At some point in every real estate broker’s career – and probably more than once – they will be asked, “have you ever considered going into property management?”.
If your initial reaction to this question as a real estate professional is “No way, no how!” then let’s take a realistic look at how property management services, and your real estate business, could work together.
Evaluate the Logistics
First are the business basics to consider before entering the property management field:
- While demographics might show that Las Vegas residents are almost 50% renters, you need to actually consider the local occupancy and vacancy rates in your area? Just because your real estate brokerage gets calls for rentals several times a week doesn’t necessarily mean that there is a need for you to fill.
- Interview top-rated property managers in your area to discuss the two key factors: time and money – how much of a time commitment is involved compared with the financial rewards. Evaluate all the tasks that you’ll have to do as a property manager. Are these jobs you have the time to manage for the income you will earn?
- Since you already have a real estate business, obviously you know the real estate rules and regulations, Fair Housing laws, and the market. In most states you are qualified already for property management, but there are exceptions so confirm that your state’s rules aren’t cost or time prohibitive.
Consider Your Professional Goals
Now let’s revisit your real estate career goals through a ‘pro and con’ lens and see if adding property management fits. The following are five of the top reasons real estate professionals give for choosing their career:
- Be your own boss. Yes! You chose real estate because you’re working for your end goals, not to boost someone else’s early retirement. The pros and cons for this depend; if you’re the landlord AND property manager, all of the proceeds end up in your pocket. If you manage someone else’s property, you have just acquired a boss, but you may also be the boss of a new property management team.
- Flexible schedule. The biggest con here is that renters definitely don’t plan their emergencies during your work hours, whichever hours you choose. Depending on how ‘hands on’ you are, you may be tackling a plumbing issue at 10 pm on Saturday night and then showing vacant units all day Sunday. However, the pro here, is that as a real estate professional, you already do this! Your flexible schedule means that you and a client spend all Sunday looking at properties, and all Monday evening (after your client gets off work) writing up the offer. The additional pro is that parts of property management, such as maintenance, can be delegated, unlike writing a contract with your client.
- Earn a large income. Real estate sales is still a profession that does not require an expensive degree with years of student loan repayment. Diligence pays off and can pay off well. The con here is that anything that cuts into the time required to maintain your current income, may require you to adjust income expectations, at least initially. The pro is that you can make sure property management pencils out ahead of time and the predictability of the income may be attractive.
- Variety in the work. One morning you’re calling prospects gathered from an open house, later you head out to a client’s home inspection, and to end the day you’re taking buyers to see ‘properties with pools.’ The cons may just lie in the type of work but if you can generate leads and schedule inspections, you can process tenant applications and manage vendors. Your skills in performing CMAs will prove beneficial when the rental owner asks you to assess the current rental market ahead of a rent increase. The pro? Again, you’re already doing it.
- Desire to help people. If this was one of your top reasons for going into real estate, opening a property management business could be an even more satisfying way to achieve this goal. For the right person, this is all pro, no con.
Personal Skills for Property Management
Now, how do you measure up personally? Let’s look at the top personal skills required in property management:
- Communication skills. You’ll need to raise rents, manage complaints, and evict tenants all with a positive but firm attitude. You’ll need to explain all of it to your property management team. And last (but not least) you’ll need to communicate well with the owner of the property. But building relationships is what real estate brokers do – ask anyone from Brian Buffini to the one-person real estate shop on the corner.
- Problem solving. Again, this is another crossover skill. You’ve kept $400,000 deals from falling out of escrow over roof repairs, you can seriously handle leaking roofs!
- Time management. Most jobs require some level of time management, but adding property management to a real estate business is a good way to test your system: a pre-approved sales client wants to spend the afternoon looking at houses with acreage but a fill-in-the blank emergency calls you away to the four-plex you manage.
- Record keeping. Incorporate the property management records into the organized system you already use for real estate, or adopt the owner’s preferred system. Either way, another tool in the shed that you already own.
- Adaptable. You handled the surprise deer head in the closet while showing a house to your vegetarian client, what will you do when tenants call the police on each other in the middle of the night?
Is the timing right?
Lastly, there are several life-timing situations that may lend themselves to naturally adding property management to your real estate business.
- New agents. New agents are often enthusiasm rich and cash poor. Taking on property management may be a good way to combine that enthusiasm with regular cash flow. As real estate agents know, sales fluctuate seasonally. The rental market is relatively stable and may be able to carry a new agent during down times and seasons.
- Prospective investor agents. Nothing beats hands-on experience! Negotiate with someone else’s tenants over a few ‘iguanas as therapeutic pets’ before actually buying a townhouse to rent to see if you have the right temperament.
- Retiring agents. Agents staring down retirement but who would still like the peace of mind of a steady income stream may find property management an ideal ‘second-career’ professional move.
As you can see, many of the skills and traits that you already possess as a real estate professional are the same skills and traits you can tap into as a property manager. Obviously there are some differences, working overtime to keep a deal together in real estate sales rewards you with an immediate payout of a five-figure check. Working on Thanksgiving night to extract a fork from the garbage disposal of tenants is just another (holi)day at the office with a longer term payout of less rental turnover and more stability.
Any one of these issues could be a deal breaker, but as you’ve learned in real estate about overcoming objections, just because now may not be the right time, it certainly doesn’t mean never is a right time. Set yourself a reminder to revisit the question in six months or a year when the ‘no’ answers may have turned to ‘yes.’
So, the question remains – you’ve looked at the evidence and compared the pros and cons – is now the right time to add property management to your real estate business?
Karla Allen is a researcher and writer for real estate with ayporealestate.com, an online education provider which provides prelicense training and continuing education in all fifty states.