On this episode of The Property Management Show, we’re talking to a guest about fiscally responsible growth after he emailed Alex a response to the podcast about Mynd.co and Doug Brien, who received a lot of venture-backed funding to grow a property management business.
Benton Cotter remarked that it was a great interview, but thought our audience should know that it’s possible to grow a property management company quickly without raising funds.
We thought that might interest you, so he’s here with us today, talking about how he went from 450 properties two and a half years ago to 4,000 properties today, in 12 markets. He has no venture capital backing him, and he calls his strategy fiscally responsible growth.
What’s more – he wants to get to 10,000 doors in 20 markets by 2020.
Benton is the co-founder of RentVest (rentvestpm.com), and he has a lot to teach us.
Growth through Acquisitions vs. Organic Growth
Initially, a big company fell into Benton’s lap in Phoenix, bringing 850 doors with it. So, the breakdown has been about 60 percent acquisitions to 40 percent organic growth for RentVest. The key to finding people who want to sell is simple: cold calling.
Benton and his business partner, Jacob Ash, get lists of property management companies from NARPM and other sources, and they make a phone call and introduce themselves. It doesn’t take long to get an idea of whether there’s a deal to be made. If you want to grow this way, get connected. Talk about what you have to offer, and start building the relationship.
It’s a hustle.
AdWords and Its Role in Organic Growth
Growing by 700 units organically is some pretty incredible growth, and it was done in new markets. Benton admits he doesn’t have great SEO. But, he does have a firm grasp on how AdWords works, and it’s the cornerstone of his digital marketing efforts.
AdWords delivers a benefit that others platforms cannot. It captures people who are searching and learning and visiting websites. By the time they pick up the phone to call you about your management services, the lead has really self-nurtured already. They are taking the initiative to call you. That gives you a tremendous advantage when it comes to closing business.
The approach to AdWords is strategic and includes:
- A projected customer acquisition cost for AdWords before opening a business in a new territory.
- An understanding of the search volume in an area.
- Researching search terms and average monthly rents and competition.
- Spending $1,000 or $2,000 just testing a market. This provides a good idea of what can be done and what it will cost to attract customers.
- When you know your cost per click, you can figure out your cost per lead and your cost per customer.
All of this data helps Benton decide where his company has a chance to earn the most ROI. It’s hard to get it wrong when you have this data to work with.
With a plan to move into more markets, adopting a system that’s easy to duplicate is critical. Benchmark the data, check the data, and study how it works in each market. There are always going to be variations, but when the system is easy to duplicate, growth is inevitable.
Mailers as a Marketing Tool: How to Reach New Audiences
Mailers have not worked particularly well for Benton because they results are so different in each market. He prefers the digital marketing strategies, where the leads he receives are prepared and already in the buying funnel.
But, if you’re growing your property management company, mailers can work.
Five or six touches are usually required. It can be expensive, but not cost-prohibitive. You get a different set of people than you’ll get through an AdWords campaign or other online marketing leads, and you’ll never overlap. Prospects aren’t going to receive your mailer and then also click on your AdWords campaign.
It’s a different clientele, and they require a trigger. But, with those five or six touches, you’re able to convert.
A Unique Sales Process: Enabling Entrepreneurs
It’s no secret that the property management industry has some catching up to do when it comes to operationalizing sales. With Benton’s explosive growth, he must have a pretty outstanding business development manager, right?
In emerging markets, keeping the overhead low is critical. So instead of hiring BDMs, Benton goes after really qualified employees and agents. And, their success starts with their ability to sell.
Finding someone who is strong with sales and marketing and also knows property management can be a challenge. In their emerging markets, Benton uses 1099 employees. Their first month on the job carries one task: to grow a business.
Can they sell?
Can they be effective property managers?
Can they present a message and understand the sales content and read a client?
That one unicorn of an employee who can sell, manage maintenance, and be the overall real estate expert who can help landlords buy and sell will do very well opening up an office for Benton and his company.
