faster resolution. Including maintenance support in a resident benefits package helps differentiate your service. Adding value through a resident benefits package also adds a new revenue stream for a property management business. Convenience Services Convenience services are great examples of ancillary income programs that do drive immediate profit and achieve a triple win. Residents tend to realize a lot of value from convenience services, and these services have become the expectation for renters. Second Nature’s air filter delivery service, which is widely used by property managers around the country, achieves this by providing the resident with cleaner air to breathe and lower utility bills, providing the owner with the peace of mind of knowing the air filters are being changed on time, and providing you with some added ancillary revenue. A great way to identify opportunities for ancillary revenue services that achieve a triple win is by asking your residents. Just ask them. They’ll tell you what services they’re interested in and willing to pay for. This will not only help you identify key insights for your business, but it has a positive side effect of improving the relationship you have with your residents. What doesn’t work in driving ancillary revenue As you can probably infer, programs that don’t work will be the ones that don’t achieve the aforementioned triple win. Property managers are starting to realize the value of the long-term game. The extra effort required to make sure residents feel respected and not leveraged specifically for profit creates a lot of value for the PM as it keeps renewal rates high. Here’s the type of behavior PMs should avoid when designing an ancillary revenue strategy. Cheap Money Grabs When your residents feel like they're just a warm body that pays monthly rent, that's really going to sour the relationship that you need to be focused on here. Truthfully, ancillary income can be created very easily, but cheap money grabs that make residents feel used are not going to be sustainable, and sustainable is the key word here. Not Understanding What Residents Value If the resident doesn’t see value, your program’s long-term prospects are not going to be good. Understanding where a resident will find value also requires you to understand how a resident perceives value. There is a saying in marketing that perception is reality, and whether or not you realize it, you're perpetually marketing your properties to residents. How they perceive their experience is going to affect how they feel when it's time to renew. Mixed Messaging The best ancillary benefit package in the world is going to be perceived negatively if the messaging around it uses words with negative connotations. Avoiding words like “fees” can help prevent a negative perception of a service you as the property manager are providing. A perceived lack of value for a required program contributes to a resident that feels disrespected, and a perceived lack of value for an optional program results in a program nobody uses. Either way, no benefit to the resident means no benefit to you. ‍ In the end, the best way to drive ancillary income is to find programs and services that add value for your residents and clients, and generate profit for your business.

April 10, 2023

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AI Property Management: Tools, Benefits, and Challenges for the Industry

Artificial intelligence (AI) property management is one of the buzziest terms in the industry right now. Today, with a special guest Wolfgang Croskey, we’ll break down its practical applications, how it can help property managers, and how it could hurt them. Meet the Expert: Wolfgang Croskey, President of The Perfect Tenant Key Learning Objectives: How to use AI in property management Best AI property management software Benefits of using AI in property management What you shouldn’t automate with AI in property management Challenges of AI in property management Future of AI in property management What is AI in Property Management? AI property management is a business strategy for real estate or property management companies to simplify and improve their processes through software-powered property management automation. It streamlines operations by automating tasks like resident screening, maintenance scheduling, and rent collection, enhancing efficiency and decision-making. In its current state, artificial intelligence best serves property managers by supporting and expediting administrative tasks. It’s essentially calendar clearing, in that it gives property managers more time to focus on their business. In fact, Croskey has implemented AI solutions into his business and noted how much extra free time his property managers have to be property managers. Croskey says, “Now, with the time we have, our property managers call an owner every day just saying, ‘Hey, how’s it going?’” Croskey’s team is able to devote more time to elements of a great resident and investor experience. It’s ironic to think that AI is helping you forge stronger relationships with clients, but it’s true. With more time to devote to opening lines of communication and being proactive in doing so, PMs can build that experience that’s the primary differentiator in modern property management. That’s what it means to work on the business. “Can AI replace a property manager? No. Because at the end of the day, what is a property manager hired for? To provide solutions for crazy problems. And that's what we do. But if your whole day is filled with all this admin work, how are you going to have the energy and time to solve crazy problems? Use these tools to unload as much admin stuff as possible, so you can really focus on the property manager’s true value proposition, which is solving crazy problems and helping owners make money.” The bottom line: AI has enormous potential to help save time if used correctly. How to Use AI in Property Management So, how do you actually use these programs to cure your team of their grunt work pains? Let’s look at some of the top business areas and use cases for AI property management. AI for Tenant Screening AI tools can streamline the screening of potential tenants by automating background checks, credit evaluations, and rental history analysis. Tools like TenantCloud analyze applicant data to predict lease default risk, ensuring property managers select reliable tenants more efficiently. AI for Reducing Maintenance Costs AI can predict and prevent maintenance issues by analyzing data from Internet of Things (IoT) devices and past maintenance records. Tools like Building Engines use AI to schedule predictive maintenance, reduce downtime, and lower repair costs by addressing issues before they become costly problems. AI for Generating Listing Descriptions With the rise of natural language processing (NLP) tools like ChatGPT and Jasper, creating unique marketing collateral has never been easier. These tools can generate compelling property descriptions quickly, allowing property managers to focus on other tasks. Copy.ai also assists in crafting listings and marketing content, saving significant time and effort. AI for Automating Lead Generation AI-driven platforms like Manychat and HubSpot can automate lead generation by engaging potential clients through AI-generated text and chatbots. These tools help capture and nurture leads, ensuring that no opportunity is missed. “Maybe once a year, take your templates, throw them into one of these AI tools, and say, ‘Hey, can you rewrite this?’ You’re just kind of freshening up,” Croskey says. “You could ask it to rewrite something with a more friendly tone or add some comedy to it or different things. And so now, each year, the point of the message is the same, but you're kind of making it new and exciting.” AI for Property Analysis and Search AI tools such as Keyway's keypilot and Saleswise AI provide in-depth property analysis by aggregating and analyzing market data, investment potential, and neighborhood insights. These tools help property managers make data-informed decisions on property acquisitions and market trends. AI for Fraud Detection and Compliance Monitoring AI systems like AppFolio can detect fraudulent activities and ensure compliance with regulations by monitoring transactions and resident activities. These tools use machine learning (ML) algorithms to flag unusual patterns and potential compliance issues, safeguarding property managers against legal risks. AI for Leasing AI assistants such as EliseAI automate leasing processes by answering prospective residents’ questions in real-time and scheduling tours. This enhances customer service and increases the likelihood of lease conversions by providing timely and accurate information. AI for Accounting AI-driven accounting tools such as Buildium automate financial tasks like rent collection, invoice processing, and financial reporting. These tools ensure accuracy, reduce manual errors, and provide real-time financial insights, improving overall financial management. AI for Scheduling Maintenance Requests and Showings Tools like Reclaim.ai offer smart scheduling solutions for maintenance requests and property showings. These AI tools prioritize tasks based on urgency and availability, optimizing time management, and ensuring timely responses to resident needs. “The biggest problem with any basic scheduling app is the concept of priority, right?” says Croskey. “Apps without AI integrations simply look at free and busy times. For example: ‘Oh, this person wants 30 minutes. Let me find the next open spot for 30 minutes and plug them in there.’ But let's say you wanted an hour with me. If I didn't manually intervene, you probably wouldn't be able to get the hour for like two weeks because finding an hour-long spot is not going to happen. But I want to give you priority, so I had to override my account and say you know what, let's do 8 a.m..” AI for Marketing AI tools are revolutionizing marketing efforts for property managers. ChatGPT and Jasper can create blog content, social media posts, and email campaigns, while Synthesia helps produce high-quality marketing videos with AI-generated avatars. Evolv AI enhances digital experiences by identifying drop-off points and improving the renter's journey. “If you are still wasting your time writing creative property descriptions, you just need to stop,” says Croskey. “Nobody reads them anyway. I’ll buy you lunch if you actually leased property because someone said, ‘You know what? That marketing description was phenomenal. That’s why I want to lease this house.’ Nobody has ever said that so why would you spend a lot of time on it?” Best AI Property Management Software You Should Try Croskey has used several AI platforms to help with administrative and communications work. Here are some of his recommendations: ChatGPT and Jasper: For content creation and marketing collateral. These tools can generate high-quality written content quickly, enabling property managers to maintain a strong online presence with minimal effort. Grammarly: To maintain consistent and effective communication tones across various platforms. Grammarly ensures all written communication is polished and professional, helping property managers avoid misunderstandings and maintain a positive brand image. Note: There’s a free version, as well as a handy Chrome extension. Reclaim.ai: For smart scheduling based on priorities. Reclaim.ai optimizes your calendar by automatically adjusting meeting times and task schedules to prioritize important activities, ensuring that critical tasks are never missed. Keypilot from Keyway: For property research, investment analysis, and contract drafting. KeyPilot leverages AI to quickly analyze vast amounts of data, providing actionable insights that help property managers make informed investment decisions, and draft precise contracts. EliseAI: To automate resident communications and improve customer service. EliseAI enhances resident interactions by providing instant responses to inquiries and efficiently managing follow-ups, which improves resident satisfaction and operational efficiency. These tools collectively enhance various aspects of property management, from resident interactions and maintenance scheduling to marketing and financial management, making operations less time-consuming and more effective. Benefits of Using AI in Property Management Automating Routine Tasks AI algorithms can automate repetitive and time-consuming tasks such as rent collection, invoice processing, and scheduling, freeing up time for property managers to focus on more strategic activities for their property management company. Enhancing Resident Communication and Satisfaction AI-driven platforms provide real-time responses to resident inquiries, automate follow-up communications, and schedule property tours, significantly improving residents’ experience and satisfaction. Reducing Operational Costs AI helps reduce operational costs by optimizing resource allocation and predicting maintenance needs, performing predictive maintenance to reduce downtime and costly emergency repairs. Generating Accurate Financial Reports AI-powered tools can automate financial reporting, ensuring accuracy and compliance while providing real-time insights into financial performance. Predicting Maintenance Issues AI analyzes data from IoT devices and maintenance records to predict and address potential maintenance issues before they become major problems, saving time and money and reducing stress. Improving Marketing Strategies AI assists in creating engaging marketing content and optimizes digital experiences to enhance lead generation and conversion rates. Screening Residents More Effectively AI-based resident screening automates background checks, credit evaluations, and rental history analysis, helping property managers select reliable residents more efficiently. What You Shouldn’t Automate with AI in Property Management While AI can solve various issues and make work better, there are still functions that are better accomplished by a human being. Indeed, if used incorrectly, AI can do more harm than good. Here are two common pitfalls of over-dependence on AI. Creating Business Policies and Procedures Croskey says, “The reality is that if you don’t have your policies and your procedures, there is no tool on Earth that is going to save your bacon… Look at McDonald’s. At one point, somebody had to roll up their sleeves and make the process of how to build the Big Mac. It probably took quite a while to do that, but now that it’s done, they haven’t changed the Big Mac for at least 40 years." Property management AI can help you repeat your processes, but can’t create them for you, and it can streamline them, but not optimize them for success. Overreliance on technology is kind of an innate vulnerability with tools so robust. Croskey is quick to clarify that such a mistake can lead to notification overload, where you can’t keep up with everything that all these tech tools are delivering to you. You still have to be aware of what’s going on in your business. Training Personnel The veteran PM also notes that, just like with any new tech, proper training for the team is of critical importance. “Really do your team justice by providing them training, providing them opportunities, not just saying, ‘Okay, starting tomorrow, we're using Jasper, have a nice day.’” For training, Croskey recommends the non-AI tech tool, Loom. You can create screen recordings and build a library of training materials for your team. “Loom does provide transcripts of the videos, too,” Croskey says. “You could take those transcripts and say, ‘Hey, ChatGPT, Could you write me a summary of this?’ And it will do it. So now you can put that summary in your email.” Challenges of AI in Property Management Data Privacy Implementing AI in property management requires handling large amounts of highly sensitive resident data, raising concerns about data privacy. Ensuring compliance with data protection regulations and maintaining resident trust are significant challenges. Security AI systems can be vulnerable to cyberattacks, posing a risk to the security of resident information and property management operations. Robust cybersecurity measures and regular updates are necessary to protect against potential threats. Cost The initial investment in AI technology can be high, including costs for software, hardware, and training. Smaller property management companies could find it challenging to justify and afford these expenses. Complexity AI systems can be complex to implement and integrate with existing property management processes. The learning curve for property managers and staff can be steep, requiring significant time and resources for training and adaptation, and checking in to make sure these processes are integrated properly. Lack of Human Touch While AI can automate many tasks, it lacks the personal touch that human interactions provide. Maintaining a balance between automation and personalized service is crucial to ensuring resident satisfaction and effective property management. Future of AI in Property Management As of now, the strategies above outline how Croskey and other PMs are finding value in artificial intelligence. AI will continue to evolve, and the technology is going to build more advancements for PMs in the future, especially with integrations with property management software. “Right now, all the AI is around language because I think it’s probably easier,” Croskey says. “I think the next step is going to be the math and numbers side, being able to look at your numbers, your portfolio, your financials, and start making recommendations from that.” Croskey predicts that AI could aid in ROI analysis and decision-making, essentially doing analytics of data points associated with specific properties and identifying trends and associations within your portfolio that can help you increase the profitability of your doors. The last place you’ll see AI reach, according to Croskey, is the maintenance realm. “There's a reason why nobody has really fully nailed down maintenance,” he says. “There are just so many variables and one-off things that it's hard to get a machine to learn that. For example, work orders come in, and the tenant says, ‘Oh, my toilet is leaking.’ Well, is it leaking from the floor? Is it leaking underneath? Is it just running? So there are three variables right there. Is it a low-flow toilet? Is it not a low-flow toilet? There are variables there. There are just all these things that can be going on that make maintenance hard. So I think that maintenance is going to be later in life.” Final Thoughts AI property management tools are nothing to be afraid of and can be a massive support to streamlining business processes, workflows, and day-to-day operations. Many leaders in property management are already leveraging AI apps and products to make their work better. The true benefit of AI is that it can automate busy work and repetitive tasks – freeing you up to be strategic, focus on relationships, and build better resident experiences. AI tools help PMCs keep up and compete with commoditization, as well. Follow us on LinkedIn, Twitter, or Facebook to stay up to date on these AI conversations. We’ll keep the conversation going and continue to deliver the best insights from experts across the industry. ‍ Hear more from Wolfgang Croskey and other PMs who have used AI on the Triple Win Property Management podcast.

April 10, 2023

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Top 20 Property Management KPIs to Track

Property management KPIs (key performance indicators) are critical, quantifiable metrics that measure your PMC’s performance over time and help you evaluate the success of your objectives, projects, or team members. PM KPIs can be divided into three broad categories: Financial performance KPIs: These measure the financial performance the the property management company Operational performance KPIs: These measure the effectiveness of the property management company’s operations Property performance KPIs: These measure the performance of the rental property that is being managed A narrow focus on KPIs isn’t a magic pill for company growth or stability. By nature, KPIs are very transactional. They tend to focus on short-term goals like maximizing rent/fees/etc. at a specific point in time. While those point-in-time metrics are critical to success, they need to be contextualized with the view of maximizing customer lifetime value. Build your KPIs with two overarching questions: “How do we create experiences so good residents never want to leave?” “How do we create investor experiences that are so good that they generate organic referrals?” These questions helps you to keep a “Triple Win” mindset – that we can grow the pie for ourselves, for our residents, and for our investors. Meet the Experts: Matthew Tringali, CEO of BetterWho, and Daniel Craig, CEO of ProfitCoach Matthew and Daniel are both experts in their respective fields, helping PMCs drive greater productivity and profits. We asked Matthew and Daniel to share insights and help us review the most important things to know about property management KPIs. 1. Net Income/Profitability Net income and profitability (which is net income expressed as a percent of total income) is what you’re making after you subtract your operating expenses from your earnings. PMs also track “profit per unit,” so they can break down exactly how much each unit is making – or costing – them. PMC valuations are typically done as a multiple of revenue or a multiple of EBITDA, so tracking your revenue and net income can help you keep an eye on the value of your business as a sellable asset too. When it comes to net income, one of the leading strategies to “grow the pie” is to build opportunities for ancillary income. Ancillary income is anything outside of the core service of rent collection. Enterprising PMs have found ways to generate more value for their investors and residents by offering supportive services like a Resident Benefits Package. With that extra value comes the opportunity to charge what it’s worth and create more net income. Adding value to the resident experience eliminates preventable vacancy costs for investors, keeping them – and your business – happy. KPI Formula: Net Income(Profitability) = Earnings - Operating Expenses 2. Labor Efficiency Ratio Labor Efficiency Ratio (LER) tracks how effectively you are deploying labor in your company. It certainly plays into improving company financial performance, but it’s also about helping your team members hit their individual goals and perform better – so they and you end up more satisfied. According to Daniel Craig: “LER is the most important driver of profitability. There are only two ways to increase profitability in any business: charge more for what you do, or spend less to get the job done. LER takes both aspects into consideration. There are three key levers to improving LER – we call them the three P's of LER: Pricing (how effective you are with client pricing as defined by your Revenue Per Unit), Pay (how effective you are in compensating your team), and Productivity (how effective you are in enabling a high-performing team).” Improving LER starts with making sure you have the right people in place. Find people who embrace your core values, who believe in the triple win, and in the importance of the resident experience. Look for