The Property Management Show’s audience has grown to about 8,000 downloads a month, with thousands of views on YouTube. So, the intricacies of property management and how to do it right are interesting topics for everyone, especially new entrepreneurs going into the business.
The guest we have today has been described as a hardworking hustler. The topic is how to expand into new markets without having to acquire a new property management company. There are multiple episodes on acquisitions that you can go back to. Check out Michael Catalano and Andrew Propst if you want to access their methods for acquiring a management company and expanding into new markets.
Today, Brock Forkey is going to talk about a different way to expand into new markets.
Brock Forkey Bio
Brock has been a lifelong entrepreneur. In grade school, he sold a skateboard in third grade for $80 and offered pet sitting services. When he graduated high school, he went into construction, where he learned about real estate. In 1999, he purchased his first investment property, and by 2001, he owned 80 properties. Now, his property management company is based in Albany and Troy, and they are expanding into Rochester and Buffalo over the next few months.
Managing Owners Rather Than Doors
Currently, Brock is managing about $30 million in real estate, which breaks out to 400 doors. Over the next 12 months, he hopes to get to 600 units, and over the next 24 months, 1,000 units.
Brock believes it’s better to look at the numbers in terms of owners rather than doors. If you have an owner with 74 properties under management with you, losing that owner is going to hurt a lot more than losing one unit. So, the goal for Brock’s company is to gain 180 owners over the next year, which will hopefully bring in 300 to 400 additional units.
This type of strategy allows you to diversify your management portfolio in terms of owners rather than properties.
Shifting Strategies from Sales to Property Management
There are a lot of moving parts in property management; more so than in other businesses. Add to that the fact that people have their safety and well-being wrapped up in their properties, and it’s a pretty critical business. Brock began buying and selling real estate, and eventually found himself flipping houses by 2006. Then, the financial landscape changed. People with credit scores in the 500s could get 100 percent financing. Selling homes was profitable. Homes were sold to investors and homeowners.
By 2007, it was getting harder to sell anything.
Not everyone saw the warning signs – but Brock did, and he made the necessary adjustments to his business model.
Knowing when to pivot is an important part of achieving success in real estate and in any entrepreneurial business. It’s like Madonna. Madonna has been relevant for 30 years because she knows how and when to change.
You have to be willing to change.
Sometimes, you’ll get hit with a brick and that’s how you’ll know it’s time to change. Other times, you’ll see it before the rest of the industry sees it. People might resist where you’re going and what you’re thinking. It’s not because you’re wrong or they’re wrong – they just haven’t seen it yet.
If you’re tracking your numbers and you’re following patterns in the industry, you’ll see the shift, and you’ll be able to pivot.
Fake it till you Make It: Shifting with Momentum
Changing the business model requires preparation and confidence. When Brock moved from sales to management, he spent $3,000 on a phone system that led callers to believe his company had a number of different departments (they didn’t…yet). He sent out some direct mail with a paragraph about their company, some bullet points, and a call to action.
People called because there was a need for this type of business. Accidental landlords were just arriving on the scene, and they needed their properties managed.
Now, there’s less of a need for fancy phone systems and direct mail campaigns, and there’s better marketing through Google AdWords and Pay-Per-Click. Brock says those marketing platforms have been life changing. And, he knows his numbers.
2017 Marketing Numbers:
- Marketing spend: $37,300.
- Cost per lead: $234.59.
- Cost per client: $643.10.
- Conversion rate: 41%.
This year, Brock is spending about $72,000 on marketing. It’s an aggressive growth budget.
Justifying the Marketing Spend
You may be cringing at Brock’s numbers.
But, he says it’s important to know what your clients are worth. Brock’s company earns an average of $20,000 per client. That’s the average over the last five years.
Who wouldn’t spend $234.59 to get $20,000?
Not a lot of property managers understand what a client is worth. One of Brock’s competitors on LinkedIn said they’d pay $100 for a referral of up to 10 units, and $200 for a referral to a client with 100 units.
That company clearly doesn’t understand a client’s value.
