Calendar icon September 9, 2022

A CEO's Thoughts on the Evolution of the Property Management Industry

Keeping one eye down the road is critical in a changing industry.

Matt Whitaker, CEO of Evernest, was kind enough to join us on The Triple Win podcast and share some interesting insights about the future of the property management industry. Whitaker has been a CEO since 2008 and has no shortage of experience managing a major player in the industry. His company is rapidly approaching 5,000 doors managed and now exists in 13 markets including Birmingham, Detroit, Nashville, and Atlanta. 

One of the topics of discussion between Whitaker and host Andrew Smallwood was the increasing polarization within the PM industry. Now, polarization as a word typically has a negative connotation to it, but it’s not necessarily a bad thing for the professional property manager in this case. 

Boutique vs. Scaled

“I see the property management industry breaking into two worlds. I do believe there is still a place for the boutique manager in the future,” said Whitaker, who noted that some people may disagree with this assessment. But the personal relationships, nimbleness, and communication offered by a small-scale handful-of-doors property manager is hard for a large company to replicate. Not everything can be scaled efficiently and the value created by the smaller business’ ability to do those things well will continue to create opportunities for boutique property managers to thrive. 

“On the opposite end of that spectrum, I think there are going to be platform businesses that provide value to investors in other ways. So the boutique manager is the partner and the platform business, let’s call it, is going to provide an ecosystem of everything from property management, perhaps brokerage, perhaps maintenance, all these other verticals that are driving value for their clients.” Whitaker continued, “What I would be afraid of is getting caught somewhere in the middle, where you’ve got a big enough company that you don’t know all your clients, but you don’t have a big enough company that you can drive scale and give your clients and customers the benefit of that scale."

Scale is certainly where Evernest is headed if it’s not already there, and Whitaker’s prediction is based largely on how companies like his and companies on the opposite side of the size spectrum create value for clients in two very different ways. This is the concept of differentiation, which is not achieved by the companies “in the middle.” Those companies are simply not going to be able to offer anything in the market that somebody else isn’t doing better. The spectrum Whitaker discusses can be warped to some degree, and some companies are attempting to do that by scaling aspects of the business, like personal relationships, that have not traditionally been scalable (see Auben Realty’s Pod System). But a general understanding of how a good property management company creates value for its investors and clients would lead you to the conclusion that, barring a major disruption, Whitaker’s polarization prediction is probably going to be right. 

“Begin with The End in Mind,” as Stephen Covey once said, is a concept that always applies in business, but is especially relevant now in the property management industry. Having a defined vision for your company can help you set meaningful goals and stick to them. Knowing what space in the industry you want to be occupying in five years can protect you from “getting caught somewhere in the middle.”

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Your Guide to Property Management Agreements (with Free Template)

