Introduction to Property Management
Well, thanks for signing up for this series. We appreciate it. We don't want to spend a lot of time on the front end with introductions, so let's kind of jump right into it. We're gonna really, really work hard at keeping these videos in the six to eight minute range. So let's kind of jump into it.
Before we get started with today's topic, I want to remind you then full disclosure, but I'm a vendor. Now, you know that 'cause you've been on our site, but kind of means that once a while along the way, I might try to sell you something or at least point you to a product that you might look at and consider downloading.
Maintaining Long-Term Owner Relationships
So the first, on the tip of the spear, the front end of this, we're gonna answer the question, why would you as a property manager want to keep an owner for 20 years? And the first, there's four or five of these. The first one is pretty obvious. You lose owners when properties go vacant. Very seldom in our experience did owners contact us while there was a good tenant in the house paying rent and say, I'm terminating you.
I'm taking over management, or I'm doing something else for the property. Usually when you get a termination is when a tenant moves out and an owner has to spend a bunch of money on the house, they'll decide to sell it or move back in, or take over management, whatever. Very seldom does somebody terminate you in the middle of the lease. We all kind of know from experience that when that house goes vacant, that's kind of your vulnerable time to lose an owner. So the formula goes like this.
Keeping tenants equals keeping owners. Bill Bass, my friend who had a tenant for 20 years, guess how long he stayed with us? 20 years. If the tenant will stay 10 or 15 years, you kinda got the owner trapped and, and 'cause leaving in the middle of the lease doesn't happen very often. Now, you saw these numbers maybe on an earlier slide, but I'll go through 'em again very quickly.
We had, we did business for 35 years in Atlanta, about 2,500 owners and 9,000 tenant. Our longest owner stayed 34 years, 35 year company, 34 year, wasn't an owner, a friend, family member, you know, was just John Q Public 34 years. And we had 32 tenants that stayed over 15 years. 84 tenants that stayed over 10 years. So we're pretty good.
I took us a couple of decades to figure this out. We're pretty good though at keeping tennis for a long period of time. Put a lot of focus there.
Cost of Acquiring New Owners
Now, before I go on to the reason number two, I want you to remember, those of you who have, ever walked Shark Tank, I learned a lot from Shark Tank. I love Shark Tank. One of the things that the, that the people, the, buyers ask the contestants is this, what is your cost of a new client? What is your cost of a customer? It's called a customer acquisition cost.
And if you want to be an entrepreneur and figure that out, you wanna calculate what does it cost you as a property manager to go out and find and sign up a new owner. So that's kind of the number two, the cost of finding and onboarding a new owner. And the reason you want to know that is because keeping an owner for two or three years and work the expense is too high. You're gonna set up a system that'll keep an owner for 10, 15, 20 years because the cost of finding and setting up a new owner is off the chart. It's a really big number.
Don't calculate it in your system. It'll, you know, give you a bad weekend. But think of all the things you have to do. You have to build and maintain a website that's not cheap. You have to do a bunch of advertising.
You pay some referral fees. A lot of managers will pay other realtors in the area or referral fee on that procurement fee that they earn. You know, just for turning a new owner, we did that for a couple of decades. The cost of a business development manager is expensive. Golly, some of you are paying 60, 70, $80,000 a year to hire a BDM and go out and hustle and sign up new owners.
That's expensive. And you always want to use your top talent to do that. The onboarding process is very expensive. You think of the number of trips to the house and lock boxes that get lost and signs that get lost and time putting this data in your software, putting, uploading photographs, going out there and getting photographs. The idea of going out and si finding an owner, signing up an owner and the staff and the manpower to do that is really expensive.
I mean, again, don't sit down and, and, and calculate it up by looking at your p and l. It'll make you, it'll give you bad weekend. So the idea is you can't afford to spend money and keep an owner for two to three years. You just don't. You gotta amortize that cost over a five or 10 year period of time.
