Property managers are asset managers. The real question is: how effectively are they managing the assets for which they’re responsible?
They have at least three different assets to manage, but many are only really managing one effectively. All of the assets are interdependent: the business, the property, and the investor. For example, the business is dependent on the other two assets, which are the investor and the investor’s properties. Mismanage one of them and the business suffers.
The economics and value of a property management business that you’ve spent your career building is tied directly to these other two assets, which you may or may not be managing as effectively as you could. The property and the investor are inseparably linked.
I started in real estate by flipping houses. My brother and I would buy, renovate, and sell, but when HUD introduced a requirement that you hold title for 12 months, we were effectively out of business. We didn’t intend to start renting properties. We were forced into it.
That experience put me much closer to real estate investors, and I realized that I could help them scale. I started helping people buy additional properties, especially out of state investors, and I saw how difficult it was to scale without good data.
I would get calls asking me, “Ron, “What’s my property worth?” or “How do I know when to sell?” For property management companies who might be managing hundreds or thousands of homes, answering these questions becomes a data nightmare and can keep them from having proactive outreach with their owners. I found that the same information my clients needed is what property management clients need, too.
Most management companies are focused on the day-to-day. They’re trying to put out fires, finding more doors to manage, and retaining high-performing staff. They often don’t have the time, systems, or tools to dig deep into their data, educate their investor clients, or provide the level of transparency those investors need.
That lack of transparency adds friction on top of the inherent tension of the PM-investor relationship. There’s a natural misalignment between the two parties. The investor has one primary interest: their investment. The property manager, though, is balancing managing the performance of the property, the needs of residents, and the expectations of the investor. On top of that, you have a lot of accidental landlords who aren’t truly approaching this like an investment, and that adds a whole other layer of challenge.
So unless you want to keep hiring bodies to answer all of these phone calls from all of these irritated property owners who don’t understand the business, you have to educate them.
When I started building Lineage, we knew that we wanted to empower property managers, not compete with them. We wanted to give them the tools educate and advise their clients. That’s why we connect to their property accounting software, pull their P&Ls, and incorporate mortgage data from their portfolio.
Not only does this make advising clients easier, it also removes friction from day to day management. If you have a refrigerator that needs to be replaced, you’re going to get a lot less pushback from an owner who’s educated on the status of their full portfolio. It changes the relationship between the investor and the property manager in a very good way.
That transparency drives more efficiency, more growth, and less stress between the investor and the property manager. It builds trust, makes conversations easier, and ultimately drives more efficiency, more growth, and less stress.
Education is mission-critical for property managers. In the past, it may have been a bonus, but in today’s market it’s become an expectation. More and more investors want to know what’s going on with their portfolio on a strategic level, and they’re looking to their property manager for guidance on how to grow and improve profitability. If you aren’t providing that guidance, someone else will.
At Lineage, we work with a lot of property managers who don’t have an education arm in their business. We actually build that out for them so that their clients learn how to truly think like investors, asking the right questions and understanding how to ride the market long-term. We also work with property managers who have great education programs, and we just help bolster it where we can.
What we see is that when investors have clarity around their portfolio, they’re incentivized to scale their portfolios. They’ll see that they’re making a much higher annualized return than they thought and they’ll want to invest more. That means more doors under management for the property manager without having to go through the process of onboarding new investors. It’s truly a win-win.
When you have clients in your portfolio who want to grow their investments, that makes your job significantly easier. You’re no longer arguing over every little expense, and they’re finally seeing the return on investment that you’re helping create for them.
Beyond that, you know that new properties you’re bringing under management are going to be a good fit for you, because they’re owned by investors you already know and trust. You want investors who understand you and properties that won’t give you problems. Educated, growing investors come with both. They’re educated on your processes and expectations, and they’re buying homes that are high-quality, and less likely to have issues.
Experienced, educated investors realize that it’s usually the boring properties that they want, because those properties mitigate a lot of the investor’s risk. New builds and fully renovated homes are typically a more consistent and stable investment.
Ultimately, when you have educated investors, transparent data, proactive outreach and streamlined processes, you can deliver a better management experience, grow your business, and take on less risk. And isn’t that what every property manager wants?