How do I make my PM company more efficient?

Question

Hey everyone, I started a property management company about three months ago. When I was looking to get into it everyone said that there wasn't any more room for managers in my town.  Since then I've scaled up from my own single unit rental to 73 units and am currently working on a few more units. I feel like I have a pretty full work load right now with the 73 units, but I believe part of that is because I'm still new and working on a steep learning curve. Most of my units are lower to mid income in older buildings.

My question is, how do I become more efficient with my business? Right now I'm using Buildium as my software which I would't want to go without. I'm also working on lining up a team consisting of a plumber, handyman, and an electrician.  I believe once I these two items are figured out it'll help me save time and take some of the stress off.

Also, how many units can one person manage alone? I understand that's a hard question to answer, but I'm looking for a ballpark figure.

Thanks,

Luke Jackson

Nathan Gesner · Answer

I was managing about 140 mostly by myself. My wife would help with owner payments and she kept the books for the business, which was a huge help. Once I hit 140 it was getting to be too much so I hired a full-time office manager. By the time I hit 200 I promoted my office manager to property manager and hired a new office manager. I am now at 300 units with a staff of four: me, my wife, a property manager, and an office manager. I'm going to train my office manager to handle certain aspects of property management so I can "withdraw" from the daily chores and focus more on PM growth, refining processes, and sales.

I think you can run 100 units by yourself as long as you are experienced, hard-working, and organized. After that, you need to start hiring help. I think your first priority is finding someone to handle the daily mundane tasks like answering the phone, scanning documents, loading bills for payment, accepting rent, filing, etc. This frees you to deal with bigger problems, handle inspections, and other tasks that bring home the bacon.

Once you grow to a certain size, you'll want to add someone to help with showings, application processing, lease signing, inspections, maintenance tracking, etc.

Everyone may be different. You have to evaluate where your weaknesses are and determine a way to change processes and strengthen that area or hire someone that can handle it for you. It's a delicate balancing act. And there's the joy of hiring someone, training them, and then watching them leave due to health or a non-supportive spouse or whatever!

A final note: there is a "black hole" around 200 units where you become less profitable because you have to hire more help but the income takes a while to grow. I still made a profit but it wasn't nearly as lucrative. Now that I'm over 300, things are looking rosy again.

One final, final note: there are a lot of hidden ways to increase revenue so you can afford to hire help. PM me and I'll point you to a great resource or two.

Cara Lonsdale · Answer

When hiring an admin assistant, or anyone for that matter, please know what they can and cannot do according to the state you are licensed in.

For Jame's suggestion, this would not be allowed in AZ.  An admin assistant would be limited to host/ess duties basically.  They cannot discuss price, complete contracts, or give facts of a listing and so forth.  Therefore, many of the assistants working in PM or Real Estate offices are actually licensed themselves to allow for more flexibility in their duties.

So, it is a great suggestion, but just be careful about what it is you are expecting them to do, make sure it conforms with your RE law/rules, and hire appropriately.

James Wise · Answer

I think you need to shift your focus. Ya see the management business is very low profit. It's actually a loss leader when you start bringing on employees until you get up over a few hundred units. Your so small right now that employees will kill any shot at profit. Once you scale up to around 400 units you'll be in good shape.

So where should you shift your focus? SALES! SALES! SALES! Sales will be the vehicle that brings in the PM. Your PM clients will then be a future source of sales business as well. Maybe they buy more properties or trade in the ones they have for even larger properties (that you can sell them) or just trade in their properties to move money into other ventures. Sales commissions are where the money is at & by default it will propel the size of your PM business.

So all that said your 1st hire should be an administrative assistant. This person should be handling all the direct contact with tenants & doing the majority of your paperwork. This will allow you to free your time up to focus on sales & marketing. Lead generation & prospecting is a MUST!

James Wise · Answer

Well done Luke.

Do you do sales as well or just management? Depending on what you are involved in my advice on who your 1st hire should be will change. Give me some more info on exactly what you do in your business. I took my company from zero to 800+ units in a few short years, so i've probably made all the mistakes you can & cannot imagine.

Luke Jackson · Answer

The 73 units are located over 10 properties with 5 of them being single families. The largest of the properties is a 50 unit apartment building.  I'm also working on targeting a smaller radius right now so that I spend less time driving. Right now almost all of the units are within two miles of my house and office.

Cory Binsfield · Answer

Luke, you have a great problem here. Keep up the hustle!

