The property management industry is valued roughly at 15 billion dollars, So it’s not hard to see why starting your own company is an attractive thought. Although, more than 70% of property management companies fail to withstand the test of time, folding within three years.
There are very few entry barriers stopping you from entering the property management industry. Finding success, on the other hand, is a different story.
Here are three of the most common reasons property management companies fail.
Weak Online Reputation
The internet has completely disrupted the way property managers conduct business. The power has now shifted to the consumer. Potential renters can perform their due diligence on your company before you even meet, forming their own opinions based on online reviews, discussion forums, ratings, your website, and social media pages.
Online reviews can make or break a property management company. The property management industry is competitive with many firms offering more or less the same product for the same price. Flattering reviews completed by past and current tenants will allow you to stand out for the sea of firms competing for tenants and property owners.
Forbes states that one negative review/ article on your company can result in losing up to 22 percent of current and future customers. Typically, bad reviews are written based on emotion and not fact, making it hard to validate them as trustworthy. This doesn’t matter to consumers as they will continue to base their buying process, or in this case renting process off these reviews.
In addition to having bad reviews online, property management companies often fall short on having an aesthetic, optimal website.
Your website is your companies online business card. It will be one of the first places potential clients find themselves after googling your company name. Your website sets the tone of your company.
If you have a poor, hard to use and ineffective website tenants and property owners will assume this is how your business operates and will quickly form a negative opinion on you are your property management company.
If your website is simple, clear, aesthetically pleasing and serves a purpose, tenants will gain more trust in you and be more inclined to make contact with you.
Lastly, having a little or no social media presence will hurt your business. You need to have a social media presence. It’s not as crucial as having positive online reviews and a robust website.
However, as time goes on more and more tenants are using social media to find their next property. Failing to engage with social media can see you lose up to 30 percent worth of total business to companies that are successfully using it.
You are Failing to use Technology
2019 has seen the proptech industry advance at a rapid pace. There are countless technology-based solutions designed to enhance your business operations.
However, most property managers are reluctant to embrace the change; this is because the property industry has been operating as a “traditional-bound” culture for a long time.
Failing to embrace change and adopt new technology can see your company quickly diminish. The root of the problem isn’t your old practices; it’s the companies that do embrace technology and make use of new solutions.
As an example, property inspection software allows you to conduct what is usually a three-hour inspection using pen and paper in under 30 minutes using your smartphone.
Property inspection apps and software turn your entire office paperless and boost productivity. They allow real-time communication, automation of admin tasks and set a standard for your company that will leave a lasting impression on clients.
There’s a vast variety of technology-based online tools that property managers should be making use of.
Simply put if you were a property owner and one company took three hours to conduct an inspection that another company took just 30 minutes to do, who would you be more in favor of hiring?
Not Knowing Your Property Management Companies Worth
Not charging the correct amount is a common mistake seen mainly among newer property management companies. It’s easy to get lost in the excitement of landing new contracts over competitors.
Given the competitive landscape of property management, it’s common that businesses will try to set themselves apart by offering well below market rate rental fees. However, this is not a substantial business model and will quickly backfire on you.
Property management companies use their management fees to fund 100% of their operations. By charging significantly less, your service quality drops accordingly. You no longer have the budget to provide the same level of service that a property management company charging above or equal to market rate can.
This method does win you new business; however, if you are charging well below market rates, you will not have the means to hire new staff to handle the influx of work. As a result, your management quality will fall for both your new and current clients. Ironically, charging less than your competitors can see you lose business long term
To steer clear of this common mistake, you need to evaluate your business and determine a fair operating budget. Calculate how much you need to charge to cover all your business expenses while making a profit.
You should also determine how many units you will allocate to staff members; this will make it easier to scale in the future when you grow your portfolio. It’s a lot easier to hire staff before acquiring new contracts, as opposed to stretching staff thin while going through the hiring process.
As mentioned previously, implementing property management software within your company can help you scale and support your companies growth. It also sets a company-wide standard for new and current hires to work off.