Introduction to Property Management Mistakes Greetings, Robert Locke here . Thanks for taking the time. We are going through a series of the top 10 mistakes property managers make, and it's a series of videos that we'll send out to you. I think there's going to be 18 or 20 of them. We'll send them out every week or 10 days, and you can, in the leisure of your home or while you're driving your car along the way, see what we've experienced over the last three years as the biggest mistakes property managers make.
Now, we started out with 10. Holy cow, I think we're at 18 or 20. And then Monica Gilroy, our attorney, is coming into the studio to share what she has seen in the property management industry as the biggest mistakes that property managers make. So this isn't so much 10, okay? This might be 15 or 20 by the time we get done.
Now, a little disclosure up front before we get started. For 35 years, I functioned as a manager. I had a management company here in town. Betty and I started it in 1980, out of the basement of our home. We sold it in 2015 to a Fortune 500 company, and now I'm a vendor, which means I sell stuff.
And what that means, you've got to put a filter in your brain that kind of says, "Is Robert training or is he selling products?" I don't know what the difference is between an infomercial and training. I think you know what the difference is. So when you get done with this video, I hope you'll conclude, like I will, it's just good training. We're not trying to sell anything. Well, we are, to be honest with you.
We're a vendor. But this will be great training, and it'll boost your knowledge of the business, and hopefully help you avoid some of the things that we did, that we did very badly.
Learning from Mistakes Okay, now, here's the premise. Here's our objective. Let's go through it. To identify big mistakes property managers are vulnerable to, okay ? Secondly, and more importantly, is to proactively, in advance, on purpose, make it a priority to avoid them.
In other words, learning of something that I screwed up and did badly or some other property manager doesn't help you unless you kind of incorporate it into your world. Be proactive, make sure that it doesn't happen to you. Modify your model today so that you don't repeat that mistake, and then prevent making the mistakes that other people have made. So the whole idea is not just to bloviate and give you a lot of data. I've heard many times the point of education is not knowledge, it's action.
So at the end of this, what I want you to do is have a list of mistakes that other people have made in this business, and then on purpose, use those as filters as you grow your business, and as you make your niche in the marketplace, make sure you don't make the same mistakes. Here's the root of this. It's smart to learn from your mistakes. We all kind of say, "Well, yeah, we get that." When we do something dumb, we learn real well, okay?
And we try to prevent our kids from making the same mistakes that we do. Sometimes that doesn't work very well, at least it didn't in my home. But really, if you think about it, it's smarter to learn from the mistakes of others. Now, the question is, why don't we do this? When we sit around a table at an ARBM luncheon, I don't remember any time somebody saying, "Well, so what are the biggest mistakes you've made in the business?" Or,
"Let me share with you one of the big screw-ups that we made." Or, "Recently, we made a very big mistake. Let me share it with you." People are not comfortable doing that.
Sharing Mistakes People want to crow about their successes. And certainly, we do a lot of that here because we had a huge success as a management business. People learn from that, but they don't learn it as well as when we sit down and say, "Holy cow, we really screwed this up. We did this badly, and you should learn from our mistakes." Now, why don't we do that? We're just not very good at sharing with people what our mistakes are.
It's a little intimidating. You have to be pretty secure to be able to say, "Hey, we blew it. We really did a bad job at this, and I want to make sure that you know, and not to have to repeat it within your own business." It's a lot less painful, a lot less costly, and your company will accelerate and get through its scaling a lot faster if you learn from the mistakes that I made and others in the business. So that's what this is all about.
Now, in a classroom, we kind of break up into groups and we ask the question: What's the biggest mistake you've made in your business so far? Now, when I do that, people are quiet. They don't talk an awful lot because it's just hard to say, "Hey, I got one. Two years ago, we did this and we thought it would work and we screwed it up and it crashed and burned. We got in a lawsuit, and here are the details.
Be sure not to repeat my mistake." That's not what people do instinctively. People want to tell what great successes they are and show people how smart they are. So this is really kind of a challenge in terms of a group dynamic because people don't like talking about their mistakes. And yet, I'd rather benefit from your mistakes and prevent making that same mistake. But somehow our brains and our hearts don't take us in that direction.