Have you joined the Minnesota Housing Association? It is the best place to learn and network with property managers along with vendors and other landlords to scale your business. Here is the link http://www.mmha.com/

Another area that helped me scale to over 100 units was an investment in property management software.

This freed up a lot of the admin and bookeeping and made running my portfolio a breeze. As an owner/operator I’m always looking for ways to systemize things.

Are you focusing on buying your own rentals as well? As a property manger, you gain inside information on the buildings you manage and can hopefully buy them before they hit the market. It appears that the best players in my small town own and manage properties.

Lastly, I’d definitely hire an assistant like the other people mentioned. It will be the best investment you can make followed by building up an inside maintenance staff that you can farm out to other landlords in the event they do not want you taking over all the duties of property management.

Nathan Gesner · Answer

To jump on the bandwagon...

You need to write down a list of everything you do. Take your time, maybe work on it at night when you can get some quiet. Think through your day, your week, your month. Some ideas:

- Answer phones

- File paperwork

- Process mail

- Enter bills for payment

- Market available rentals

- Answer calls about rentals

- Schedule / attend showings

- Accept / process applications

- Fill out contracts

- Conduct move-in, periodic, and move-out inspections

- Collect rent, chase down late tenants

- File lease violations, 3-day Pay or Quits, Evictions, etc.

- Market for new business

This is just an example. I personally built a spreadsheet with a list of tasks on the left side and some blank space on the right. I kept it on my desk. Any time I had a spare minute, I would write down how much time I had spent on each task that day. It didn't take long for me to identify the menial tasks that were eating up my time but could be done by any trained monkey. If I wanted to continue growing, I would have to dump some of my work.

I hired an Office Manager (assistant, secretary, whatever title you want). She answered the phone calls, helped me keep the schedule straight, handled mail, loaded invoices, helped track maintenance requests, received rents, helped track late rents and owner payments, answered the questions she is allowed to, etc.

It was pretty basic stuff and didn't take long to train her. Within a couple months, I probably freed up 30% of each day or more. HUGE difference and it got better as time went along.

I grew more and had to do it again. My Office Manager got her license and was promoted to property management. I hired her replacement and then we made a list of all the tasks in the office and split them among us. My new PM now handles all marketing, showings, application processing, leases, lease renewals, and maintenance. Most days we are about 75% occupied so there's a little time for both of us to deal with surprises, new owners, the occasional sale, or whatever else pops up.

I personally believe you shouldn't wait until the help is needed before hiring. Desperate people make bad decisions.

Duane Smith · Answer

Wow Luke that's awesome, you have the right kind of problems my man!As far as getting help, I suggest our MNREIA if you're not already a member. A ton of big players from across the state attend the meetings and I know you'll get some great ideas from some good people in person!Here's the website:

http://www.mnreia.com/default.aspx

Hope that's another resource for you!Duane

Tim Swierczek · Answer

@Luke Jackson you might want to read the No Nonsense Landlord.  It's a bit outdated but it will give you some inspiration.  Also, in order to hire help, you will need to charge enough to be able to pay help and profit so you will be a challenge for a while.  Look to network with other PMs and gain some knowledge, look to increase revenue and do your best to stabilize what you've got.

Luke Jackson · Answer

Thanks for all of the wisdom guys! I am a licensed realtor in Minnesota, but selling is not my main focus. I do have a commercial listing and some lots, but that is just because they are my buddies.  My main focus is to scale the management business. My goal is to distance myself from the tenants and do more of the financials, line vendors up to work on the maintenance issues, work with my current property owners, and acquire new properties to manage.

My fist mistake was agreeing to manage an older 50 unit apartment building for a flat 6%. When I accepted to do it for the investor my thought process was that it would get me over 60 units, thus giving me some credibility in the marketplace, which it did. And frankly, it'd give me roughly $2,000 in income a month to pay the bills. Now I realize that an older, mid to low income building like that is quite a bit of work for 6%.

As an inexperienced manager, how do I put systems in place for other people to work off of? I feel that you could have systems in place for 75% of the work, thus being more efficient and giving my wife and perhaps a future employee somethings to work off of. Would I setup minimum qualifications based on the property? I.E. credit score, background, etc? A process for delinquent tenants?  I feel that I need to streamline it so no one in confused.

Right now I have my wife starting to do some of the showing. We have our Google Calendar linked so I can see what week looks like and schedule showings in. This is a big help for me.

Am I working in the right direction?  This is a MASSIVE learning curve to say the least!

Thank you so much for taking you time to help me!

Luke Jackson

How do I make my PM company more efficient?

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