people with initiative who understand that proactively seeking success for others is the way to achieve success for themselves. Matthew Tringali’s secret sauce for a better LER? Global remote team members. Tringali says: “I used to tell people that utilizing global Remote Team Members (RTMs) can be your unfair advantage against your competition. Now I tell people that if you aren't properly leveraging global RTM's, then you are going to get left behind. Top property management companies have 65% of their direct labor comprised of global RTMs. Companies who have six or more global RTMs on their team have a 7% higher profit margin, on average, compared to companies not yet using RTMs. LER is a master KPI that captures right people, right seats, revenue, efficiency and payroll. These type of A-players add value, nail performance metrics, and keep residents and real estate investors around. KPI Formula: LER = Gross Profit / Direct Labor Cost Related: 10 Property Management Goals to Set for the Year (with examples) 3. Resident Acquisition Costs Some may track this as “tenant acquisition costs" or customer acquisition costs. But, again, our focus should be on the resident experience to generate value for a triple win. That’s why we call this KPI “resident acquisition costs.” Language matters! You can calculate resident acquisition costs by totaling your annual sales and marketing budget and dividing it by the total new units you acquired in the same date range. As you track this benchmark year over year, you will see how effective your Biz Dev strategies are. The objective of both the PM and investor is to lower acquisition costs while not sacrificing the quality of the resident match. One of the best ways to reduce the cost of resident acquisition is to focus on building an attractive experience – particularly one that attracts the best residents in the applicant pool. A resident benefits package or another value-add can draw in residents without much effort on your part. KPI Formula: Customer Acquisition Cost (CAC) = Total Costs of Acquiring Customers / Total Number of New Customers Acquired 4. Average Maintenance Costs Tracking average maintenance costs is tricky as an SFR property manager. The properties you manage can be far apart and vary greatly in their needs and resident requirements. Plus, repair and maintenance costs are a huge chunk of expenses for PMs and investors. One great way to build value for yourself and your investor is to take a proactive approach to maintenance. Offer services like an HVAC filter delivery subscription, comprehensive renter’s insurance, and other features of a resident benefits package. With Second Nature’s filter delivery service, property managers saw a 38% reduction in HVAC-related ticket requests. This saves hundreds of dollars in maintenance costs a year. For more advice on using your KPIs and data to drive value, check out this video from BetterWho featuring Ray Hespen of Property Meld. KPI Formula: Average Maintenance Costs = Total Maintenance Costs / Total Number of Units 5. Average Arrears Every property manager’s approach to arrears is some form of: “MINIMIZE!” Arrears – otherwise known as the unpaid debt owed by residents – can have a massive effect on your company’s cash flow. Tracking average arrears helps you see who is paying rent on time vs. who isn’t. These metrics can also include delinquency rates (paying late and how late) and eviction rates (never pays and must be removed). Here are a few examples: Offering credit building as part of an RBP – reporting on-time payments to credit bureaus can have a huge impact on residents’ credit scores. Offering rental rewards programs through an RBP – turning rent day into rewards day. Identity protection – this guards the resident’s financial security and ability to pay rent. The triple-win approach here is working to prevent delinquency and eviction before they happen. The best way to do that is to incentivize on-time payments and continue to add value to the resident. KPI Formula: Average Arrears = Total Amount of Overdue Payments / Total Number of Tenants 6. Occupancy and Vacancy Rates We all know vacant properties come at a high cost. They require upkeep and payments, but they aren’t generating any revenue. That’s why occupancy rates are one of the most important metrics that a property manager can track. Your turnover rate or average days vacant can tell you a lot about your company. A higher occupancy rate than the market average can be a huge selling point for your property management company, signaling to potential investors that you provide a better experience for residents and, therefore, have better retention. (Or it could signal you aren’t charging enough!) One of the best ways to drive that coveted retention is to offer experiences that residents will pay for and stay for. That means identifying services that offer long-term value, not just a fancy one-time “shiny toy.” An example of this in the multi-family housing space is the apartment complex that invests in a $15k pool table. Sure, it’s great for tours. But 99% of the time, it isn’t used, and a pool table is never the reason someone chooses to stay in their home. Professional PMs know better and take time to think about what’s attractive in the sales process vs. what’s going to make people stay. For example, a better benefit than the pool table might be co-working phone booths so people can more easily work from home and save money. Finding ways to add value like that in the SFR space will go a long way to boosting this metric. KPI Formula: Occupancy Rate (%) = (Number of Occupied Units / Total Number of Units) x 100 KPI Formula: Vacancy Rate (%) = (Number of Vacant Units / Total Number of Units) x 100 7. Maintenance Request Response Time It’s important for PMs to know how long it takes for maintenance requests to be solved. When we’re talking about resident expectations, a reasonable response time for maintenance is one of the most basic things residents need and want. When requests take too long, residents can quickly become unhappy with their experience and decide to leave. Tracking this metric helps you understand how well your team is doing and if you need more resources to ensure timely responses. An online maintenance request portal can help streamline this process, and an RBP with services like air filter delivery can help reduce maintenance problems in the first place. KPI Formula: Maintenance Request Response Time = Total Time Taken to Response of Requests / Total Number of Requests (this gives you an average overall) 8. Property Inventory Property inventory is the metric tracking the number of properties you’ve acquired successfully and the number of properties lost. It’s also important to consider whether you’re acquiring properties that really support your business. Is your team burning out? Do your investors fit with your property management niche? One of the best ways to get more doors and keep them is to build resident experiences that are the best on the market. By offering more value than your competitors, you can attract more of the kind of business you want. KPI Formula: Track the total # of properties at the start and end of a period. Subtract Properties Lost from Properties Acquired. 