What Does Fiscally Responsible Growth Look Like?

What Does Fiscally Responsible Growth Look Like? Twelve Markets and 4,000 Properties in 2.5 Years – How Benton Cotter Did It

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?

Wrong.

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.

Thanks for joining us on The Property Management Show, and we look forward to seeing you at the PM Grow Summit. Contact us at Fourandhalf if you have any questions about what you learned today.

Alex Osenenko

About Alex Osenenko

Alex’s professional mission in life is to help small businesses grow and thrive. Alex is the President and CEO of Fourandhalf.com and a Co-Founder of the PM Grow, Inc. His business philosophy is simple: Happy Customers are created by Happy Employees, which results in Happy Shareholders. Alex's deep commitment to entrepreneurship and improving the lives of small business owners everywhere empower him to host “The Property Management Show” bi-weekly Podcast and speak internationally on the subjects of Growth, Marketing, Sales, and Entrepreneurship.

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Desired Growth (# of properties) :
Average Monthly Rent :
Annual Contract Value: $0
Customer Lifetime Value: $0
Estimated Annual Profit: $0
Estimated Lifetime Profit: $0
Estimated Portfolio Value Upon Sale: $0

How we got these numbers

• Annual Customer Value (8% of average rent multiplied by 12)
• Customer Lifetime Value (4 multiplied by ACV)
• Estimated Annual Profit (at 20% of ACV)
• Estimated Lifetime Profit (at 20% of LCV)
• Estimated Portfolio Value Upon Sale (1.2 times ACV)

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Alex Osenenko
President and CEO

Alex’s professional mission in life is to help small businesses grow and thrive. He is the President and CEO of Fourandhalf.com and is serving his 5th year on the Board of Directors for CALNARPM.

After spending 9 years in the trenches with his property management clients, Alex draws on his experience to host “The Property Management Show” Podcast and co-authors a weekly Property Management Blog on Fourandhalf.com. Alex has extensive experience speaking for various NARPM events at the local, state, regional and national level.

Alex is a graduate of San Francisco State University with an Electronic Commerce Systems Degree. His business philosophy is simple: Happy Customers are created by Happy Employees, which results in Happy Shareholders. Alex serves on the Board of Directors of CALNARPM (California Chapter of National Association of Residential Property Managers) and hosts a Podcast “The Property Management Show“, available on iTunes.

 

John Bykowski
Chief Operating Officer

After graduating from the University of Michigan with a film degree, John proceeded to do everything but. During his career, John has specialized in operations and has developed processes for small companies in diverse industries, such as bleeding-edge marketing technology, social networking, trade shows and exhibitions, and cloud software. John and Alex had worked together previously, and when he needed someone to help take Fourandhalf to the next level and beyond, Alex brought in John as his first employee, and later, business partner.

In addition, now that he’s using his film school know-how to help property managers look their best in their blogs, his mom no longer feels his degree was a complete waste of time.

Danny Morris
Director of Account Management

Born in Australia and growing up in Israel, Danny has spent a lot of time traveling the world between those two places. After completing his military service in Israel, Danny began following his biggest passion, writing, which he discovered while backpacking South America and publishing his first book.

When it was time to unpack, he returned to Australia to complete his Journalism studies amongst the beaches of sunny Perth. Danny is a huge online fan and after working in a number of related jobs, he finally gets to combine his two favorite things, working with media and people.

Marina Osenenko
Product Manager

Marina draws upon her real estate, business operations and customer service expertise for Fourandhalf. Her favorite part of being with Fourandhalf is the opportunity she has to really get to know our clients, build professional customer relationships and truly be part of a team that assists in their success.

Her time away from work is happily spent watching her children grow up and attempting to keep up with them! Any spare moments beyond nurturing her children are filled with hiking, spending time with friends, exploring the Bay Area and squeezing in a non G-rated movie every now and then.

