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Our guest on The Property Management Show today is the legendary Deb Newell, of Real Time Consulting Services.
She has a lot of experience as a consultant and a property management business owner, so we wanted to get her thoughts on the state of the industry and what property management companies need to do to prepare themselves for the future.
Deb Newell: A Background
Deb began renovating homes as a hobby in 1998. That grew into buying rental properties, which was a matter of wanting to get out of debt. This was the best way for her to do it, so she partnered with someone and they bought property, did all the work to renovate it, and then sold the home. Deb says she learned a lot about maintenance and she made a lot of mistakes.
She kept buying more properties and eventually instead of selling them, she began to hold onto those assets and rent them out.
It escalated, and that’s because she enjoyed the recurring income.
At this point, Deb wasn’t thinking too far ahead. She didn’t even realize there were resources out there that could help her do this more profitably. But, she treasures the mistakes that she did make because they made her a smarter business owner today.
From there, she became a third-party property manager and from the beginning understood the importance of setting boundaries. She took on owners that she probably should not have, but she learned from those experiences, too. And then she kept growing.
Deb managed properties for over 20 years. Then, personal circumstances required her to sell her company. In 2013, she began a consulting company because so many people had been asking her to help with their businesses. She grew organically, went back to school for her MBA, and is now in a Ph.D. program.
Her goal is to keep expanding so she can help others.
Real Estate Recessions and Property Managers
Deb was in Minneapolis in 2007 to 2009, when the last recession hit the real estate industry.
She points out that these downturns can sometimes be a win for the property management industry because people always need a place to live. What matters is how you create the narrative.
Recessions are a good time to consider investing in the market. This is the story you need to tell when you’re protecting and building your business. What we learned from the last recession is that markets bounce back. Maybe not to the level that we would want, but it’s an opportunity for property managers.
Owners are not equipped to manage themselves.
Or, they do a poor job of it.
Rising Regulations and the Need for Professional Property Management
Deb believes the industry is in a stronger position now, thanks to the regulations and new laws that have arrived over the last 10 years. This is especially obvious in states like California, Oregon, and Washington. It’s painful for property managers to deal with these laws, but it positions you well. You’re the experts. You’re able to capture new business because dealing with these regulations is a huge headache and a big risk for landlords and investors.
Owners don’t want to make mistakes. They don’t want to make bad decisions. Property managers who are prepared to help them and make sure their needs are met will win new business, especially and even during a recession.
Show these potential clients what you can do to help with licensing and rent control and eviction.
You need to know what’s coming, as a property management business owner. Always be aware of the legislation that’s being proposed. You have to understand what’s going on in order to paint yourself as an expert. Even locally, make sure you can speak intelligently on what new laws mean. Sometimes, inspectors don’t always understand what’s changed when new regulations are passed. Property managers can be a partner instead of an adversary.
Deb talks to a lot of people who are trying to start property management companies, and sometimes they can’t even get started because the licensing rules have become so strict. She always advises them to first make sure they can start a company. You need to know what might prevent you from getting started, and only a handful of states don’t require a real estate license in order to run a property management business.
Property management is not a passive business.
How Disasters (Recessions and Pandemics) Impact Property Management
Deb says her business wasn’t big enough to be too impacted by the recession in 2007 – 2009.
She does recognize the damage that was caused by the pandemic, though, and believes that the pandemic was harder on most companies than the recession. During the real estate meltdown, a lot of people lost their homes to foreclosure. It was detrimental, but it was an external factor that impacted businesses. The pandemic, however, did the unthinkable and actually shut things down.
It was always more of an unknown.
But, Deb reminds us, everyone needs a place to live. We recovered from the pandemic and from rent that wasn’t paid and from waiting for rental assistance to kick in. If you can weather these storms, you have a solid business that can withstand such economic struggles.
How NOT to be Vulnerable
Deb consults with a lot of property management clients, and the one piece of advice she can give for not falling victim to external emergencies like recessions and pandemics is this: Be involved.
You don’t want to NOT be involved in the operation of your business. Lots of property management owners want to get out of the day to day management of their company. That makes sense. You shouldn’t be in the weeds. But, you shouldn’t not be involved.
At least understand the company’s metrics and where you are at all times.
A lot of people don’t know where they are with profitability. They don’t know what their acquisition costs are or what their profit margins are. They don’t know how many people they should hire and what those people should do.
KPIs and metrics have been buzzwords for a while. But, they’re important.
The way you operate your business and the company culture you establish will make a difference in how you’re able to respond to something like a recession.
Always have your pulse on how things are running. If the right people aren’t in place, you’re going to have to stay over-involved more than you expect. Sometimes, business owners are afraid of people quitting. But, if the wrong people are in place, having them stay on is far more dangerous than having them quit.
Most companies have a version of a strong foundation, but not the whole foundation.
People don’t always know what they need to know, and there can be a disconnect between the thing that needs to be done and the way you interpret how to do that thing.
Deb’s advice is to work backwards. Figure out what you want and work backwards to get it. If want a particular profit margin overall, start there and figure out what you need to do to make that happen. It gives you a starting benchmark, and then you can build out the rest.
Growth and the Future of the Property Management Industry
Growth will happen.
People are focused on growing the business, and according to Deb, sustainable growth will happen when you fix the internal operations piece.
What about the future of the industry? Will big mergers swallow up the small property management companies who say they refuse to sell?
Deb says no. She thinks there’s still a need for small companies.
Owners want service. They understand that larger companies cannot pivot as quickly as smaller companies to deliver what they need.
A.I. and automation won’t solve all the industry’s problems. Some things can be done that way, but in the end, people want to see a face and they want service.
People are trusting you with a large and valuable asset. They don’t want to hand that investment over to an iPad. They want a person to manage it, and that’s the difference between a transactional experience and a recurring experience.
A recurring experience is happening all the time. You’re managing someone’s property every month. You’re charging that fee every month. When you become more of an asset manager for your clients, you’re more like a partner.
Look at financial advisors. With all the retirement calculators and online tools available, A.I. could have taken over financial management years ago. But, people like the relationship they have with their financial planners. It’s meaningful.
If you’d like to reach out to Deb to talk more about this, please contact her at propertymanagementconsulting.com. And, if you have any questions about property management marketing or The Property Management Show, get in touch with us at Fourandhalf.