We’re back on The Property Management Show with Kathleen Richards. In Part I, she shared her story about buying and selling a property management business, and how she introduced herself to her new employees and clients.
We ended the chat talking about toxic owners and how to deal with them while acquiring a business.
Property Management and Customer Service
Giving bad owners permission to leave is helpful when you acquire a new business. And, if you don’t call people out on their bad behavior, you’re telling them you are okay with it.
Don’t do that.
Make sure you can distinguish the bad owners from those who simply need a new strategy.
In her first six months of taking over the business, Kathleen had to fire a couple of owners that were not working out. Overall, she was committed to being proactive with people and letting them know that she was there to help.
One owner had extremely high expectations. Kathleen is fine with high expectations, but what she didn’t like was his habit of bringing up every mistake that had ever been made with his properties. These are problems that pre-dated Kathleen, but he hammered away at them anyway.
Kathleen told him that she represented a fresh start. She suggested that they tour all of his properties together. They did that, and then they sat down over lunch and discussed what he wanted to do with each property. It was a meeting of the minds.
It delivered a great outcome. Everything was reviewed together and they agreed on a course of action. Moving forward, he agreed to let Kathleen do her work without bringing up past mistakes where everything went wrong.
It was about discussing what could be done together, and the relationship improved dramatically from there. This owner became a favorite client and a dear friend.
Setting expectations is an important part of the acquisition process. Tell the owners who you are and what they’re getting with you. They need to know how you operate.
Communicating with Your Employees While Acquiring a Property Management Business
Be positive when meeting with employees. Invest in the time it will take to sit down and talk to them. You don’t want to give superficial assurances that everything will be okay. This is new for you, and you’re excited. But, the employees you’re meeting with are likely scared.
Connect with employees by asking a lot of questions.
Listen to what they’re saying.
Get them to understand that you need each other.
Seek their advice.
Ask for ideas.
Find out what their career plans are. There may be room for pay increases. Discuss a performance plan. Show them that you’re looking to work with people who are excited to be contributing to the company. When you come into a new team from a place of compassion, you’ll earn their trust.
Employees leaving is not usually the problem.
The problem is that they’re stuck in how they’ve always done things. “That’s not how we do it” is commonly heard, and there’s often resistance to some of the change that’s coming.
Getting employee buy-in will matter. Performance growth plans will matter.
Find out how to work with your employees. With remote working, you might find out that someone is starting to care for a parent. Why not see if they can work from home for some hours? If you’re willing to work with your people, you’ll see they are bringing a lot to the table.
What can you bring to that table?
Have a meeting of the minds.
When you’re talking to your employees as a new owner, ask more. Tell less.
You also want to make space for emotions. It’s okay to be sad when the company is sold. Be compassionate and acknowledge their grief.
Retaining and Restructuring Tenants
How can you retain good tenants and set boundaries with problem tenants?
Problematic tenants need to be dealt with head-on. Enforce your rental agreement and remind your tenants about what the rental agreement says. You cannot just evict nasty tenants anymore in California. You need just cause.
People skills are necessary when dealing with tenants. Here’s an example Kathleen provided:
A tenant was late with rent every month. She would come in and pay $200 and then $400 the next week. Obviously, the prior owner had allowed this. Kathleen met with her at her home and realized she was living in a three-bedroom home all by herself. It turned out this was the home in which the tenant raised her children. Kathleen suggested finding her a one-bedroom with lower rent. It was less of a financial burden.
She could have said no to partial payments, and she would have been within her rights. Instead, she began asking questions and finding out a better way.
Owners, tenants, and vendors typically want to do the right thing. But maybe the owners you’re working with have had multiple property management companies, and they’re scarred by previous experiences. When you let people know how you can have a successful relationship, they’ll rise to the occasion and be willing to participate.
Another example Kathleen shared is from 2009 when she had a tenant who was downsized from a job in Silicon Valley. Instead of evicting him because he could not pay rent, they put together a plan. He moved out as soon as it was possible, and a new tenant moved in.
There is always a solution as long as you can have a conversation and problem-solve.
Talking and communicating is where it starts.
When you communicate with residents, they feel like you’re there to help them. Remember that you hold a lot of power over your tenants. You are connected to the roof that’s over their head. Try to come to them from a perspective of wanting to help.
Solve problems together, Kathleen advises. This is what has worked for her.
A tenant was a nurse working nights and sleeping during the day. He kept calling because other tenants were noisy and he could hear the kids playing all day while he was trying to sleep. They weren’t doing anything that isn’t normal, so Kathleen had to suggest that living in a fourplex might not be the best idea while working nights. She helped him find a unit with a bit more quiet.
Kathleen is simple and straightforward. Honesty and integrity are her two main business values, and she tells all prospective owners that. If they want to get $6,000 a month in rent from a studio apartment, she’s not going to lead them to believe that she can deliver that.
Building up trust is important as a new business owner. You have to elevate your communication.
Scaling the Service Model for Larger Property Management Companies
The examples Kathleen has provided are perfect for a small business when it’s possible to reach out to individuals. What if you’re buying a giant business and you can’t really just pick up the phone and have those conversations directly?
If you’re buying 1,000 doors or 2,000 doors, that’s not your role. You shouldn’t be calling every owner.
Understand your position in the company. In a large business, you have departments and teams and an organizational chart (pleasehave an organizational chart).
Basically, you have a more defined structure to your business. The owner communication will be up to your property managers, who you need to trust to speak to their owners the same way you would.
You’ll need to empower your team.
Kathleen doesn’t hire anyone without knowing how they handle conflict and challenges.
In a larger company, make your property managers the experts. Defer to them when it comes to doing what they do best. This empowers them when they need to handle things.
Put together a monthly training session with your staff about expectations and customer service once you’ve been in an ownership position for a while. Find out how they do things. Train them to become leaders.
Very successful companies like Coldwell Banker and Starbucks and In-and-Out Burger all have specific training programs in place for employees. Once you grow from a small business, you have to scale the training and the mentoring. Universities can exist within companies.
Don’t show up as a know-it-all when you’re a new owner. Get down on the ground floor and always be in a place where you’re assessing how you can improve. Make your staff your leaders.
What about the future of property management acquisitions?
Many venture capital companies are buying everything up. But, there’s still a place for smaller companies. In the marketplace, there are always going to be owners who want to work with smaller property management companies. They appreciate the unique service.
Your business model is not going to go away.
If you have any questions about how to acquire a property management company with ease, get in touch with us at Fourandhalf and we’ll talk further about this podcast and how we can support you.