9. Average Time to Lease Tracking the average amount of time to lease helps show the cost to your investor when a property hits the market. Property managers and investors both want to reduce the average time to lease. The best way to do that? Build experiences that stand out. When someone sees your listing – beyond the property and rent price, do they see a different experience and set of benefits by renting from you as a professional PM? Are you offering benefits that residents will pay for and stay for? Other things that help with this metric: Measure traffic and conversion from listings to showings Provide attractive photos, 3D or virtual images, and clear pricing, etc. Provide and track the availability of showing times, self vs. guided showing experience, etc. Track incomplete applications, qualified %, time to approve/reply, etc. All of these impact two critical business metrics: "days on market" and "days vacant,” which are key to this KPI. KPI Formula: Average Time to Lease = Total Days on Market for All Properties / Total Number of Leased Properties (during the same period) 10. Revenue Per Unit Tracking your profit goes beyond simply adding up revenue and expense. Not all revenue is created equal. Tracking revenue per unit is a key KPI to increase profitability. Revenue per unit does just measure whether you have enough doors. It also assesses whether those doors are worth your time. What if the doors are unprofitable? According to the 2022 NARPM Financial Performance Guide, “it’s worth noting that a 10% increase in RPU can easily lead to a 100% increase in profitability.” We’ve said this before, and we’re saying it again – the most innovative way that professional property managers are generating greater revenue for themselves is through building better experiences. According to Eric Wetherington at PURE Property Management, “Revenue is all about providing a service.” You can increase your RPU by adding more value that investors and residents are willing to pay for. With the right tools, you can add that value without increasing your cost too significantly. That’s where services like an RBP and other value adds translate directly into revenue growth. KPI Formula: Revenue Per Unit = Total Revenue / Total Number of Units 11. Unit Churn Churn is one of the leading KPIs for any business. After all, what’s the point of all your sales effort if you’re losing as much (or more) business each month as you gain? According to NARPM’s Financial Performance Guide, “Cutting your churn rate in half will double your average lifetime revenue per unit.” Some churn is out of your control and subject to market changes. But for the most part, churn is a direct result of customer satisfaction. PMs should find out why customers are leaving, where they would like to see improvement, etc. And, of course, that’s where resident and investor experience comes into play. Figuring out how to make the experience so good that your best clients never feel the need to look for another manager. KPI Formula: Unit Churn Rate = (Number of Units Vacated / Total Number of Units) x 100 12. Ratio of Customer Acquisition Cost (CAC) to Lifetime Value (LTV) of a Client The Ratio of Customer Acquisition Cost (CAC) to Lifetime Value (LTV) of a Client is a crucial metric in property management and business, as it evaluates the cost-effectiveness of acquiring new clients relative to the value they bring over time. Nothing feels better than letting a bad client go. This metric can help you put numbers behind that decision and helps property management companies understand the long-term financial impact of their marketing and sales strategies. Customer Acquisition Cost (CAC) is a key metric for any business dealing with clients and customers. This is the total cost of acquiring a new client, including marketing and sales expenses. It’s calculated over a specific period, and you can use the following formula: CAC = Total Cost of Sales and Marketing / Number of New Clients Acquired. Customer Lifetime Value is another common metric in business, and it’s calculated by adding up the total revenue you expect to earn from a client throughout their relationship with your business. You can calculate it as LTV = Average Revenue Per Client x Average Client Lifespan. A lower ratio between these two indicates a more cost-effective client acquisition strategy relative to the value the clients bring. Typically, a healthy CAC to LTV ratio would be below 1, indicating that the lifetime value of the client is higher than the cost to acquire them. KPI Formula: CAC to LTV Ratio = Customer Acquisition Cost / Lifetime Value of a Client 13. Executed Renewals This is a measure of how many lease renewals have been successfully completed within a specific time frame. This will help you understand your tenant retention rates and the stability of your income. A high number of renewals is the goal since reducing turnover can help cut costs and improve income and revenue. A low number of renewals could be a signal that resident satisfaction is on the decline or issues with property conditions, market competitiveness, etc. KPI Formula: Executed Renewals = Total Number of Renewed Leases within a Given Period 14. First Call Resolution & Number of Unanswered Calls The "First Call Resolution" KPI is essential in property management as it measures the efficiency and effectiveness of your customer service team in resolving tenants' or clients' issues during the first interaction. This metric indicates the quality of service and the ability to address concerns promptly. Essentially, you’re tracking how effective your team is at resolving an issue right away – or escalating it to the right person or process. You can also track the number of unanswered calls that come to your team to know if too many are getting missed. If you track days and times of unanswered calls, you can better understand where your team may have gaps or how to communicate to residents and clients the best way to contact your team. KPI Formula: First Call Resolution Rate = (Number of Issues Resolved on First Call / Total Number of Calls) x 100 15. Average Hold Time Average Hold time is a common KPI in any customer service or customer management role – but is just as important in property management. The metric helps assess the efficiency of your team’s call handling and refers to the average length of time callers are put on hold before speaking to someone. Longer hold times, as we all have experienced ourselves, generally lead to frustration and dissatisfaction, while shorter hold times can indicate your team is more efficient with service and your residents are happier. Reducing AHT is key to boosting resident experience and operational efficiency. KPI Formula: Average Hold Time (AHT) = Total Time Callers are on Hold / Total Number of Calls 16. Number of Overdue Tasks This KPI is critical for tracking the effectiveness and productivity of your team members. It tracks how any scheduled tasks or maintenance jobs are past their due date. Prioritizing this metric helps ensure that your team is tracking tasks in a way that drives efficiency and resident satisfaction. Obviously, a high number of overdue tasks can indicate workflow bottlenecks, staffing issues, or inefficiencies in task management. If this number is increasing, it’s a red flag (or maybe a beige flag?) that you should open up the hood and evaluate your operational effectiveness. KPI Formula: Total Tasks Scheduled - Total Tasks Complete on Time (it’s key to track deadlines for tasks) 17. Average # of Units Per Client While most SFR property managers work with clients who have one or two properties at most, you may want to consider this if you have any multifamily units or clients with a uniquely high number of units. The average # of units per client can help guide your business strategies and service offerings. It can also help you identify if your business is niche-ing down in the right direction. What kind of client do you want to work with? KPI Formula: Average Numbers of Units per Client = Total Number of Units Managed / Total Number of Clients 18. Average Google Review Rating While residents in single-family homes aren’t a great referral source, their reviews of your company can go a long way toward building your reputation and bringing you to the attention of new clients. Google reviews are a great way to track how your reputation is faring in your