Management One Property Management

Advantages of a Residential Property Management Company In Your Real Estate Office

“Cash is King.” We’ve heard this in the financial world forever, but even more so in the Real Estate business and your Real Estate office where it can be very volatile with changing markets due to things Brokers/Agents can’t control. I experienced a 21 ½ % prime interest rate in 1982 and mortgage rates as high as 17 1/2%, to the prime interest rate of 4% in 2017 and mortgages rates at 3 1/2%.

Monthly consistent cash flow of even a small amount of $5,000 t0 $15,000 a month can go a long way in keeping the doors open and not losing a significant investment you’ve made in your Real Estate sales office when the market goes south.

Just 50 doors could provide you with $7,500-$10,000 a month in monthly cash flow. 50 doors can be attained just by the clients you service now and a few referrals in as little as 4-6 months.

Stacks of coins with the words CASH FLOW on top

In good times, the cash flow can be used to expand either your property management company, your Real Estate sales, purchase an investment property for yourself or just plain take a 3-week safari vacation.

1. Cash Flow Gives Your Entire Real Estate Office Stability

Consistent cash flow gives you something else that even I didn’t see, and that is great peace of mind and a sense of comfort. When you know all your bills are paid in your property management company, your Real Estate company, and your personal bills, a feeling of relief comes across you that’s hard to explain.

It gives you time to think since you’re not concerned about the bills and overhead. You can really spend time thinking and strategizing how to either build your Real Estate Company and sales or your Property Management Company and how to cut cost in both, thus boosting profits even more.

 2. You Can Use Some Of Your Real Estate Offices Current Facilities, Staff And Agents To Start

 

Your Real Estate office and agents are a built-in platform for you in a number of ways:

  • You can use one private office in 100 sq ft with two workstations that you’re probably using for storage now
  • Some of the office equipment you will need you may already have most of it
  • Your Real Estate Receptionist can answer the phones and customers walking in
  • If you yourself will not be heading up your property management company, you’ll most likely have an agent who does moderate in sales but has great people skills, who would be excellent in this role as a property manager
  • Some of your other Real Estate Agents can show properties for rent
  • You already have a Real Estate License which is adequate in most states
Businessman Discussing With Female Colleague

The number of staff that you need if you have property management systems is one staff member for every 75-125 doors (a door is one resident one property).

Agents starting out with limited or no property management experience usually begin closer to 75 doors. This person would do most everything, then at 75 doors, you would need to hire a second staff member.

Your property management systems would tell you what the second person needs to be, and exactly how the workload of the entire company is split between those two with a detailed job description that is already set out for you.

The resources you already have can greatly reduce your upfront investment. Your dusty storage room can be repurposed into a cash cow that pays you thousands monthly.

 3. Creates Listings At Zero Marketing Cost 

 

Who doesn’t like listings, especially at zero marketing cost? With great property management systems, your owners of the rental properties will receive exceptional customer service because “systems” create great consistency and trust.

So, when it’s time for them to sell, you will get 90% of the listings. Here at Management One, we do just that.

Couple shakes hands with realtor outside new house

Since the listing came in virtue of your new management company, your ROI is infinite. Think about it: If someone was to refer you 25 listings a year, and you paid them no referral fee, how would that change your bottom-line for the year in your Real Estate office.

With just 300 doors you will have hundreds of investors of the other properties you’re managing. Many times, you will have another investor client buy the property you just listed. The investor gets a property that is rent ready with a resident who is paying rent and ends up with no vacancy or repair cost.

You receive a commission on the listing side, the sale side, you keep the management of the property, and your management fees keep coming in. In addition, it’s a simple transaction since you control all facets of the sale and escrow.

Depending on your market you can earn a commission of just $6,000 – $10,000 on each listing that is $150,000 – $250,000 a year since the management company keeps producing new listings every year.

So, your property management company becomes another marketing tool for listings for your Real Estate office.

 4. You Get First Option To Buy Properties

By owning the property management company, you will know first when they are ready to sell, giving you the first option to buy it for your own Real Estate Portfolio.

Here are the advantages:

  • You know the maintenance track record of the property
  • You know what the neighborhood is like and what the appreciation % has been every year on the property
  • If the owner is having trouble making the mortgage payment, you’ll already know, as your residents would have gotten postings on their door
  • You will know if the property is located in a growing part of the city that will continue to increase in price or not
  • You know the track record of the resident paying and taking care of the property
  • And the property is already rented so you get to rent the day escrow closes
Real estate concept

This allows you to build your Real Estate Investment very quickly. If there are properties you determine you don’t want to buy, you can list and sell them.

 5. Creates Buyers At Zero Marketing Cost

Residents who give a 30-day notice to vacate the property, or residents who do not renew their one-year lease, indicate they may be looking to buy.  This is another opportunity to create commissions at zero marketing cost in obtaining a new buyer.

One option is they could possibly buy the property they are living in, in which case you would get the listing and the sales commission if the owner was going to sell anyways.

Buy or rent real estate property concept

Option two is you find them another property on the open market. This also allows you time to find a new resident for your owner’s property they are moving out of and reduces their cost of vacancy since you can start re-renting it during the process of you finding the current resident a property buy. So, it’s a WIN for your current Owner, WIN for your current resident you’re selling a home too, and a BIG WIN for you as you get a commission and keep the management at zero marketing cost.

 6. Creates An Asset You Can Sell

With a Property Management Company, you have a cash flow asset that you can sell on the open property management market of some 84,000 companies nationwide.

You can also use it as an enhancement to sell your entire Real Estate office. Selling just a Real Estate office on its own can vary due to the branding that you’ve created–especially if you’re not a Real Estate Franchise and sometimes might not be able to sell it at all.

First, I want to discuss what you can expect to receive if you’re just selling the Property Management Company. To begin, the pricing of a Property Management company today can vary from 1- 2 ½ times gross annual earnings.

security deposit

If we take the average of 1.75 for a company that is grossing $700,000 a year in management fees and other ancillary fees times a factor of 1.75, that would give a selling price of 1.2 million. There are many variables that make up this valuation, and this evaluation can vary from company to company and State to State.

Want more details? Click to get the facts 

Banks LOVE to Loan Money to Purchase a Property Management Company

A very big plus you have in selling a Property Management Company is banks love to loan on them. Think about anytime you’ve gone to the bank for a loan, the Bank always asked what your form of repayment is, right?

When you can show the Banker a track record of your rent role and verify it with your tax returns, Banks open their arms for your buyer. So, your new buyer would have no problem getting a loan; therefore, your Property Management Company becomes a very marketable asset.

If you were wanting to sell your Real Estate office operations and your Property Management company together as one package, it’s easy to see the advantages of having a Property Management company in the mix.

In this scenario, the buyer would be getting $700,000 a year / $58,000 a month in gross management fees on a 300-door company.

In addition, the buyer is getting the possibility of 300 future listings as all the owners will eventually sell.  Being conservative, if they only received 50% of the listings at a commission of $10,000 for each listing, that equates to $1,500,000 in commissions over the future years.

So, where it might have been a tough sell to sell your singular Real Estate company on its own, now it’s not.

 

 

Property Management Systems Guide

Call 949-721-6695