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Are You Planning Properly for Rental Portfolio Growth?

Are You Planning Properly for Rental Portfolio Growth?

Before joining Propertyware as a senior vice president, Charles Riska helped grow a single-family property management business from a small regional company to over 6,000 doors. This rich experience gives him the ideal vantage point from which to look back and offer advice on how to create a roadmap for growth and institute changes when they become necessary. “Without the right planning and execution, you’ll either grow more slowly than you could, or not at all,” he warns, “and you’ll certainly be less profitable than you would be otherwise.”

Along the lifeline of a single-family property management business are predictable tipping points that necessitate changes, he says: “You don’t want these milestones to just creep up on you and leave you scrambling for solutions. If you anticipate them, if you’re proactive and plan, you can experience smooth growth without hitting crisis points in staffing, expenses, customer service and other areas.”

Mom and Pop, wearing too many hats

The classic early growth problem, Riska says, occurs when a small business expands to the point where the staff are wearing too many hats. For example, people who should be concentrating on leasing are buried with prospect and owner phone calls, and sometimes even maintenance issues.

“When you’re small, you can get by with people handling all kinds of functions for various properties,” says Riska. “But once you’ve reached a certain number of doors, this becomes an extremely inefficient use of your human resources. Your valuable people are capped at a certain number of doors because they’re buried by too much busy work to take on any more.”

The solution, he says, is specialization, often best accomplished by outsourcing.

“A contact center, either internal or third-party, becomes critical at some point,” he says. “Without this, you have expensive and talented leasing staff chained to phones for much of the day, handling things that can be handled perfectly by a specialized contact center with people trained in single family property management, like Propertyware’s.”

Riska says that to grow large without offloading calls to a contact center virtually guarantees an unnecessarily large and expensive staff. And beyond this, he says, customer service greatly improves with a contact center, since instead of reaching busy leasing staff who must get off the phone quickly, prospects reach reps with the time, training and information at hand to give them everything they need to move a leasing decision forward to the next stage. “They’re also available 24/7, unlike the office, and those off-hour calls aren’t accumulating into a pile of messages that need to be dealt with in the morning,” Riska says.

It’s not just prospect calls that can be outsourced but general questions from residents, he adds. “There’s no reason for valuable staff to be stuck on the phone answering questions such as ‘What does this mean on my statement?’ from an owner or ‘What’s this on my ledger?’ from a resident,” Riska says. “You can have less expensive people taking care of these things.”

Then there’s maintenance, which after leasing, is the most critical function in property management.

“A first-class contact center like Propertyware’s is staffed with people who know exactly what questions to ask in order to be able to enable detailed, actionable work orders,” Riska says. “Often you don’t get this level of information from a busy staff member who just writes down “AC broken.”

Riska explains that his former company actually grew to a size where it made sense to outsource maintenance itself altogether. “It was more expensive for us to handle it in-house, with a big payroll burden,” Riska says. “We had strategic contractor agreements in place that allowed us to realize maintenance revenue without boots on the ground.”

Teams of specialists

At a certain growth point, says Riska, the ideal structure of the property management company is an assemblage of teams of experts, both in-house and contracted. “The larger you get, the more it makes sense to have leasing agents doing leasing, maintenance people handling maintenance, accounting people doing accounting and even IT people doing IT,” he explains. “We did actually reach the point where instead of managing our technology in-house we outsourced it to an outside company.”

Riska says this structure was used as a selling point to potential owner/clients. “We’d say ‘You’re basically the CEO and we’re your board; we have experts in leasing, customer service, maintenance, accounting, everything, all on your board working for you.’ That’s much more effective structure than a team of people all running around trying to do all kinds of different things outside their core skillsets.”

Alignment of goals

Riska says that the typical PMC is owned by two or more people who divide up duties, often doing the actual work themselves until growth permits hiring. As growth occurs, he says, it is typical for these leaders to become wrapped up in their own areas of oversight and lose sight of the shared strategic goals and vision.

“The solution to this is simple,” offers Riska. “My partners and I had monthly meetings to review our written strategy and whether what we were doing was in alignment with that strategy. If we needed to pivot, we did. If we needed to review process changes, we did it in those meetings. Managing the business through growth requires a high level of communication between stakeholders.”

Planning for rental portfolio growth

Business processes change as businesses grow. You don’t do things the same way with three employees and 100 properties as you do with 30 employees and 1,500 doors. That’s why Riska says the PMC must stay well ahead of growth with careful process planning: to what levels of growth are current processes adaptable? Will they work at 500 doors? 1,000? 3,000?

“We had four different process manuals between January of 2008 when we had 1,000 doors and July of 2016 when we reached 6,000 doors,” says Riska. “Before we put anything into place, we’d ask ‘Will we have to change this down the road, and if so, how disruptive will this be? Is it better to put something in place now that can handle the growth and changes we anticipate?’”

Riska provides the example of businesses growing across state lines. “If you feel you will be expanding to other states but you ignore the differing regulations they might have until you get there, you might find you have to painfully alter the systems and processes you have in place to accommodate the expansion. You’d have been better off building this accommodation into your earlier plans.”

And that’s just one example. Riska says that one, three or five-year growth strategies help avoid later impediments to growth in areas as diverse as staffing, IT, maintenance, accounting and taxes, reporting requirements and office space. “The staffing issue, the transition from Mom and Pop wearing many hats to specialization of staff, is alone enough to necessitate advanced planning if you ever want to grow your business and profit,” he says. “But there’s so much more to consider.”

Software matters

When it comes to choosing software that’s scalable, Riska is naturally a bit biased: not just because he’s currently with Propertyware, but also because his former company built their business on its foundation.

“We invested in Propertyware after RealPage acquired it and we knew there would be all the resources that come with a large, strong company, including R&D and product improvements,” he says.

“The truth is that most software used for single-family property management is designed for businesses with up to maybe 200 or 300 doors,” he continues. “What you see is what you get, and it’s not customizable. You can’t change or add fields, and instead of tailoring the software to the way you do business, it’s vice versa: you have to change your processes to fit the software.”

Many small businesses, he says, start with a basic solution that does one or perhaps a few things, then add solutions from other companies as needs grow, ending up with a mish-mash of unintegrated software. “You’ll have a PMC that’s now a decent size using this inefficient assortment of property management software along with generic software such as Excel, and they would have been much better off at an earlier stage to have converted everything to a single solution that does everything they need.” This includes the more advanced reporting that comes with growth, he adds, as larger owners demand more institutional-quality reports.

Asked to summarize his advice for PMCs seeking growth, Riska says this: “Establish growth milestones, then look at each of your internal functions to determine the people, processes and technology you’ll need to achieve these milestones. Plan ahead. Ride the wave of growth rather than having it wash over you.”

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