area. It may feel like moving this average up is out of your control, but you can influence it if you don’t like the direction it’s going. First of all, the baseline is to provide excellent service and resident benefits to boost your resident satisfaction. But beyond that, you can also give perks for filling out a review, simply ask good residents if they’re willing to give you a rating, etc. KPI Formula: Total Sum of Review Ratings / Total Number of Reviews 19. Number of Tenant Delinquencies This metric tracks how many of your residents are behind on their payments. It’s crucial for assessing the financial health of your rental portfolio and the effectiveness of your rent collection processes. If the number is higher than you’d like, you should look for a few culprits. Maybe you have several residents who aren’t able to make the payments, and you need to consider being more clear in your rental requirements at the application stage or your tenant screening process. Or, maybe it’s difficult for residents to figure out how to pay, and your payment system needs an update. KPI Formula: Ensure your property management system tracks the total number of tenants with overdue rent payments 20. Client Net Promoter Score (NPS) In SFR property management, residents don’t tend to make referrals, but you know who does? Clients. Your clients can be your best promoters if you’re looking to grow. And you can track how well you’re doing in that area by keeping track of your Net Promoter Score (NPS). NPS is a widely used metric to gauge customer loyalty and satisfaction. To get it, you need to conduct a survey. Ask your clients how likely they are to recommend your property management services to others on a scale of 0-10. Categorize responses like this: Promoters (score 9-10): These are your most satisfied and loyal clients, who are likely to recommend your services. Passives (score 7-8): Satisfied but not enthusiastic clients who are unlikely to actively promote your business. Detractors (score 0-6): Unhappy clients who might not only refrain from recommending you but could potentially damage your reputation through negative word-of-mouth. Next, calculate the percentages of respondents who are promoters and detractors. Subtract the percentage of detractors from promoters: the result is your NPS. KPI Formula: NPS = (% of Promoters) - (% of Detractors) How 1,000s of Property Managers are Creating Triple Wins with Savvy KPIs Property management KPIs are critical to success in the property management industry. Tracking metrics like these eleven KPIs also set professional property managers apart from hobbyists or amateur landlords. The key to all of it is building metrics around the idea of incredible resident experiences – all aligned in such a way that we’re creating new value. When we’re focused on driving success in that arena, the resident does better, the investor does better, and our team and talent do better. Creating triple-win experiences for everyone involved allows a more rewarding relationship focused on lifetime value. Through value drivers like a Resident Benefits Package, property managers are building those wins across the industry.

April 10, 2023

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Four Keys to Successfully Scaling A Property Management Company

Today we're looking at the best ways to successfully scale a property management company. And we're going to an industry expert with our questions: Patrick Freeze. Patrick Freeze was once a professional poker player. Now he is the CEO of Bay Property Management, a Baltimore-based firm that has scaled to nearly 6,000 doors and is one of the largest PMCs on the east coast. While his personal origin story is one of the most interesting in the PM industry, his company’s growth story and the tactics used to go from nothing to a heavily-scaled PMC are equally interesting. Through a marketing-focused approach that was complimented by intentional and detailed process optimization, Freeze achieved an impressive amount of growth at Bay, and he joined us to explain exactly how he got there. Four Keys to Successfully Scale Your PMC Here are Freeze's top strategies. Optimize Your Marketing for Efficient Growth From day one, Bay Property Management has invested in its organic marketing efforts to help attract new business. Freeze himself became an expert in SEO early on and it’s the primary focus of his robust marketing team today. “I started reading everything I could on online marketing, so SEO, pay per click, etc. Over that coming year, I became really skilled at doing all the marketing on my own,” says Freeze. “So if you were to type in property management companies, Baltimore property management companies, or any variation of those keywords, we could come up number one. And then we started getting phone calls 24/7.” Bay grew rapidly as a result of its ability to generate web traffic and organic leads through SEO, and Freeze doubled the size of the business on a yearly basis for several years after the initial launch, eventually expanding into four different markets. Freeze credits his and his team’s investment in low-funnel digital marketing tactics as the catalyst for his rapid business growth. The CEO estimates he gets between 120 and 140 new single-family leads a week, with almost all of them coming from online sources. “We have 10 people in our marketing department that solely focus on that. Google is actually going through a big algorithm update right now, and you have to be on that. If you’re not on top of that, you’re not going to rank well in search. We spend a lot of time on that. Someone could probably argue the other side and say you should be more diversified, but at least that’s worked for us.” Process Improvement Never Takes A Back Seat One of the biggest pitfalls as a business grows is its process development and refinement. Scale requires processes, and enacting and optimizing these can often be a much bigger challenge than actually growing the client list. A rapidly growing PMC has already optimized its process for finding new business. Defining the systems your company will depend on to be efficient is a new undertaking, something Freeze learned quickly as Bay grew to nearly 200 employees. “When you’re managing 500 units, you know everyone at the company very well, and you can get away with not having systems, policies, procedures. When you have 190 people, you really have to have your systems down,” says the CEO. Freeze notes that the challenges that come with a large company are not universal, and what you have to be prepared for at 50 employees is different from 150. It pays to have continuous improvement and always be optimizing. Process management is never something that’s done. “So I think probably scaling from let's call it, you know, five employees to 15 to 50 To 100. You have to keep iterating. You have to continuously make improvements on what you're doing. So what worked for, let's call it 200 doors is not going to work for 1,000. So a good example, I guess when we started out. We had one person handling maintenance, we had one person handling accounting, we had one person as the property manager, right? And I would go out and get new business. Well, as the company continued to grow then we had two people on maintenance. And then we had two property managers. And as we were growing, we realize, wait a second, when a work order comes in, whose work order is that?” Early on in the company’s growth, Freeze sought to define the exact responsibilities of all positions within the company in order to minimize overlap. Overlap in roles leads to inefficiencies that can be avoided with clear guidelines as to exactly what role is responsible for what upcoming tasks. “We have a handbook for our property managers that’s probably 80 pages. We have a procedural guide for every