Now, there's kind of two big databases that I'm going to draw from to describe the mistakes. By the way, if there was an ARBM designation for mistakes made and learning curves gone through, I'd get it. I'd get a PhD in screw it up. Part of the reason is I did this for 35 years, and that means I had a ton of opportunities to screw it up. And during a great deal of that period of time, there was no NARPM, there was no designation classes for CE.
You couldn't learn anything from property management from other people. I had to learn this by the seat of my pants, and that means we screwed it up more than most people. So if you think you've made some mistakes, stand in my shoes for an hour. You'll see a whole lot more. So there's two kind of buckets of information that we're going to dispense, okay?
One is from my own experience. Now let me give you a little history lesson. Betty and I started this business in 1980 out of the basement of our home. We had five or six rental houses. I got to love the business, and buying houses was fun.
So I'd buy houses, and I would give them to investors, and I'd show the investor how to buy the house. And like many of you who got in this business, the investor would say, "Robert, I'll buy it if you'll manage it." So in 1980, we formed Crown Realty and Management, and we jumped into property management for other people. Okay? That's kind of how we got started. Now, property management for us was a sideline.
It was to facilitate sales. So I wasn't looking to build a management company. I was looking for a way to handle property management while I went out and sold more houses. So that's kind of the evolution. And over a period of the first 10 years, we grew it to about 200 properties.
Now, that's when the S&L scandal hit, 1988. And many of you don't even remember that. You weren't around in the business world. But this is the Jimmy Carter years, the crash and burn, the S&L scandal. And everything stopped.
Sales stopped. And that happened again in '07 and '08, didn't it? And some of you got caught with sales going into the toilet. And all of a sudden, the only thing I had left was property management.
Property Management Growth So that's kind of when we started leaning into the property management side of the business, kind of out of necessity, not because we thought it was a great business. So over the next 10 years, we went from 200 houses to about 750 houses . And we just grew it up. We did what everybody else does, go out and bring in new business. But what I realized, I was still doing a lot of selling to investors.
I took my eye off the ball. I had another guy running it for me. I wasn't paying too close attention because we were making a ton of business on the sales side . And like so many other property managers who have done this, we camouflaged a bad model with lots of money coming in from sales. We didn't do well in the management, but it was kind of taking care of itself.
Model Crashes I realized in 2000, holy cow, I got a bad model . I made a lot of mistakes. And what I ended up doing, it was such a bad model. Average staff stayed about six months . We were going backwards by 3,000 or 4,000 bucks a month on 750 properties.
Now, that's hard to do. You got to really do it dumb in order to go backwards with 750 properties. But I was able to do that. Accomplished a great thing. Okay?
Rebuilding Model So here's what we did. We crashed it . We kind of went from 750 to 300 properties in about three months. We laid off 12 staff. We sold off management and buckets of management accounts to other property managers around the city.
Other property managers thought more was better, kind of the mistake we made, thinking that if you double in a model, you double in size, that everything will work out. And I'm here to tell you, you can't take a bad model and double it and make a good model. It just doesn't work. So we crashed it . We took it down to the 300 houses that kind of fit in the bullseye of, these are profitable management accounts.
We can make money with this. So we didn't start from zero, but in 2000, we started at 300 houses in year 2000. Now, in 2000, we were getting designations. We were active in NARPM. And we really put our shoulder behind the business.
And so in the next 15 years, we grew it from 300 to a little over 1,000. And that's when we ended up selling out to Coldwell Banker. And so a Fortune 500 company, NRT, came in, loved our model, wanted to duplicate it around the country, wrote us a check. And no earn-out, they just gave us a ton of money. And in 2015, I kind of retired and took all of my time that was spent on property management and leaned it over to the training world.
Experience and Lessons So I have made a lot of mistakes in 35 years of property management. And here's kind of the question you should be asking: How do I have Robert's 15-year experience ? In other words, if you're sitting here listening to this, what you want to do is figure out, how do I go from here to here ? And how do I avoid this? And that's kind of what these videos are all about, is some of the lessons I learned that you should learn without the experience that I experienced, because it's just too painful.