With a renewed focus on rental income as an investment trend, the popularity of property management is on the rise. Busy professionals and out-of-town real estate investors increasingly rely on property managers to handle the day-to-day operations of their rental properties. When they come to you for the first time, one approach to establishing clear differentiation with respect to your competitors is through the clarity and comprehensiveness of your property management agreement. In today’s guide we’ll cover the essentials of a property management agreement that provides a foundation for transparency throughout this critical relationship, as well as peace of mind for the investors relying on you to manage their investment. A Step-by-Step Guide to Building Your Agreement Crafting a solid property management agreement doesn't have to be daunting. Here's a breakdown of the key components: Parties Involved Property owner: Clearly identify the legal name and contact information of the property owner(s). Property manager: Do the same for the property management company or individual. Property Details Address: Include the full address of the property being managed. Legal description (optional): For added clarity, consider including the legal description, particularly for complex property ownership structures. Property type: Specify whether it's a single-family home, multi-unit building, or commercial property. Unique features/limitations: Mention any unique features (e.g., pool, historic designation) or limitations (e.g., zoning restrictions, HOA rules). Term and Termination Effective date: Define the start date of the agreement. Termination clauses: Outline the grounds for termination by either party (e.g., breach of contract, property sale). Notice period: Specify the required notice period for each party if they wish to terminate the agreement (e.g., 30 days, 60 days). Termination mechanisms: Explain how the date of termination should be communicated (written notice, specific format [e.g., certified mail]), along with any applicable indemnification measures. Manager Responsibilities Resident screening: Detail the process for resident screening, including applications, background checks, and credit checks. Rent payments and security deposit collection: Outline procedures for security deposit collection, rent collection, late fees, and eviction processes. Maintenance oversight: Specify the property manager duties and roles in overseeing maintenance requests, repairs, and independent contractor/vendor selection (approval thresholds, cost limitations). Financial reporting: Define the frequency and format of financial reports provided by the property manager (monthly statements, annual reports). Communication protocols: Establish communication protocols regarding occupant inquiries, maintenance emergencies, and routine updates. Availability: Consider outlining the property manager's availability for emergencies (24/7 hotline, designated contact person). Owner Responsibilities Repairs: Specify the owner's responsibility for major repairs beyond normal wear and tear. Providing access: Outline the owner's role in providing access to the property for maintenance or showings when residents are not present. Major decisions: Define how major decisions regarding the property (e.g., renovations, capital improvements) will be made (joint agreement, owner approval). Property inspections: Address expectations regarding the frequency and purpose of property inspections conducted by the owner. Insurance coverage: Clarify the owner's responsibility to maintain appropriate liability insurance policy coverage for the property. Fees and Compensation Management fee: Detail the structure of the property management fee (percentage of rent collected, flat fee). Additional fees (optional): Address any additional disbursements for specific services, such as resident placement or lease renewals. Dispute Resolution Process: Explain the process for resolving disagreements between the owner and the property manager (mediation, arbitration, legal action). Governing laws: Specify the governing laws that apply to the agreement in case of disputes. Free Property Management Agreement Template (Basic) This contract template is for informational purposes only and should not be considered a substitute for legal advice. Please consult with an attorney to tailor the agreement to your specific needs and to ensure that the provisions of this agreement comply with local and state laws. Property Management Agreement This Property Management Agreement ("Agreement") is made and entered into as of [DATE] by and between: [Property Owner Name] residing at [Property Owner Address] ("Owner"), and [Property Management Company Name] located at [Property Management Company Address] ("Manager"). WITNESSETH WHEREAS, Owner is the legal owner of the property located at [Property Address] (the "Property"); and WHEREAS, Manager desires to provide property management services for the Property; and WHEREAS, Owner desires to engage Manager to provide such services for the Property NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the parties agree as follows: 1. Services Manager agrees to perform the following services for the Property (Services may be added or removed based on specific needs. Consult with a lawyer.): Resident screening and resident selection (application processing, background checks) Collection of rent and late fee enforcement Maintenance oversight and coordination (up to $[AMOUNT] per repair) Move-in/move-out inspections Monthly financial reporting related to management of the property 2. Term and Termination This Agreement shall commence on [DATE] (the "Effective Date") and shall continue for a period of [NUMBER] year(s), unless earlier terminated as provided herein. This termination of this Agreement may be effected by either party upon [NUMBER] days' written notice to the other party. 3. Management Fee Owner shall pay Manager a monthly management fee equal to [PERCENTAGE]% of the gross monthly rent collected. 