Smart Growth for Smart Property Managers Part 1 (Set a Specific Growth Goal)

David Borden

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January 27, 2014

Set a specific growth goal:

In order to grow your property management business, you need a goal.  First, decide how many units you want to add to your portfolio over the next 12 months.  Add to that the number of units that you expect to lose over the next 12 months.  Now divide that number by 12 and that is your monthly growth goal.  Example:

Growth Target 100 new units.  Attrition 24 Units.

100 new units + 24 lost units = 124 total units.  124 units / 12 months = 10.33 new units per month.  Round up to 11 and that is your monthly target to grow one’s business by 100 units in a year. 

Next identify the type of property that you want to manage.  Set a price range and location for the accounts that you would like to add, and be specific.  At least 3 bedroom, 2 bath, 2 car garage single family homes in a specific radius from your office.  Or homes and condos that will rent for at least $1200 per month within a ten mile radius of your office.  It is important to concentrate your management portfolio as close to your office as possible, as you will need to travel to and show the properties often.  It is significantly more profitable to manage units close to your office than far away because it reduces your travel time and cost to conduct the efficient management of the property.

Calculate the exact ANNUAL revenue and PROFIT per unit.  Add together all leasing, management, and any other fees that you will charge the homeowner over the next 12 months.  It is important to find out how much revenue and profit you will make per property so that you can calculate your return on investment for acquiring new properties.  Knowing this number will allow you to decide whether or not you should invest in a particular customer acquisition strategy or not.  Generally you should expect AT LEAST a three times return on your investment, and anything above that is typically a no-brainer.  Example:

Average rent amount:  $1500

Total Annual Management Fee: $1800

Leasing Fee:  $1500

Ancillary Fees:  $600

Total Annual Revenue:  $3900

Average Expense per property: $1000

Total Profit per Property:  $3900- $1000 = $2900

Now you know that every property that you acquire will add $2900 of profit to your business every year. 

Next calculate your lifetime value of customer. 

Start tracking how long your customers stay with your company and this will tell you how valuable they are to you over the lifetime of their business.  If your average annual profit is $2900 and your average customer stays with you for 4.2 years, then your lifetime value of customer is ($2900 * 4.2) or $12,180.  Now you can decide how much you are willing to invest to acquire these properties.

Stay tuned for our next post…  Lead Response Time 

About the Author

David Borden

David Borden

With a resume that includes West Point graduate, Captain of the West Point Team Handball team (which, interestingly, is also referred to as “Borden Ball” around the world. Google it. We’re not sure which name came first, but we’re pretty sure Dave could tell you), US Army Chinook helicopter pilot and Co-founder, President & CEO of what is now the leading website in the country for advertising long term residential rentals, it stands to reason why Dave has a place at the PMW kitchen table: his appetite for success. And, well, because he keeps us laughing.

As our resident funny-man (possibly self-proclaimed), his booming voice can be heard spreading the PMW gospel to anyone who’ll listen. And, frankly, even those who have no interest in property management. (Don’t they teach “Inside Voice” at America’s oldest military academy?)

But his high-decibel, funny ways become awfully serious when it comes to staying one step ahead for the good of our customers; because Dave has been there. As a second-generation property manager from Colorado Springs, CO, he knows the struggles that property managers go through and painstakingly dissects every step of their process to come up with ways to ease their burden.

As former CEO & President of RentClicks (which went on to become, he strategically positioned their business to become NARPM’s first official partner and was awarded NARPM’s National Affiliate of the Year three times.

When he’s not devouring industry information at our kitchen table, you might find him bellying up to a plate of wings while watching his beloved (understatement) Broncos, flipping channels in search of a historical documentary, searching out a tennis match or preaching the ways of the world to his pre-teen sons, Andrew and Brady.