If you speak with experts in the property management industry, you’ll probably hear as many different perspectives on a property management business plan as there are different PM businesses. But one thing holds true – in the classic adage usually attributed to Dwight D. Eisenhower – it’s not the plan that matters so much as the planning.
Today we sat down with property management entrepreneur Peter Lohmann, CEO of RL Property Management, to discuss property management business plans. Outlining a detailed business plan isn’t just important for defining your own goals, it’s key to communicating those to potential clients and investors. It also requires deep insight into what residents want and are willing to pay for.
Whether you’re new to property management, have been managing properties for years and are ready to start your own business, or own property management business but are looking for greater investment, we’ll cover important topics to address where you are.
We’ll explain why business planning can be so important, who to target with your plan, and how to create a habit of regular planning (not just at the outset of your practice). We’ll also share a free template to get you started.
Key Learning Objectives:
- How to identify and find your ideal clients
- How to articulate your value proposition
- What to include in your business plan
- How to outline your business plan
- A free property management business plan template
Meet the Expert: Peter Lohmann, CEO RL Property Management
Peter Lohmann has owned and managed properties in the greater Columbus, Ohio, area since 2008. He founded RL Property Management with his business partner in 2013, transitioning from a full-time job as a control systems engineer to running his own company. Since then, he has helped other professionals find an “off-ramp from their W2.” Now they manage around 700 units, focused on resident rentals in the Columbus area.
Lohmann writes a popular newsletter about the business of residential property management, and regularly blogs and podcasts about the industry with tools and advice for business owners and property managers. You can follow him on Twitter @pslohmann.
What to know before creating a Property Management Business Plan
Not to get too deep down the rabbit hole, but the first step to creating a high-quality business plan is – you guessed it – to make a plan for the plan. For entrepreneurs, planning is the key to success.
Going through the following steps first will make the process much easier and more effective in the long run. Here’s what you need to get clear at the outset.
State Laws governing property management business
As you know, each property management company’s approach is very dependent on regional or state regulations. Before taking any steps to either start or change your business, you need to have a clear understanding of the local laws governing your business venture.
We highly recommend hiring an attorney who can help you navigate those laws and regulations.
Who are your ideal clients
Lohmann lays out three critical steps to crystalizing a successful business plan:
- Identify your ideal clients.
- Articulate your unique value proposition for those clients.
- Go out and find leads.
So, first: Who are your ideal new clients?
“Get really clear on who your ideal customer is,” Lohmann says. “Are you managing associations, office buildings, big apartments, single-family rentals, etc.? The narrower and more specific you can be, the better your life is going to be and the more money you’re going to make.”
In other words, anything outside of this target market is going to be a waste of your time. That’s why this is the first step.
“The more narrow and specific you can be here, the more directly you can speak to your prospects in a way that’s compelling,” Lohmann says. “Everything becomes easier – content strategy, sales conversations, even operations become easier – if you know who you want to manage for and what types of properties you want to manage.”
What type of property management company you are
The next step is to identify your unique value proposition. There are tons of property management companies out there. Why should your ideal client choose you?
In Lohmann’s words: “Your second step is to ask, ‘Why should anyone care?’ Property management isn’t a new concept; there are tons of property managers. So, identify what your unique value proposition is.”
This is key to figuring out not just who to pitch to but how to pitch to them.
“What are you going to talk about?” Lohmann says. “You can’t just say, ‘Oh, hire us, we’re the best!’ You need clear examples that say, ‘Our company does something a little different.’”
For RL Property Management, that started as a promise that they would never charge a leasing fee.
“Sure, it’s kind of crazy, and I don’t know anyone else who doesn’t charge that, but it worked,” Lohmann says. “We were trying to figure out why everyone hated their property manager. And we decided that it might be an incentive problem where the property manager’s incentive is to fill the unit as quickly as possible so they can get that big leasing fee, and that was creating bad outcomes for property owners. So we decided that we weren't going to charge a leasing fee, and we've stuck with it ever since.”
How to find your ideal clients
The third and final step of preparation is to identify where you need to go out and find leads.
“Given what you know about how you defined your ideal prospect and your company and what they offer, the next question is where you go and get these leads,” Lohmann says.
“A lot of property managers start with this third step. They just say, ‘How can I get more leads?’ But that’s the wrong question. Why do you deserve those leads? Answer that first. Downstream of that is ‘Where are those people hanging out, and how can I get this to them?’”
Getting this step right involves researching property management and real estate property in your area and getting familiar with industry news, conferences, and listings.
What should your property management business plan include
Now that you have your target audience and value proposition clear, it’s time to think about what to include in your actual business plan.
The overarching goal of your business plan is to arrange your company in a way that maximizes resident experience and outcomes for you, your investors, and your residents.
(Learn more about maximizing resident experience in our State of Resident Experience report.)
Each property management business plan should be able to answer the following questions.