4. Legal Proceedings In the event of a legal proceeding arising out of this Agreement or the management of the Property, the following provisions shall apply: Authority: The Property Manager is hereby authorized to initiate and prosecute any legal action deemed necessary to collect rent, enforce the terms of tenant leases, or protect the Owner's property interests. Owner Approval: Prior written approval from the Owner shall be required for any legal action exceeding $[Dollar Amount] or involving potential litigation. Costs and Reimbursement: The Property Manager shall keep detailed records of all legal expenses and attorney’s fees incurred. The Owner shall reimburse the Property Manager for all reasonable and documented legal expenditures associated with authorized proceedings. Representation: The Owner shall have the right to be represented by their own counsel in any legal proceeding. However, the Property Manager shall have the right to participate in the proceedings and may retain separate counsel at the Owner's expense if a conflict of interest arises. Communication: The parties agree to cooperate fully and share all relevant information in a timely manner throughout any legal proceedings. 5. Dispute Resolution (Optional - Replace with preferred method if applicable) Any dispute arising out of or relating to this Agreement shall be settled by [METHOD OF DISPUTE RESOLUTION, e.g., mediation] in accordance with the rules of [NAME OF MEDIATION PROVIDER] (the "Rules"). The decision of the mediator shall be final and binding on the parties. 6. Waivers The Owner acknowledges and waives any and all claims, demands, or causes of action against the Property Manager arising from the following, unless such claims arise from the Property Manager's gross negligence or intentional misconduct: Acts or omissions of any resident of the Property. Loss or Property damage caused by reasons outside the Property Manager's reasonable control, including natural disasters, acts of war, or civil unrest. Unexpected repairs or maintenance issues beyond the scope of normal wear and tear. The Owner further agrees to indemnify and hold harmless the Property Manager from any and all claims, liabilities, damages, losses, or expenses (including attorney's fees) arising from the Owner's violation of this Agreement or any applicable laws or regulations. 7. Entire Agreement and Governing Law This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written. The terms of this Agreement shall be governed by and construed in accordance with the laws of the State of [STATE]. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. [Property Owner Signature] [Property Owner Name (Printed)] [Property Management Company Signature] [Property Management Company Name (Printed)] Optional addendums For specific situations, consider adding supplementary documents like: Bed bug addendum Pool addendum Pet lease addendum These addendums can address unique requirements and regulations related to these aspects of the property. Legal Considerations and Customization Consulting with a lawyer is crucial to ensure your property management agreement is legally sound and reflects your specific circumstances. An attorney can help you with: Specifying maintenance coverage: Clearly define which maintenance issues are the responsibility of the property manager and which fall to the owner. Pet policy details: Outline a comprehensive pet policy including pet restrictions, fees, and deposit requirements. Local legal compliance: Ensure your agreement adheres to all relevant laws and regulations in your area, such as resident rights and fair housing regulations. FAQs: Helping Potential Investors Demystify Your Property Management Agreement Q: Is a property management agreement legally required? A: While not always mandatory, a property management agreement is highly advisable. It protects both the owner and the manager by outlining expectations and responsibilities. Q: Can I use your template for any property management situation? A: The provided template is a basic framework. It's best to consult with a lawyer to customize it for your specific property type, location, and desired services. Q: Do I need a lawyer to draft the agreement? A: While not mandatory, legal guidance is highly recommended. An attorney can ensure the agreement is legally sound, protects your interests, and complies with local laws. Q: Can I use this template for agreements outside of property management, e.g., for lease agreements or rental agreements? A: No, this template is specific to property management agreements. For other types of agreements, consult with a lawyer or use appropriate templates designed for those purposes. Q: What should I do after finalizing the agreement? A: Once both parties have signed the agreement, keep a copy for your records and provide one to the property manager. Familiarize yourself with the terms and communicate openly to ensure a smooth and successful working relationship. Conclusion A well-drafted property management agreement is the cornerstone of a successful relationship between owner and property manager. By using the provided template as a foundation and consulting with a lawyer for customization, you can establish a clear and comprehensive agreement that provides full transparency and fosters a smooth rental property experience. On top of your agreement, consider rolling out a resident benefits package (RBP). It’s a powerful way for property managers to create a Triple Win – for residents, investors, and themselves. An RBP like Second Nature’s is designed to be simple to use and easy to implement. All the services included within it are managed externally by Second Nature, meaning there is no day-to-day upkeep required from the manager. You plug it in and Second Nature keeps it running. The value creation an RBP generates – with such little work required from the PM – is an incredibly easy way to grow your business and create great experiences that residents will pay and stay for. Don't get left behind in the evolving world of resident experience. Learn more about our fully-managed Resident Benefits Package and how we can build ease for you, your investors, and your residents.