single position,” says Freeze. “I don’t think anyone whom I’ve talked to that has scale has not had very, very defined policies, procedures, handbooks, because if you don’t, it’s going to be a total mess.” Structure has helped create more traceable outcomes, which results in processes that are “more easily optimized and improved as the company continues to grow. “We made a change when we had about 1000 or 1200 units from having maintenance coordinators and property managers to just having the property managers handle everything. It was a big switch for the company, but I think it was for the better because we know exactly when there’s a mistake that’s made. We can trace that and see exactly who was responsible for the problem instead of having four hands in the pie.” Quality Employees Are The Backbone of Growth “I don’t think there is anything more important than having good quality employees,” says Freeze. “You can get all the new business you want but if you don’t have good employees managing the new property, you’re going to lose it as quickly as you gained it.” Bay did not grow to almost 200 employees without a developed process for finding good quality workers. While the hiring process has become much more role-specific now, Freeze credits a unique interview design that’s much more action-focused than response-focused as what has helped him pick the most suited people for property management. “I had a list of 30 to 40 questions that had nothing to do with property management. I would ask questions like ‘who is the vice president?’ ‘What is 46 times 24?’ I used to have this brick wall in my office and I would ask how many bricks are on the wall. I would ask them to name something that’s complicated but you know really, really well, and take five minutes and explain it to me. And I would just keep going on and on for probably 30 minutes with these questions.” Freeze never particularly cared if the candidates got the answers correct. He was much more interested in their process for getting to the answers and how they handled the abnormal interview. “In property management, you’re constantly dealing with problems. You’re basically problem-solving when you’re a property manager, and if you can’t deal with complicated questions, you’re probably not going to be able to deal with complicated situations. So I would just start blasting off for 30 minutes all these random questions, and some people did great with it and we would hire them. We probably had 25% of all people who wouldn’t even finish the interview.” Resiliency is a key trait for a property manager, and Bay’s interview process succeeded in testing for one of the harder traits to ID in an interview setting. Freeze’s process also includes a timed writing test designed to see if candidates can write clearly and quickly when applying for a company that’s very email heavy. The process is designed to test ability more so than experience, and it’s helped get the right people in place from the beginning, allowing Bay to offer a better property management service that is more marketable. Compliance Is Key Compliance is hard enough in the heavily regulated world of property management, but one of the biggest challenges as you expand into other markets is managing the different laws and ordinances in each individual market. Freeze believes that compliance is “far and away” the biggest challenge of scale. “All of our leasing agents have to know different things in different jurisdictions that we’re in, because the requirements are different,” says Freeze. “We have attorneys review our stuff every single year, all of our lease documents, addendums, etc. Even with all that said, there is so much legislation that is passed every quarter that it can be tough to stay up on it.” Managers at Bay’s regional offices are required to be diligent in remaining current with the nuances in local leasing laws and ordinances, which can change monthly. “They really are changing that much, as crazy as that sounds. And then when COVID happened, it was a complete and utter nightmare. They were changing weekly, and the odds of getting hit with a big class-action lawsuit go up, and you can be sued for something that you don’t even know you’re doing wrong. So always make sure you are totally buttoned up and spending extra money on compliance. I can’t say that enough. You can’t spend too much on that.” Advantages of Scaling a Property Management Business With these tools for scaling a PMC, you can increase the size and scope of your business in order to achieve higher levels of efficiency, profitability, and growth. Let’s look at what benefits you stand to gain from scaling your business. Business growth Scaling a business can help to grow your business by expanding the customer base, increasing sales volume, and improving operational efficiency. Improved profitability As a business grows, it can benefit from economies of scale, which can help to reduce costs and improve profitability. Competitive advantage Scaling a business can help to create a competitive advantage by allowing it to offer a wider range of products or services, enter new markets, and achieve greater brand recognition. Improved access to capital A larger and more successful business is often able to attract more investment and secure better financing terms, which can help to fuel further growth. In the case of property management, it can also drawn clients. Attracting and retaining top talent Scaling a business can help to create new opportunities for employees, increase job security, and improve overall job satisfaction, which can help to attract and retain top talent. Increased innovation As a business grows, it can invest more resources into research and development, which can help to drive innovation and create new products or services. Tools You Need to Scale Your Property Management Business The property management industry is an enormously tech-savvy group of people. In our network of property management companies, we’ve seen quick adoption of new tools and tech like AI, cloud-based systems, etc. Of course, the property management tools you choose will depend on the specific needs and goals of your PMC. Second Nature’s RBP aims to provide tools that are customizable across multiple property management levels, needs, and niches. With fully managed and integrated services that add value for residents and investors you can much more easily see the benefits of scale. Here are some other tools and property management software we’ve seen most highly rated in our industry. Slack: A cloud-based platform that makes communicating with your team easy. You can get immediate responses from team members, and even vendors or clients you add to your channels. LeadSimple: Sales CRM and process automation RentCheck: Automating property inspections Process Street: No-code, simple process and workflow management Airtable: a low-code platform to build collaborative apps to visualize data, processes, etc. Zapier: A tool that allow syou to integrate all your applications and set up automated workflows between them. These are just a few of the many property management tools available. It's important to evaluate the specific needs and goals of your business, and choose a tool that best fits those requirements. How Second Nature Helps With Scaling Second Nature was built on the idea that we could help make property management easier for everyone involved – residents, investors, and especially property managers. To that end, we’ve built fully managed services that generate greater value for your PMC by delivering better resident experiences. Our team takes care of the details for you so that your team can focus on growth, reputation, and quality. Learn more about Second Nature’s industry-leading resident benefits package and how it can help you scale with greater ease.