Marie Liamzon
Product and Marketing Manager

Before joining Fourandhalf, Marie worked for one of the largest banks in the world. She took on different roles, but couldn’t find what she was looking for. She pursued a variety of side projects until she finally decided it was time for a career change.

Marie is very passionate about helping people and learning new things. In her spare time, you might catch her exploring new places and taking far too many pictures.

Kyle McLean
Customer Success

Born in San Diego County, Kyle McLean has since migrated to the Oakland woods. A fan of tall trees and tall tales, he holds a bachelor’s degree from the creative writing program at the University of California, Riverside and is a licensed California Certified Shorthand Reporter.

After a few years as a freelance court reporter, Kyle has joined Fourandhalf for an opportunity in sales and digital marketing. In addition to reading and writing, his hobbies and interests include gardening, hiking, soccer, coffee brewing, and craft beers.

Karen Wyle
Account Management

Originally from the Philadelphia area, Karen moved eight times in seventeen years all over the East Coast and to the Midwest before settling here in Northern California six years ago. She is an alumna of Brandeis University with a BA in American Studies and earned a MBA in Marketing Management from Indiana University in Bloomington. Karen’s business career has been well-rounded, with experience including advertising, direct marketing, corporate retail, product management, new product development, and new customer generation. Beyond an office setting, she has been thrilled to volunteer her time giving back to the community with KPMG’s Family for Literacy, at her daughter’s school, and as a Girl Scout Troop Leader. Karen enjoys music, good food, traveling to new places, completing jigsaw puzzles, meeting people and making connections.

Karen became a part of Fourandhalf’s Account Management team in 2016, relaunching her marketing management career after a pause to raise her family. She is excited to rejoin the business world and to work with such a strong marketing management team.

Paige DeRuyter
Account Management

Paige graduated from Chico State University with a degree in Journalism. Her favorite part of working at Fourandhalf is helping clients create and produce educational blog content to grow their business. She is an avid sushi enthusiast who enjoys riding her bike and watching college football and in her free time.

Nissim Boozaglo
Web Hosting Support

After working as a Radioshack store manager, Nissim decided to change his career path and pursue his passion for music production by getting his B.A.S. from Expression College for the Digital Arts. Nissim has a beautiful 8-year-old girl and loves cooking delicious homemade food and going camping with her! At Fourandhalf, Nissim is responsible for the implementation of the clients’ Landing Pages and Google Adwords campaigns.

Theresa Barnes
Campaign Director

Theresa Barnes was born and raised in the Bay Area and graduated with her Bachelors Degree in Communications Studies at San Francisco State University. She worked in aviation at a private FBO for 3 years, and other industries, before joining the Fourandhalf team. She finds a balance between being a young mother, work, and living a healthy lifestyle outside of work by staying as active as possible. She is dedicated to customer satisfaction and having a great work ethic.

Brittany Stephens
Campaign Director

Brittany recently moved to the Bay area after graduating from California State University Chico with a degree in Business Marketing. She is known for her excellent communication, customer service skills, and shameless nerdyness. Her passions include: music, tabasco, Lord of the Rings, and the Golden State Warriors.

Logan Jones
Business Development

After graduating from CSU Chico with a Degree in Business Marketing, Logan moved back to the East Bay and pursued a career in sales. With an attention to detail and a relentless drive, he strives to improve himself and his passions each day. When not at work Logan enjoys playing guitar and writing songs, and occasionally performing around the Bay Area. He is an avid sports fan keeping up with everything SF Giants, 49ers, Cal Bears, and Golden State Warriors.

Hope Lumbley
Account Management

Hope recently moved to the Bay Area after graduating from Chico State University with a degree in Journalism. She is coffee crazed, dog obsessed and hopes to visit all National Parks. One of the greatest times in her life was when she lived abroad in Costa Rica and hopes to travel more of Central America in the future. She feels blessed to work for a company who supports her love for travel and the need to learn more about what the world has to offer.

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