Calendar icon May 14, 2024

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How to Reduce Employee Turnover in Property Management: A Guide to Retaining Your Valuable Team

The property management industry faces a significant challenge: high employee turnover. In the US, the national average employee turnover rate measured in 2023 across all sectors was 17.3%. With highs of nearly 33% in some sectors, and lows of 12% in others, turnover is a pressing issue. Indeed, the National Apartment Association (NAA) reported that multifamily industry turnover rates in the last decade were up to 40%. While numbers for single-family home property management companies are harder to measure, the bottom line is that employee retention is often a casualty of the stresses that come with the high stakes of simultaneously managing people’s homes on one hand, and substantial real estate investments on the other. A revolving door of staff creates a ripple effect of negative consequences: residents face disruptions in service and communication, while companies struggle with lost productivity, increased recruiting and training costs, and a decline in overall morale. This comprehensive guide will equip property management teams with the tools and strategies to build a happy, engaged workforce and keep valuable co-workers on board. Understanding the Reasons for the High Turnover Rate Multiple factors contribute to the high property management turnover rate, particularly during inflationary periods, when low wages and benefits may fail to match the demanding workload. Team members face long hours, stressful interactions with residents, and the constant pressure of handling emergency situations. Many may feel undervalued and underappreciated, with limited opportunities for career advancement. Poor communication within the company, coupled with an unsupportive culture, will further fuel feelings of dissatisfaction and disengagement. Another factor may well be the cultural fallout from the recent pandemic, which catalyzed large changes in labor market behaviors, particularly among the so-called millennial generation. This has driven an upending of traditional wage-earning paradigms, giving rise to an endemic “gig economy” that industry and governments are still grappling with across sectors. Building a culture of retention Shifting the focus to a positive and supportive work environment is key to stemming the tide of staff turnover of property management employees. Here are several strategies to help cultivate a culture of retention and employee satisfaction: Competitive compensation and benefits Analyze local market wages and offer salaries that reflect the responsibilities and demands of the job. Provide comprehensive health insurance plans, paid time off, and other benefits that demonstrate your commitment to employee well-being. Consider offering perks and incentives such as gym memberships or fitness equipment subsidies to further enhance the compensation package. Work-life balance Promote healthy boundaries by offering flexible scheduling options whenever possible. Explore remote work opportunities for certain roles, especially those suited to administrative tasks. When dealing with difficult resident issues, encourage employees to take breaks throughout the day to prevent burnout. Implementing a core-hours policy, where employees are guaranteed to be available during specific times for urgent matters, can help maintain a sense of work-life balance. Investment in training and development Investing in your employees demonstrates your commitment to their growth and success. Offer ongoing training programs encompassing property management software, tenant relations, conflict resolution, fair housing laws, and industry certifications. This not only enhances their skillset and knowledge, but also empowers them to perform their jobs more effectively and confidently. Clear communication and recognition Establish consistent communication channels to keep employees informed and engaged. Hold regular team meetings, conduct performance reviews, and encourage open communication from the bottom up. Address concerns promptly and professionally. Most importantly, recognize and celebrate employee achievements publicly. A simple "thank you" or a public shout-out goes a long way in boosting morale and fostering a sense of appreciation. Building a team environment Foster a sense of teamwork through team-building activities, mentorship programs, and encouraging collaboration. Promote a supportive environment where colleagues can rely on one another for help and share best practices. This creates a sense of community and belonging which helps reduce feelings of isolation and discouragement. Strategies to Reduce Stress and Burnout High levels of stress can lead to employee burnout and ultimately, turnover. Here are some practical solutions to address this concern: Workload management Analyze workload distribution within your teams and identify opportunities for better balance. Consider cross-training employees to share the burden and alleviate pressure points. Utilize temporary staffing solutions to handle peak periods or unexpected vacancies. Technology and automation Embrace technology to streamline tasks and free up employee time for more strategic endeavors. Implement property management software to automate tasks such as rent collection, maintenance requests, and lease renewals. Consider online portals for residents to submit service requests and access property information, which reduces the burden on leasing and maintenance staff. Stress management resources Offer access to Employee Assistance Programs (EAPs) to provide confidential counseling and support for employees dealing with personal or work-related stress. Consider offering on-site mindfulness training or wellness programs to help employees develop healthy coping mechanisms for managing stress. Retention through Growth and Opportunity Providing a clear career path is critical for retaining top talent. Here's how you can promote employee growth and development: Create clear career paths Map out advancement opportunities within the company and establish clear performance benchmarks for promotion. This gives employees something to work towards and motivates them to invest in their long-term success with the company. Mentorship programs Establish mentorship programs that connect experienced employees with newcomers. Mentors can provide guidance, answer questions, and offer support during the onboarding process and beyond. This fosters a sense of community and helps new hires feel more integrated into the team. Cross-training Invest in cross-training opportunities to broaden employee skillsets and increase job satisfaction. This allows employees to gain exposure to different areas of property management, keeps their work interesting, and prepares them for potential future opportunities within the company. Empowering Your Team: Fostering Ownership and Engagement Empowering your employees fosters a sense of ownership and engagement, leading to a more motivated and productive workforce. Delegate tasks and decision-making Delegate tasks that match employee skill sets and provide them with some level of decision-making authority. This demonstrates trust in their abilities and encourages them to take ownership of their work. Encourage feedback and suggestions Create an environment where employees feel comfortable sharing their ideas and suggestions for improvement. Hold regular brainstorming sessions and actively solicit feedback on company policies, procedures, and resident services. Recognize and value employee ideas Acknowledge and value employee ideas, and whenever possible, implement suggestions that can enhance efficiency or improve resident satisfaction. This demonstrates that their input matters and fosters a sense of ownership within the company. Conclusion Reducing employee turnover in property management requires a multi-pronged approach that prioritizes employee well-being, professional development, and a sense of belonging. By implementing the strategies outlined here, property management companies can cultivate a happy, engaged workforce that delivers exceptional service to residents and contributes to the company's long-term success. Remember, a strong team is the foundation for a thriving property management business. Invest in your employees, and they will invest in your company's success. Learn more about property management company best practices, marketing, and more in our Second Nature Community,

Calendar icon May 14, 2024

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