March 21, 2023

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Property Management and The Experience Economy

What is an experience economy and why is it relevant to single family rental property management? There are 3 questions driving the future of value creation in professional property management. How do we create an experience so good, residents never want to leave? How do we create an experience so good, investors never want to sell? How do we create an experience so good, talent wants to be in this business forever? The word experience is key. Whoever creates the best experiences will create the most economic value as the service side of property management becomes commoditized. In Joe Pine’s book, The Experience Economy, he reveals a critical insight that transcends real estate to other industries. It’s about the staging of value creation through the lens of commoditization and customization. In today’s highly competitive world, companies often focus solely on process improvement, optimization, cost-cutting, and driving efficiencies. While these are critical to remain competitive and improve margins, they are the playbook of a game that ends with operating a low-margin commoditized business. Some business leaders even talk about their industries being commoditized as a badge of honor. Interestingly enough, that thinking is self-fulfilling; by not focusing on creating higher-value offerings, they are riding the train to commoditization.History contains many examples of innovations so groundbreaking they captivated people and led the way for economic prosperity. Artificial light, telecommunications, automobiles, to name a few. While these were all once higher-margin innovative offerings and the most attractive businesses to be in, they have grown to be stale and competitive industries, forced to compete on price, leading to lower profits and company value relative to size. For example, Ford and GM, once praised as innovators in manufacturing goods, are now in a sea of competition and worth a mere 0.4x revenue at the time of this writing. The Experience Economy dives into these macroeconomic trends and shows the change over time in their Progression of Economic Value chart. The macroeconomic trends demonstrate how we have gone from extracting commodities to making goods to delivering services to, finally, staging experiences as the current primary driver of economic growth. One of the many great examples included in the book is the staging around birthday party: A birthday party at home that consisted of a cake and celebration requires the commodities, flour, sugar, butter etc.. to make at a cost of <$0.10. Then companies began offering “cake mix” which was more convenient that cost $1.00, followed by bakeries making the whole cake as a service for $15, and now, people outsource the whole birthday party to a venue like Dave & Busters or a party planner. There’s a party, invitations, custom napkins, entertainment, and yes, a cake is part of it. So someone can be in the pennies for cake materials business, the quarters for cake mix product business, dollars for a fully-made cake, or thousands of dollars for a full birthday or wedding or celebration event experience. That’s the commoditization to customization journey. Many property managers have correctly said, “We’re in the service business.” However, looking at where the most economic value will be created, today’s industry leaders have already started the shift to “We’re in the experience business.” They’re seeing different opportunities, which lead them to different choices that yield different results, and they find themselves in differentiated businesses. Professional property management is fast approaching a “hotelification” phase, where premium amenities and hospitality-grade service are creating a rental experience so good that more people choose the rental experience for longer periods of time. Hotel staff are called upon to enhance the experience of a proposal, an anniversary, a birthday celebration. And the great ones answer and emotionally connect. They are “moment-makers'' who create enduring loyalty, allowing them to drive more economic value. Consider how many of life’s meaningful and memorable moments are created at home. But how many people can name the owner of the apartment they lived in as easily as the hotel that elevated that special moment? So what are property management leaders doing today, and talking about doing tomorrow to create the #1 resident experience? The occupied experience is being defined by the “Resident Benefits Package”. From conference events like IMN, to NARPM, to PM XChange and PM Grow, it is hard to find an agenda that doesn’t include it. It’s a hot topic. Property managers and service providers have figured out how to turn persistent problems into a suite of proactive solutions that residents will pay for. Some of these services have been amenitized, like 24/7 maintenance coordination, vetted vendor networks, home-buying assistance, multiple payment options, and more that have become standard practice in professional firms. But there’s also a list of emergent ancillary services that are making their way from initial adoption to the definitive standard in the professional management experience. Move-in Concierge - Getting utilities and home services set up is a hassle for residents. Instead of 4 phone calls to get water, energy, internet, and TV services set up after researching who services the address, now residents can make one phone call and speak to a concierge who has looked up the discounts and promotions available and can confidently guide them through the process. In the future, this service likely expands to moving itself, deals on furniture with offers to assemble it, coordinated home cleaning, and landscaping. Air Filter Delivery - HVAC has been the #1 maintenance line item in SFR in most markets, second to plumbing in more temperate markets. And it has been a persistent problem of getting residents to change their filters on time. A 2020 HVAC Data Study that looked at over 7,900 SFRs in 4 markets, over an 18 month period, showed a 38% reduction when comparing a scheduled filter delivery program over the status quo of leaving a stack at move-in or hoping the resident remembers to go to the store. Every 2-3 months, residents are getting a box on their doorstep, where convenience makes it easier to do the right thing than to forget or ignore the responsibility entirely. Credit Building - every month that residents are paying rent on time, they get the benefit of that activity contributing to their credit file. A Goldman Sachs study showed a 42 point average increase in credit scores over 4 months. The credit bureaus also allow for up to 24 months at the same address to be back-reported which can provide a meaningful boost. Property managers are able to incentivize on-time rent payment and help residents build their credit over the course of their lease. Rewards - Residents are used to getting points and rewards for their loyalty with hotels, airlines, their credit cards… why not on their largest monthly expense? And while a rewards platform offers residents a unique benefit and savings on both everyday and luxury items, it is an incentive platform for the property manager. Rewards points allocated for on time payments, timely renewals, and ticky-tack maintenance like flipping a circuit breaker or resetting a GFI outlet mean more of the resident behaviors property managers want. Leveraging it for concessions and leasing incentives also means savings over cash offers, or higher perceived value at the same cash expense. Washer/Dryer Rental - Some properties may have these appliances installed or the residents come with their own, but we’ve seen the impact on prospective applicants choosing homes due the convenience of having the washer/dryer available. Smart Home - From thermostats to keyless entry to water leak detectors and more, there is hardware and technology alike growing more popular each year. Not only are they appreciated by residents, but they provide critical operational efficiencies to the management team. In addition to these, there are many more innovations that are going to dramatically improve the experience of renting and raise the bar on what’s expected. The companies that architect the best experiences will be the market leaders and capture the most upside in this future economic environment. We constantly are asking ourselves, what might the professional property management industry look like in 2030? The shift from transactional services to transformational experiences is one of the surest bets on the table. The big winners will be the players who embrace the new discipline of experience design. We believe the future belongs to the professionals, the trusted, the innovative… the people dedicated to changing the way people live forever.

October 25, 2022

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