This defines fiscally responsible growth. It’s keeping overhead low and finding just the right person to help you grow your market and your business. If you cannot afford a BDM, a broker, and a property manager in one place, you need to find a rock star.
Conversion often depends on those rock star employees.
Underperforming agents know where they stand. The company provides KPIs and expects the agents to measure and evaluate themselves. This creates self-awareness, especially when conversion rates are shown to everyone in the company. They know where they stand. They also have the freedom to deviate from standard procedures if it means success. These 1099 employees are treated as entrepreneurs. They need to be creative, and they need to be exposed to as much information as possible.
Establishing a Pricing Model with Potential
RentVest has a simple, flat-free pricing model of $80 per month. With a motto of just say no to business, they choose high-performing properties with high-performing tenants. They have very few $100,000 properties. They have one multi-family home that they inherited. Generally, they manage single-family homes with three bedrooms, two bathrooms, and a rent that’s between $1,600 and $2,500 per month.
With quality homes, you’re working with landlords who have the funds to buy more properties. You’re getting quality tenants with enough income to afford ancillary fees and optional services like renter’s insurance and filter programs. Provide these owners and tenants with value, and your revenue will increase.
Lease-up fees are 50 percent of one month’s rent.
Tenants pay an administration fee at move-in and a monthly administrative fee. These things are common in Arizona, but not in all markets. Those fees are justified with the cost of maintaining the tenant portal and the ease of paying rent online.
Other auxiliary services are offered. Your property management company can bundle services like cable or satellite television and utilities. You can offer real estate services. Offer your tenants a credit repair program so they can start preparing to become buyers. If they’re already in good financial shape, offer them the opportunity to become landlords themselves. This is rentvesting; when a tenant buys a home to gain some income and equity. Then, they can either move into that property or sell it and buy something else.
There are a lot of revenue options with your owners and your tenants.
Benton currently earns 85 percent of his income from property management fees, and his goal is to bring that down to 60 percent, with his complementary business units bringing in 40 percent of his income.
Scaling Locations and Managing People
When the single rock star agent at one of Benton’s location grows to over 100 doors, it’s time to hire a second agent. The original agent can maintain their portfolio and continue to earn referral business. They even had one agent hire an assistant. It’s been a work in progress.
Technology as a Means to a Customer Service End
Benton’s role is not operational, but focused on marketing and technology. He’s very hands-on and has even built some of the tech that’s being used by his company.
Technology is expensive, and part of running a fiscally responsible business is wearing multiple hats. SalesForce is the software of choice and they also use PropertyWare. Big data helps them tremendously, and they’re integrating everything they can, whether that means building an app from the ground-up or working within one of SalesForce’s modules.
Big data has helped with calculating KPIs and lead cost. Benton knows the cost of leads in every market. In Phoenix, it’s $22 to $40 per click and in Reno, it’s about $9 per click. Their average cost per click is around $18. Technology is stacked to help them earn smart money.
If you’re not tech-savvy yourself, work with someone on your team who loves experimenting with software and apps. Let it be someone’s secondary function. You don’t have to bring on an expensive software guy or IT expert. If your accountant also loves writing software or gets enthused about making a current tech system work better, they’ll spend some extra hours on it and build whatever they want. There are plenty of free platforms out there to help. Let that person experiment for a while before releasing it to the whole staff.
Remember – tweaking software is going to help you succeed as a fiscally responsible company. But, no amount of outstanding technology is going to help you if you don’t have a purpose and a vision. Software is a solution, not a purpose. As an industry, we need to get better educated on customer experience.
If you’re thinking about the customer retention game (and you should be), try this book that Jordan Muela recommended:
“Never Lose a Customer Again” by Joey Coleman.
Customer engagement has to be first. You have to know what they want. Don’t go out and build a huge tenant portal with all the bells and whistles if all they want is a way to pay rent online and request maintenance.
Alex always says there are three core principles to business success:
- Define your Purpose
- Know your Numbers
- Culture of Experimentation
Benton is an example of all three. There’s how he got to 4,000 units in 12 markets in two and a half years.