You have to know your numbers, and you have to be willing to spend the money.
This is a business.
Slowing Down the Sales Process: Closing Those Leads
You probably wouldn’t mind closing 41 percent of your leads.
Brock has learned how to sell. While interviewing other property managers to get a sense of his competition, he noticed that very few companies have an effective sales process. They’ll hand over the property management agreement as if it’s sales collateral. It’s not.
Slowing down the sales process is the best way to convert leads. When someone calls, Brock asks them questions. This is the revolutionary question that makes such a huge difference:
So, tell me a bit more about yourself and your property.
It’s hard NOT to close the sale when you ask that, and you’re willing to listen.
After hearing what he needs to hear, Brock sets up another call before that initial call is over. The second call will cover the Q&A. The prospect can ask any questions they want, and get some good answers. Pricing is on the website, and it’s a flat fee. So, that question is easy and out of the way.
Slowing the sales process down this way also gives you a chance to do some research. If you’re selective about the types of properties you manage, you’ll be able to determine whether this is a client you even want to add. Brock takes on all the properties he can. He says it can be scary, but they take on the property and then they figure it out. While he’s doing all the sales now, his plan is to hire a BDM in the Buffalo office once he gets to 50 or 100 properties in that market.
The management agreement is not a sales pitch. Repeat that to yourself if you’re currently handing it out to anyone who fills out an online form or calls your office: The management agreement is not a sales pitch.
Put in the work. Slow down the process. Talk through the discovery process and find out what the prospect really needs. Be patient and answer questions.
Establishing trust is critical. Investors are preparing to hand over their asset while they’re living in Germany or Israel or across the country. You have to get to know each other.
Your Sales Process Challenge
On your next 10 leads, try this system of slowing down the process. See what happens.
- Do your discovery and learn what you can about the prospect and their unit(s).
- Set up the next call before the first call ends.
- Send them some content that matches their pain points.
- Call back and answer their questions.
- Close the lead and sign the agreement.
Choosing Your Market: Where to Expand
How do you sell in a market where you don’t have local knowledge?
It takes work.
You might want to visit the area at least half a dozen times before you open your doors. But remember that a lot of work will be done over the phone rather than in person. You can begin gathering business before you have sales boots on the ground there. It might take longer. You’ll miss out on those face to face leads. But the number of leads you can close over the phone are likely to far outnumber the leads you’d close in person.
Competition is what drove Brad to decide to expand into Buffalo and Rochester. He went online and searched for property management in those areas. He found an opening for a company like his.
It’s easy to learn what you need to know. If you have a good contractor in the area and some leasing people ready to go to work, you can get all the information you need about a place online or over the phone.
You Know You Need Ancillary Services
Construction services have been folded into Brock’s business, and they offer full remodels and construction work. It’s easy to pitch this an advantage. Owners are getting professionals who know their properties. The safety and liability concerns are nonexistent because there’s no third party company to worry about.
Keep in mind that the construction industry is going through its own pivot. One out of three construction jobs are vacant because it’s hard to find someone to do the work. So, construction and maintenance as part of a property management business are valuable.
Facebook Marketing for Talent
Everyone who owns a property management company is forever on the lookout for new talent and reliable team members. Brock uses Facebook, and you can too.
The process is simple. Create a landing page for the position you’re looking to fill. Maybe it’s a leasing agent or a contractor or a business development manager. Target your Facebook ad to the people who might be a good fit: Realtors and handymen. If you have good copy and good information, you’ll get some leads. It’s not dissimilar to attracting new clients.
The Future of Property Management
We’re going to start asking all our guests what they see for the future of property management.
Brock sees it continuing to grow. This industry started in 2008, because of the recession. Renter’s Warehouse and Real Property Management got involved early, and it has grown since then. It will continue to do so.
Warren Buffet said he would buy as many investment properties as he could if he knew how to manage them. All types of people are in this industry. It’s getting bigger, and it’s getting better.
If you have any questions about what we’ve discussed with Brock, please contact us at Fourandhalf.