Podcast: Play in new window | Download
Summary:
The Property Management Show is back this week to continue our conversation with Ray Hespen of Property Meld. In the last episode, we talked about property management maintenance trends and increasing costs. Today, we’re mostly talking about how property managers can position themselves to have effective conversations with owners about maintenance.
Key Takeaways:
- Talk to owners openly about the fact that maintenance costs are rising. Explain that it’s happening everywhere – not just to them. Communicate. Educate. Don’t leave them to draw their own conclusions.
- It’s costly to lose owners, and to keep them your message needs to be that you can help deliver better ROI, even with the property management fee.
- Owner engagement has to move beyond a simple monthly accounting statement. It needs to be a live updated and ongoing conversation.
- You can prioritize keeping costs down for owners while still making money on maintenance.
Property Management Messaging
We learned last week that a 10 percent increase in costs is likely to drive an owner away from property management in an effort to lower costs by doing it on their own.
Like all of us, most owners don’t like to admit when they’re wrong. So, even if they begin managing on their own and realize they can’t keep costs down, they’re unlikely to return to their property managers.
The property management industry needs to pivot when it comes to messaging.
Stop talking about obvious benefits to property management – like peace of mind.
Instead, the constant message needs to be that you can deliver better ROI by managing lower maintenance costs.
Talk to owners openly about the fact that maintenance costs are rising. Explain that it’s happening everywhere – not just to them. Talk about the things you can do that they can’t:
- Increased buying power
- Access to vendors they can’t access on their own
- Long term relationships with vendors and contractors and suppliers.
- Internal maintenance teams
You have to share the right message and you have to make sure your owners believe what you’re telling them. This is all about perception.
Your owners need to believe that even though prices are higher, you’re still doing it for less than they could do it. Communicate. Educate. Don’t leave them to draw their own conclusions.
Stepping Up Your Owner Engagement
It’s costly to lose owners, and to keep them your message needs to be that you can help deliver better ROI, even with the property management fee.
The only reason anyone wants to manage their own property is because they believe they can do it cheaper than a property manager. Your job is to change this perception. It has to be the conversation you have with existing owners and new owners.
Selling new owners on peace of mind isn’t wrong. It’s true that you deliver peace of mind and protect their investments. But, you have to tell them what else you do. ROI is what matters, and right now you’re losing clients and not getting new clients because of maintenance costs.
You have to address that.
There’s a huge landlord market in the U.S.
Check out these statistics from Ray:
- 8 million rental homes are professionally managed in the U.S.
- 23 million rental homes are self-managed by landlords.
Retaining clients and acquiring new clients line up together behind messaging. If the industry can show landlords that property managers maintain homes at a cost that’s better than what they’re doing, there won’t be a self-managing landlord left in the U.S.
Messaging includes knowing your audience and their hot button issues.
Throughout 2020, property managers had an opportunity to market themselves as experts in the complex legal situation that the pandemic brought about. Landlords didn’t know if they could collect rent or send a notice, and property managers were relied upon to take care of that for their owners.
Now, we’re coming out of that. Courts are opening and evictions are happening. Rent is more consistent.
Maintenance costs are now front and center. It’s a new fear that property managers have to be prepared to talk about.
How Property Managers Can Position Themselves
Hopefully, you caught the podcast with the Real Estate Gladiators. Tracy Minick and Katherine Swanberg talked about how they constantly communicated with their owners everything that they were doing for them, even during an eviction moratorium and a difficult period in rent collection.
Talk to your owners about what you’re doing to save them money – even while costs are going up.
Ray has some additional recommendations on how property management companies need to position themselves right now. Here are his tactical suggestions:
- Explain what’s happening – maintenance costs are rising, and here’s why. Provide education.
- Talk about what you’re doing about it.
- Solicit preventative programs.
- Make this an active conversation at least once a month.
The owner engagement has to move beyond a simple accounting statement every month. It needs to be a live update and an ongoing conversation.
Not all your property owners are going to complain about rising costs. They’re just going to leave without any explanation. Get ahead of these conversations.
Owners need to see you doing things they wouldn’t have done themselves.
A good example is preventative maintenance.
The team at Property Meld is encouraging their customers to solicit for owner approvals to adopt preventative programs.
Maybe you can offer an annual HVAC inspection in March for $99. Explain why that expense is worth it: because the average air conditioning call in the summer is a $500 repair and you want to prevent that expense. This is part of how you keep costs down.
Owners wouldn’t do this on their own. It’s how you show them that you care about their money.
Work-From-Home Tenants and Maintenance Costs
With tenants still spending more time at home, appliances are being used more and wear and tear is happening a lot faster. Should owners invest in high-end materials and more expensive systems to avoid frequent replacements and repair costs?
It’s not much of a trend yet, especially among independent landlords. Institutional investors have access to the data that tells them exactly which model of which dishwasher will save them the most money in a rental home. Owners who are worried about costs can’t make it over this hurdle without the same data.
One thing a property management company might consider doing is buying appliances and items in bulk.
For example, if you can buy a stockpile of toilets, you’ll save 30 or 40 percent on what you’d pay to replace toilets one by one. Use your buying power.
Making Money on Maintenance
You can prioritize keeping costs down for owners while still making money on maintenance.
Maintenance is a huge cost center – a $75 billion industry.
Property managers who run high-performing maintenance teams make the most money in property management. Property Meld recommends using technician utilization rates as a KPI. If you want to be profitable with in-house maintenance, you need to keep your people busy doing work. Track it.
You don’t want to bring maintenance in-house and hire an arbitrary six people just because you expect that’s how many employees you’ll need. Start incrementally. Hire a handyman. When they’re at an 85 percent utilization rate, hire someone else.
Remember that you can always backfill with outside vendors. A hybrid system of in-house contractors and outside vendors usually works best for most management companies.
Messaging is tactical – that’s the message of today’s podcast. Make sure you’re positioning yourself so that owners know you’re getting them the best returns.
Check out the information Property Meld has on their website and contact us at Fourandhalf if you have any questions.