And of course, the answer is avoid the mistakes Robert made. So how do you have the 15-year experience? How do you grow it up to 1,000 houses with two to four evictions a year, average rent $1,350, $1,300, and sell it off to a Fortune 500 company? I know how to do that. I know what that looks like.
And so if the question is, how do I have that 15-year experience, the answer is avoid the mistakes that I made.
Avoiding Mistakes Now, that's one bucket of resources and where I'm coming from in these mistakes, but there's a second one. Over the 35 years, I have watched many other companies go out of business. In Atlanta, especially, there's a very big graveyard on the south end of town called Property Management Graveyard. Of course, I'm kidding, but there is a graveyard of property managers . There's tons of companies who close their doors.
They open, maybe they had an investor with 300 or 400 houses, or they started from zero. And we've seen them all over Atlanta over the last 20 years grow it up to 100 or 200 or 400 or 600 and then crash and burn. You know some of them. If I can get their testimony, I'll splice it into this video and kind of let you have testimonies of people who grew something up to 400 or 500 houses, crashed it and burned it. And there's a whole graveyard full of them.
And I know some of them are. Or they sold out for nickels on the dollar because sometimes people will grow up to 50 or 100 or 200, not making any money, and they'll just say to a bigger company, "Just take on my management accounts. Give me $50. I'm out of here." And there are plenty of those illustrations. We bought out 14 management companies during that period of time.
And 99, well, 100% of them were brokerage firms who opened up a rental division, got in that real wormy area of 50 to 100 houses, and then just said, "We can't do this. We don't have anybody with their heart in property management. We want out of the business." And we bought management accounts. We did that 14 times over the last 20 years that we were in the business. It was part of our growth model.
So there are plenty of people that closed their doors or sold out. And kind of what I've done over the years is do autopsies. I've kind of said, "Hey, this company grew to this and that number there. They have lots of staff and everything is going good. Why did they crash and burn?" And so I've got a whole list of biggest mistakes property managers make based on my own experience crashing it and burning it in
2000, and based on the experience of a lot of property managers that I've seen grow up a company, crash it, and burn it. So the series is "10 Biggest, 15, 20 Biggest Mistakes Property Managers Make." So thank you for joining us. We have about 15 more videos now, maybe more, in this series. Monica's going to do some. And we'll just kind of take this whole area of big screw-ups, because I'm a master at it, of things that you want to be careful of so that you
can guide your own company around these hurdles and not step on the landmines that we stepped on. Thanks for hanging out. Thanks for taking the time to watch this series.
About the speakers Monica K. Gilroy Esq.
Real estate litigator, The Gilroy Firm
Founding principal and managing partner, The Gilroy Firm J.D., University of South Carolina School of Law, 1993; B.A. Political Science, University of Wisconsin, 1990 Named a Top 50 Woman Attorney in Georgia Past Chair, Real Property Law Section, State Bar of Georgia Outside national counsel to NARPM and General Counsel of its Atlanta chapter American Land Title Association (ALTA) National Education Committee since 2014 ALTA National Title Action Network (TAN) Chair since 2020; ALTA National Title Professional designation AV peer review rating, Martindale-Hubbell Peer-nominated Georgia Super Lawyer in real estate since 2008 Hundreds of jury trials, bench trials, arbitrations and mediations; licensed arbitrator and mediator; Special Master in Fulton County Robert M. Locke RMP®, MPM®
Property management trainer and consultant
Residential Management Professional (RMP®) designation, 1998 Master Property Manager (MPM®) designation, 1999 Led Crown Management to the Certified Residential Management Company (CRMC®) designation, 2000 Founded Crown Management in 1980 and grew it to over 1,000 single-family homes under management Sold Crown Management in 2015 to a Fortune 500 company Past president and board member, Atlanta chapter of NARPM Certified instructor, National Association of Residential Property Managers Georgia Association of Realtors Partner in Education (PIE) Expert witness on real estate disputes in magistrate, state and federal courts Licensed in real estate since 1973; B.A. in Business and Marketing, Michigan State University, 1969 