So when you figure out it's costing you $2,000 for every owner you sign up or 1500 or some number, again, it's usually, it's pretty astronomical. You gotta be able to take that expense and amortize it over five or 10 years. So keeping an owner for a long period of time is really important because of the cost of bringing in a new owner.
Renewal Fees and Bottom Line
So let's move on to number three Reason. There's no offsetting hard cost in a renewal fee. The reason you want to keep a tenant for two decades is because the renewal fee is a net number to your p and l. You know, some of you go out and you charge a full month's rent or half a month's rent to get a tenant in a property and it's really expensive and all that money is spent on the process. You get a renewal fee of 2, 3, 400 bucks.
That's a serious amount of money. It goes right to the bottom line. Here's the thing we learned out after a couple of decades in the business. There's really no money in a leasing fee. And I wanna scream that message loud and strong to you.
The, you get a chunk of money when you lease a house from an owner. But if you sit down and calculate the cost of new, of new, owner development and the cost of advertising and showing and applications and the whole process of leasing up a property, some, there's a lot of money in it, but there's no net to the bottom line. You sit down with a yellow scratch pad and figure out what does it cost us to lease a house and how much income are we getting? The two don't come close, they're just no money in leasing fees.
But there can be a big check in renewal fees. And so number three on why should you keep a 10 to 20 years? Part of the answer is 'cause the renewal fees are huge and they go straight to the company bottom line. Now we've got a video I want to show you on this because some of you are not convinced. Why should you deserve a big renewal fee?
We did a video. They, I heard managers all over the place say, well, the owner doesn't think we do anything for a renewal, so we can't charge a renewal fee. And that is not the right way to, that's not good understanding. You can't think that way. So we put a video together to help convince you that you deserve a big renewal fee.
Here's where to find it. You go to training property managers.com/myths. There's your, there's your, extension. And we have about 80 videos in our Myth drip campaign for you to consider downloading. If you can't find it this way, go to products.
And you'll see this graphic called dismantling the myths of property management.
Myths in Property Management
Myths, meaning things I used to think were true, things you think are true that really are not true. You don't have to sign up for this one video, it's on the landing page.
Renewal Fees for Property Managers
What you want to do is look for myth number 33 and it says, property managers don't deserve a big renewal fee when tenant decide to stay. Right? Well, quite honestly, that's a myth. You deserve a huge renewal fee. I can give you five or six reasons in that video why you should get a big renewal fee.
And those arguments are really good when you're talking to an owner and saying, Mr. Owner, make sure your property manager's getting a big renewal fee and we'll give you the reasons why. It's a great video. It's about eight minutes long, you should download it.
Multifamily Management Differences
Now if you're mul managing multifamily, it's different. Well, I understand that the fee system between multifamily and small residential is different. If you've got a hundred unit apartment building, you've got an onsite manager, the management company seldom gets a renewal fee. Often they don't get a procurement fee because the owner and the manager are somehow doing a cost share on the onsite resident manager. Those of you who are managing a 20 unit building don't have onsite.
You should be charging a procurement fee and a renewal fee because of the trips that it takes to the property to get it done. So my point is, this multifamily model is different. Okay? So I'm not sure you can take this idea of a big renewal fee and apply it to your multifamily. If it's got resident managers, it probably won't work.
Now I wanna make sure that you saw where to find that video. I'm gonna repeat myself, okay, why you deserve a big renewal fee. Go to our website, training property managers.com/miss. There's your extension. Or go to the product page, find this myth, and you'll see that myth number 33.
Encouraging Video Series Subscription
Now, I would encourage you to sign up for a myth series. Doesn't cost anything. And again, same drip video idea. Every five or six days you'll get another video. Things I used to think were true about property management, things you probably think are true about property management, that over the decades we found it really not true.
Consider doubt signing up for that series, sharing it with your staff, help you along, try to make you some money. Thanks for listening.
