Our company has identified the need for a program that allows realtors to refer small portfolios to free up their time to concentrate on sales. Internally, we’re calling these “micro-acquisitions” since they are manageable chunks and simpler to work with agents as growth partners instead of a more formal buyout. Externally, we present it as a vehicle for Realtors to provide better value to their clients without forgoing all of the revenue. Perhaps this growth strategy works for you.
Many Realtors get into property management by accident. It’s at the request of an owner with whom they have a relationship, and that client thinks that all real estate functions are the same….but we know better. Maybe the owner didn’t get the offer they’d hoped for, maybe some maintenance was needed, or it could have been one of a million other reasons that kept it on the market. Perhaps the owner is moving away temporarily but planning to return to the property eventually, or they just wanted to build an investment portfolio and assumed their agent could handle it. These are just a few of the scenarios in which a Realtor may take on the management of the property when it’s not their core business – or competency.
Is it worth the Realtor’s time and risk?
Realtors are unlikely to have the necessary infrastructure in place to manage properties, so they’re trying to use disjointed screening systems, inconsistent forms from different places, and processes that aren’t adequate or haven’t changed much over the years. It’s a part-time gig, so it’s a matter of fitting in the duties of a property manager between prospecting, buyer consultations, showings, and closings. You know, the full-time job that brings in the real money.
Most Realtors could have vendors for some repairs, but this differs from a team of trusted and reliable service partners they can call on 24/7 when work has to be done NOW. They may have to start from scratch when they’re looking to have larger projects done on a property. In fact, most Realtors tell us that property management, although it might bring in some extra income, is a hassle and almost always more trouble than it’s worth.
That’s where a professional property manager can help. These companies can be allies to a sales agent because they have the full-time staff, refined processes, and sufficient resources to manage properties as they should be handled. They can ensure the property is maintained on an ongoing basis, repaired when needed, and occupied quickly when a lease ends or a tenant moves out.
For Property Management Companies: How it works
We pay you for management contracts. When we agree to buy out the property management agreements, we remind our Realtor partners that we keep up with current local laws and other guidelines for fair housing and anti-discrimination. We have the right professional liability insurance, and we take on the risk for the rental, making sure the process is compliant and that the property owner isn’t unnecessarily exposed to risk of loss or civil action.
The key to success with this method of growing your portfolio is ensuring your structure is prepared to take on additional properties without needing significant capital investment. Depending on your current size and capacity, your definition of “micro-acquisition” may vary from the next company. Because you’re buying out the agreements and taking on more owners and tenants, you’ll need to assess whether or not you need to increase your staff or incur other expenses for ongoing operations. You’re betting on the contracts being renewed and retaining tenants to extend income for the next lease term as well, so if you’re losing money on the current term, the acquisition is not helping your company grow.
Second, we promise our Realtor partners that we only care about property management. If and when the property is designated for sale, it goes back to the Realtor so they can handle the transactions and earn the commission. It’s a win/win for the agent and the property management company. The owner significantly reduces their risk and liability while benefiting from the Realtor’s sales expertise and the property manager’s management experience.
As part of this growth strategy, we’ve crafted a letter to prospective Realtors and other professionals to introduce the idea and start productive discussions. If you’d like a copy of the letter, email me at [email protected], and I’ll send it to you!
