We’ll be the first to admit, some places are easier to start a property management business as opposed to others. It is one of the most common questions that are asked by both new and established owners who are looking to expand, or simply looking to find the best area to start a property management company.
If you can choose anywhere in the United States – where would you start a property management company?
Well, the latest numbers have helped us identify the 5 best cities to start a business in 2017.
Before we reveal those cities, there are a few factors that one needs to consider before making the decision.
Breaking Down the Math: Our Metrics
As a property management marketing company, we have one target in mind – our client’s growth. We used our own data and information gathered through Google’s keyword tools.
We used these numbers to answer one thing:
“What cities have the lowest customer acquisition costs through digital marketing?”
Below are the 4 metrics that we looked up for each area:
1. Search Volume. This determines the potential of your service area when you’re starting an AdWords campaign. This is public information which you can find through Google’s Keyword Planner.
We made sure to choose areas that are receiving at least 1,000 hits per month. Anything less may not be enough for you to get a good return on your investment as it might result in only one or two leads if you are unlucky.
2. Cost Per Click. The second metric that you can find through the free Google Keyword Planner. The cost per click is Google’s estimate of how much it would cost for each click on an ad. This determines the amount of competition in your area: A high cost per click means that there is a lot of competition in that particular area, a low cost per click means that there is not as much competition.
For reference, the average nationwide price for property management-related searches is currently $5 per click on Google Ads.
3. Lifetime Contract Value. When you calculate monthly management fees, lease-up fees, and other charges, you can see that over the lifetime of a contract, the value you get from a single property owner with a single house should be $4,500 or more.
4. Average Conversion Rate. The last metric to consider is the average conversion rate per owner lead for a campaign. On average, it is at three percent. Simply put, 100 clicks to your ad means that you would receive 3 owner leads.
You can achieve a higher average if you have a great offer or stronger value propositions than the competition, and it can also dip lower depending on your services and where you are. Three percent is typically the average that we see nationwide.
Each area that appeared in our study was validated by using the following criteria: reputation, competition, and visibility. We manually checked for the competition by checking the keywords and conducting searches in each of these cities.
One caveat to remember: our customer acquisition costs are based on professionally-run AdWords campaigns that include a landing page. Campaigns that don’t use a landing page are less effective, and thus drive up the average cost per owner lead.
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The 5 Best Cities for Property Management Growth
5 – Eugene, Oregon
Located two hours away from the major metro area of Portland, OR. There are 1,500 monthly searches on average and the cost per click on average is $3.00. So the average cost per owner lead will only be about $100.00, which is a great return.
4 – Tacoma, Washington.
Just outside the reach of the major property management companies in Seattle. Tacoma, WA has a monthly search volume of 2,000. The cost per click is a low $2.50, which means you’re only paying $83.00 per lead. This is a great market with a good potential return.
3 – Colorado Springs, Colorado
Located approximately one hour away from Denver. The average cost per click is $4.50, but the average monthly search volume is higher, at around 2,500 searches. So that means you pay about $150.00 per lead. That’s a little higher than other cities, but you have a bit more opportunity here for investment.
2 – Pittsburgh, Pennsylvania
This is a big market. There are 3,000 monthly searches for property management on average, and the cost per click is $3.00. That’s a $100.00 cost per lead. The 3,000 monthly searches represent a lot of potential business, and the cost per click is still below average. It’s a ripe market.
1 – Miami, Florida
The best city to start or grow a property management business is Miami. The average monthly search volume in Miami is a little over 6,000. The average cost per click is $5.00. So, your average cost per lead is about $150.00. This would require a higher budget, but a great market to break into. There are so many monthly searches and great housing deals in Miami, making it your best option in 2017.
Investing a Little and Earning a Lot
If you’re thinking that $100 per lead is a lot of money, look at what the math really tells you. In Eugene, Oregon, with a fundamentally strong property management sales process, you can imagine closing one out of every three leads. So that’s $300 you’ve spent to get one closed contract.
The average lifetime value of that contract is $4,500. So, you’ve spent $300 to earn $4,500. Money well invested.
Even with a more conservative closing rate, you’re coming out ahead. If your company closes one out of every eight leads – in Eugene, OR you will still be spending $800 for $4,500 worth of revenue.
We also found a lot of other areas with great potential. This list represents our top five, but there were others that almost made the list.
These places include:
Reno, Nevada. A great location if you are looking to get into the vacation rental management industry.
Fresno, California. A high volume of searches with a low cost per click.
Boise, Idaho. Another city that came close to making the top 5 list. It was left out due to a few fairly well-established companies, however, the opportunity is there.
If you have any questions about on growing your property management company, feel free to contact us at Fourandhalf.
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