Peter Lohmann's Newsletter - Issue #88

How To Organize a Property Management Company

There are the 3 common ways to organize a property management company as it grows beyond a few employees.

There is no single “best” way to do things, but if you’re managing rental properties, you should at least be familiar with the options.

Below, I explain them and list the pros and cons of each. For what’s worth, I run my property management company (~650 units under management) with a Departmental style.

1. Portfolio Style

The company hires property managers. Each property manager has a set of client accounts. They do everything for those clients and their properties. Leasing, rent collection, maintenance coordination, accounting, etc.

Pros

• Clients and tenants have a single point-of-contact.

• The property manager knows everything that is happening with their clients, properties and tenants. This provides a great customer experience.

• Very little wasted communication. Able to move & make decisions very quickly.

• Hiring a new property manager doesn’t disrupt anything with existing operations.

Cons

• Single point of failure for an entire set of clients. If the property manager leaves or goes on vacation, nobody is up to speed on what is happening.

• Very little consistency in handling operational details. Each property manager will handle things differently.

• Requires the property manager to have a diverse set of skills. Must be good or great at multiple things.

2. Departmental Style

The company is organized into departments. Each department or employee has a specific set of tasks they do for all properties under management. For example, the maintenance coordinator takes all incoming maintenance calls and handles them, for every single property. Same for the leasing agent, etc.

Pros

• Allows hiring of specialists instead of generalists. Employees can excel at what they do & go deep.

• Service delivery becomes very consistent from property to property and client to client.

• Allows documentation of SOPs.

• New employees can be up to speed quickly (narrow set of responsibilities).

Cons

• Duties are constantly changing as the company grows and tasks are redistributed among employees.

• Clients may not have a single point of contact (bounced from dept to dept for answers).

• There can be a lot of time wasted communicating between departments.

• No single person is watching out for a client’s overall portfolio / performance.

3. Pods

Pods (or “squads”) of 3 people are assigned a large set of accounts (~300 units). Each squad is made up of a property manager lead who deals primarily with clients, a property manager assistant who deals primarily with tenants, and a maintenance coordinator. The squad will share a large office or neighboring cubes to facilitate quick and easy communication. There is a natural progression whereby new employees in training start with maintenance coordination and move up from there with experience.

Pros

• Clients have a single point of contact, with a backup too.

• No single employee departure or vacation is too disruptive. The remaining pod members can cover while a new employee is moved into that pod and brought up to speed.

• Operational and client benefits from some specialization within the squad, with minimal wasted communication.

Cons

• Spinning up a new pod can be expensive and wasteful until they are fully utilized, which depends on future growth

• May be difficult to enforce a set of SOPs (each squad may do things a bit differently)

4. (Bonus) Hybrid Style

Hybrid style is a mixture between departmental and portfolio. Some core back-office functions are retained at the departmental level, while some or most activities remain with the individual Property Manager.

THIS ISSUE PRESENTED BY: «MYSTERY SPONSOR»

You may be familiar with Josh Heintz, formerly Head of M&A for the 13,000-unit property management company Evernest.

Josh’s article last year about the impact of client concentration on PM company valuation, which I linked to here in this newsletter and on my blog at the time, really impressed me. Josh knows this industry, and has a deep understanding of what PM owners need to grow their business.

In the past few months, Josh has quietly been preparing to launch something new. I can’t say much yet; I had to twist his arm to even let me talk about this at all. I can’t even say the name yet! Hence today’s “Mystery Sponsor”.

Curious? Watch this space for a big announcement next week, and be sure to swing by Josh’s booth at NARPM Broker/Owner in a few weeks.

In closing I will leave you with one question:

Which is better — a new client, or an existing client growing their portfolio?

Rolling Out New Tech at Your Company

Rolling out major changes (especially software) at your small business is often frustrating, and fails completely more often than we would like to admit.

I've had my fair share of successes and failures, but eventually figured out some best practices that seem to be working well for my property management company (we've scaled from 0 to 29 employees while remaining profitable). In fact those very same softwares & systems are what allow me to take a month away every year.

If you're interested in learning more about how to drive change through your organization with a minimum of pain & frustration, Wolfgang Croskey and I are hosting a special event to share details of how we implement new software systems and processes at our companies:

Engineering Luck with The Real Estate God

Special guest “The Real Estate God” (anonymous) joined me for Season 3, Episode 6 of my podcast last year. This is the most listened-to episodes of my entire podcast!

We discussed topics like:

• How “The Real Estate God” capitalizes deals

• Learning about delegation and leverage

• Opportunity costs and finding the high-leverage tasks you should be working on

• Being deliberate about your environment and network

• How he approaches Property Management

• Creating your own luck

• The value of building an online network

• Creating your own “yacht”

Check out the full episode below, on YouTube for the first time:

Industry News and Events

• LeadSimple is rolling out their brand new Visual Workflow tool next week (it’s amazing). Sign up here.

• Will I see you at the NARPM broker/owner conference in a couple weeks? Tickets are still available (location: Amelia Island, FL). Catch me on stage recording a live episode of my podcast!

• Showmojo is hosting a webinar on April 11th to update the industry on leasing trends. They always bring amazing data.

• Thumbtack has launched an extensive redesign, aiming to become a “property manager in your pocket”.

PM Companies For Sale

• Here’s a PM company for sale in Milwaukee (100 units, asking 500k)

• Here’s a PM company offering 100 accounts for sale in the San Francisco Bay area of CA (asking 1.1M).

• Here’s a PM company for sale in San Diego, CA (450 units, asking 960k). Company name RJW Properties.

• Here’s a PM company for sale in San Jose, CA (300 doors, asking 1.4M)

Closing Thought

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Stats from last week’s issue:

Valid Recipients: 7,572

Open Rate: 60.9%

Clickthrough Rate: 9.1%

Most Popular Link (233 clicks): Notion AI update to my team

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That’s all for this week! Have a great weekend. -Peter