Getting more properties under management is key for many business owners. But what are the best strategies for doing this? Residential Property Manager talks to three businesses and finds out how they’ve gone about building their rent roll
Donald Trump once said, “In business when things aren’t working it’s time to mix it up”. Just open any newspaper or turn on the TV and you’ll see big brands like Apple and Microsoft doing that continuously. Just last month Apple launched their new iPad Mini, this comes just six months after the most recent iPad hit shelves.
In a month’s time Microsoft will launch Windows 8, which is said to have more capabilities than ever before.
Companies like Microsoft and Apple are always changing and growing to adapt to the current business world.
With the global economic crisis many real estate businesses have realised in order to compete with the big guys they need to also mix ‘it’ up. No longer is the sales team the be-all and end-all of the business. Now, more than ever before the rent roll is being seen as the center of the business.
After all, its value translates into real dollars, particularly when a principal looks to sell their business.
But where does one begin when starting a rent roll from scratch?
PICKING THE RIGHT PATCH
According to Simon Cox, rent roll business coach and trainer at Brisbane-based Real Estate Dynamics, building a rent roll isn’t as daunting as it seems, if you get the location right.
“If you are looking to grow from scratch, the most obvious place to look at is where you are going to get the biggest return,” he said.
“Many people go to open up their office and they want to grow around the corner from where they use to work with another agency, or in an area they are familiar with. And that is fine if that is what you are familiar with, but when you are trying to grow the rent roll you need to make sure the returns are going to be there.
“Look at the average rents in that area. Calculate the management fee you want to charge and then work out if that is going to make you enough money and profit.”
But don’t forget to look carefully at you competition in the area - are they growing rapidly or are they struggling to find properties? Are they using different techniques than you plan to use?
“There is no point opening up an office from scratch and then trying to grow a rent roll, if first of all there isn’t enough market there or it is over populated with competition, because all you are going to do is ‘water down’ the market,” he explains.
The key to successful rent roll growth is starting with a solid foundation – and that means developing a proper plan, according to Mr Cox.
What makes for an ideal foundation, Mr Cox continues, involves three items: the plan, the numbers and the triggers.
Firstly, the most important tool is a business plan.
“This is to determine not only what you want to make out of the business but how you are going to do that. The places, tools, resources, people … that all forms the plan,” he explains.
“Once you’ve formulated the business plan you now create your marketing plan.”
With those fundamental pieces in place you need to determine the numbers to make your business work, he says.
“[If] I need ‘X’ amount of staff and ‘X’ amount of skills, I need ‘X’ amount of resources,” he continues.
And lastly, setting triggers in your growth plan will highlight to you if you are on track or if you need to rethink your goals.
“Create triggers, for instance if you’re on zero and you hit 50 properties that means I will inject another person into the business so I can go from 50-100,” he says.
IS LESS MORE?
Bob Walters, managing director of BWT, cautions principals to remember that, first and foremost, property management is a people business.
“Principal need to ensure they don’t push their property management to staff ratio to high,” he says.
“There is a temptation to keep loading properties onto your managers and then what happens is your customer service drops and you start losing clients.”
Mr Cox believes a business can never grow too fast provided the correct structures are in place.
“It is very simple, and that is why the triggers are in place,” he said.
“If I am at 100 properties and all of a sudden in a month I go to 140, I am not going to be able to do that with my existing resources, tools and team that I have got, I am going to have to plug someone is quickly.
“Inevitably what will happen is I’ll spend my time servicing those 40 new properties and not so much worry about the other 100, and I may lose some out the back door.
“What businesses need to realise is that it is great to bring them in the front door but we’ve got to stop them walking out the back door.”
While having ‘triggers’ in place is important, setting clear goals is equally critical if you’re to achieve your rent roll targets, says Mr Walters.
“Every second business owner I talk to wants to grow their rent roll and they want to grow it by a particular number,” he said.
“The missing link is the ‘How To’ part. They want another 100 properties but very few have written down on a piece of paper how to achieve that.
“Don’t just have a number and goal without the ‘how to’ part. If you don’t have that, it’s not a goal, it’s just a dream.”
But Mr Cox warns the most important goal you must have is a ‘net gross’ goal.
“If your business wants to bring 10 properties in a month, but your business is losing three a month, well you’re only going to achieve seven a month, so you are not going to achieve your goal,” he explained.
“Your goal should be 13 to achieve your net gross goal.” Or work out why you’re losing three each month, and try and reduce that number.
THEM AND US MENTALITY
Property managers and sales consultants should work together to build the value of a real estate business, Mr Walters continues.
“It is vitally important for the team to work in harmony of each other, because when a landlord client needs the service of a sales agent there needs to be a seamless pathway from the property manager to the sales team, and vice versa,” he said.
Only recently, the country’s largest property management focused operation, RUN Property, added a sales division to their business after acknowledging this truth.
It was a no brainer to expand into sales, RUN Property CEO, Rob Farmer says. With an average of 1,200 properties on the rent roll that are sold each year their property management department was a great basis for a strong sales team.
“You can’t have a strong real estate business without one or the other. Whilst they are different businesses with different needs, they do work together and compliment one another.”
However, in order to not confuse the two roles there must be transparency between the two departments said Mr Cox.
“That is, if a salesperson has a lead they go to one person in the property management department who can work with that client and can turn that into business.
“ And conversely, when a property manager has a lead it should go back to one person. That way there is no diluting of a relationship there.
“But they have to work hand-in-hand. You often will hear they are on one side of the room we are on another but it doesn’t work like that.”
GETTING THE POSITION RIGHT
With over 16 years of experience in the industry Mr Cox believes, with the utmost respect, that property managers are not equipped to grow a business’s rent roll.
“The first point about growing a rent roll is it is a sales job. People that fail to grow a rent roll are property managers,” he says.
“The fact of the matter is a property manager will not grow your rent roll unless they have sales skills. The person who grows your rent roll is the salesperson. They have the ability to negotiate, to market and they know what to do and how to do it.
“So the reality is they have to be driven from a sales perspective.
“The easiest way to do that is to sit with your sales team and watch what they do and get the leads from them, and prospect that way.”
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