Understanding Property Management

Well, greetings, and thank you for staying with us for this series on cashing in on property management. The conversation we're going to have is kind of an unfolding one through the different parts of the preliminary conversation we're having about cashing in on the business. We talked about how this is a nickel dime thin margin business, how it's a service business as compared to a sales business, how that has to really change your thinking about how to turn it into a money machine. What we said was there's kind of two parts to this conversation. One is the mental part, and that's kind of what we're on still, is how to get our heads right and how to think correctly about the business.

And then the next one is the actual implementation part, which is the rest of this website, and we'll help you do that. Okay?

Unbundling Services

So this section talks about four keys for cashing in on property management. So we're going to go through really a set of four different videos here to kind of unfold some good thinking about how to turn this business into a real cash cow. Okay? So the first one we're going to do is how to unbundle your services, called unbundling your services. Now, to describe this, I came out of the sales business, and one of the things I noticed about that business is that you didn't make any money until the actual finish line.

And the brokerage business, as we know, is you're going to tie your income to the outcome. And so you ran for two months, three months, in some cases five or six months, and then you got one great big giant check at the end. That's called bundling up all your services. You didn't charge the owner when you made trips to the property or ran an ad. You didn't charge the owner anything when you processed a contract or fell through or got an appraisal or did a home inspection or anything like that.

We bundled up all our services into one gigantuous check, and that's the opposite of the property management business. But before we go on to the management business, let me give you a couple other examples so that you kind of get this idea thoroughly locked into your brain. The telecommunications industry are masters at unbundling their services. If you want to get a cell phone and buy some minutes, you can get voice minutes or text minutes or FaceTime minutes. That's called unbundling.

You can have weekday minutes. You can get a rate for weekdays, for weekends. You can have another rate for after 5:00 or 6:00 at night. You can get another rate for friends. And so the phone industry has learned to unbundle all their services and let you select and choose exactly what you want to do, and they get paid for each one of those services.

Here's another example you may be familiar with. Fifteen years ago, when I would fly to Texas, I might pay $300 for a ticket, and I'd drop my baggage off at the baggage drop-off area, and I got on the plane, had a nice lunch, maybe even a soda, a glass of wine or something, and I didn't pay anything else. I arrived there, and there was my bag. Everything went just fine.

Bundled their services. Now, in the last 10 years, what have the airlines industry done? Yeah, they've unbundled their services. So today, I pay $350 for a ticket to Dallas, and then I go and I drop off my bag. That's another $35, $45.

If I get on the plane, I can't expect lunch. I might get some peanuts or some salted c******s. But a Coke can cost you money. A glass of wine or a beer can cost you money. So the airlines industry as well has learned to unbundle their services.

Well, when you're making this transition from the sales business to property management, you've got to get there quickly and understand that since it is a nickel dime thin margin service business, you can't use the same principles that you learned on how to make money from the sales world. And that was a tough transition for me, and it's tough for a lot of people because the idea of charging owners for events and tasks and things like that was very foreign to me, and I always thought that you charge one big fee, and that should pay you to work for all the things that the owner wants you to do during the process. It just didn't work out that way, and people that have been in the business have kind of learned this.

But a lot of folks that are new in it don't understand this term, and you've got to get it clearly in your head that you've got to unbundle your services, and you've got to learn to charge for things like pulling up old owner statements when the owner's getting audited, or they want you to run out to the house and see if the local tornado or hailstorm did any damage to their roof, or they want you to run up to their house and pick up their mail and forward it to them or turn off the lights they left in the house. Owners will ask you to do a jillion little things, and if you try to bundle up all your services in that $80 a month management fee, you'll go broke. Your staff, your labor costs will go through the roof.

You won't be able to make any money. But if you learn to unbundle your services and say the $80 a month pays for this, but it doesn't pay for all this other stuff, and you begin learning that there are tasks and things that they will ask you to do that you're going to say, "Yeah, I'm happy to do that, and the charge for it is this." Okay? And we'll kind of unfold that conversation a little bit more. So principle number one in these four keys for cashing in on property management is learn to unbundle your services.