How to find properties to manage
Similar to the steps above, your business plan should explain how you will find the properties you manage. Outline how you will target and find those clients. This also means being clear on the types of properties you want to manage, which we discussed above.
How to evaluate properties
Get clear on your standards for how you will evaluate properties and potential clients. Know what type of properties you are willing to manage and what your specific niche is. It’s key in this step to very clearly articulate what makes a good property for your PMC and what types of properties you will say “no” to.
How to market properties to find residents
You’ll also need to include marketing strategies
and channels in your business plan. How much are you going to spend on marketing efforts? How intense of a content strategy are you prepared to create? What tools and resources do you need to support that strategy?
(Lohmann discusses rental property management marketing strategies on his blog.)
How to screen residents
Different property managers have very different approaches to screening residents. You need to decide how you want to approach screening and define that approach for your business plan. Will you accept the first-qualified applicant? The “best” applicant? Now is the time to answer those questions. You should also clearly outline the regulations in your area and include tools that help PMs evaluate residents holistically.
How to collect payments from residents/tenants
Next, outline how you plan to collect payments from residents. This section should also include strategies for how you’ll make this part of your job easier on yourself, your residents, and your investor. Rent collection can be incentivized through smart resident benefits packages like that Second Nature offers. You can also wrap this value into a channel for more revenue.
How to provide repair and maintenance
Repair and maintenance are foundational services of any property management company. It’s also an area where you can set yourself apart. Define your approach to rental property maintenance, how you offer better value than other companies, and how you are driving better results for residents and investors.
How to retain your residents/tenants
Resident retention is key to any PMC’s value proposition, even if we all have different approaches to it. Outline your approach to driving value for residents and building experiences they are willing to pay and stay for. In our State of Resident Experience report, we identified some of the key programs that residents are looking for right now.
Creating a PM Business Plan Presentation Deck for Investors
Now, let’s talk about the actual outline of your PM business plan. If you’re starting a new business and aiming to present a business plan to investors, or even business partners, you should outline each section below as a presentation deck. The information presented in this section needs to read like it is designed for investors and should highlight key terms and concepts they care about.
This is a high-level overview of your entire presentation. As such, it should be the last section that you write. You want to be concise but interesting and hook the reader quickly. Outline what type of property management company you are operating, your target market, and your growth plan. You can also include a mission statement. Next, outline the rest of the plan.
The company overview will dive deeper into your property management niche and business model. Explain what types of properties you manage and how you operate. Options include single-family residential property management (SFR), multi-family property management (MFR) or residential apartments, HOA management, and commercial property management.
Give a brief history of your company and your legal structure.
Market Analysis: Industry, Customer, and Competitive Analysis
This section benefits you almost as much as it does your audience. Researching for this section will help you more deeply understand the industry, customers, and competition.
- Industry analysis should include details on the trajectory of the market, its size, key trends, etc.
- Customer analysis should include details about your target customers, their wants and needs, etc.
- Competitive analysis should outline direct competitors (PMCs in your area) and indirect competitors like in-house managers, automated tools, etc. Explain why your value proposition is unique.
This section should describe the property management services the company plans to offer, such as leasing, maintenance, and rent collection. It should also discuss the pricing strategy for these services.
Marketing Plan & Sales Strategy
This section should describe the company's marketing plan and sales strategy, including how it plans to attract and retain clients. It should also discuss any advertising or promotional campaigns the company plans to undertake. Promotions could include paid advertising in print and on websites, social media marketing, radio advertising, SEO marketing, and more.
Outline your short-term processes and long-term business goals, as well as estimate day-to-day operations. What property management software are you using in the business? What bottlenecks slow down work that’s moving through the organization? How will you structure your company and your teams?
Outline your management structure and the skills and experience of your management team. You’ll particularly want to highlight property management and real estate experience. This is a key moment for you to consider who you have in the company, who is a right fit, and who needs to be looked at as not a great fit.
This is where you give your financial projections and approach. Outline your major cost centers and revenue drivers. What management fees are you going to charge? You should include a profit and loss statement, balance sheets, and a cash flow statement.
Identify and outline the most targeted growth opportunities for your business right now and over the next five and ten years. Knowing your long-term goals requires you to gain a deep understanding of the real estate and property management market in your area and to understand clearly where you fit in and how you can generate growth and value for years to come.
Explore Revenue Growth Opportunities with Second Nature
At Second Nature, we work with property managers around the country to develop better resident experiences that will generate more value for their clients and more profit for their companies.
Our State of Resident Experience report includes input from dozens of property managers and our collective findings about what residents are looking for right now. The report aims to speak to your questions and needs whether you’re just starting to think about property management, pivoting to launching a startup PMC full-time, or working to grow your PMC.
The product we have found most helpful to property managers at every stage of their company’s growth is a fully managed resident benefits package or RBP. Each product in this package aims to deliver something residents want or need and a service that helps set your PMC apart. We want to help make running your business as easy as second nature.