Wondering how to scale a rental property business? Let’s look at the 3 factors that can make or break your success.
We get the opportunity to work with many investors and property owners who are excited about the growth of their businesses but also want to be intentional about how they scale. They know that doing too much too fast can be dangerous. So they have questions about how to balance their zest for growth with a degree of caution.
At its roots, scaling an investment real-estate business comes down to 3 main components:
- Capital
- Deal Flow
- Management
Find Capital (or Someone to Find It for You)
“To make money, you need money,” as the saying goes. And it’s no surprise that scaling a rental property business often means finding multiple sources of capital.
Some property owners have learned a thing or 2 about what it takes to manage their properties. But building and maintaining relationships with investors involves a different set of skills.
If you’re the type of person who thrives in the operational aspect of business but not as much on the investor-relations side, it will benefit your business to partner with (or hire) someone who is strong with investor relations.
Improve Your Deal Flow
Along with finding new and innovative ways to source capital, improving your deal flow is another key element in building a resilient and sustainable real estate business.
This can often feel like a full-time job because it requires
- Attending local and national events
- Maintaining consistent communication with brokers, industry experts, and fellow investors
- Finding new ways to network and add industry connections
However, it’s an important part of building a robust deal pipeline and staying ahead of emerging opportunities.
Refine Your Management Strategy
To grow your business, you will eventually need to grow your team—or, far easier and better yet, hire an excellent property management team to handle the details.
Many investors start with the traditional approach of taking on a handful of small to medium-sized properties, mostly single-family homes, and managing them on their own or with a small team.
As you’re getting started, this model can help set a foundation—and you can learn quite a bit (the hard way). However, property management is a business and an expertise in its own right, and most investors can make better use of their time, and achieve faster success and growth, by hiring an experienced property management firm and using the time that is freed up to focus on finding money and deals.
Furthermore, when you shift to larger, multifamily properties with over 100 units, it is imperative to be consistent, streamlined, and professional in your property-management style.
Adapting to Growth
Many owners find that it’s not just the shift to more properties that proves challenging. As you scale, other factors come into play on the operations side:
- Overseeing and maintaining an office
- Hiring and managing on and off-site teams
- Developing and implementing systems and procedures
…just to name a few.
On top of this, new challenges come into play with more and/or larger properties, such as weekend leasing and admin, after-hours emergencies, and detailed maintenance tracking.
How can you maintain an elevated level of service without the burden of 24-hour staffing? Hire an efficient property management partner with a smart pricing model.
Scale Provides Savings
Let’s go straight to an example:
On average, you would need a leasing agent and a maintenance tech for every hundred units. So let’s say you’re managing a 150-unit property. Since it’s over 100 units, a property of this size is typically operated with 2 leasing agents and 2 maintenance techs. But that is slightly overstaffed for a 150-unit property.
An experienced property management company will be able to staff that property with one leasing agent and one maintenance tech, supplementing with additional staff in times of high demand—such as the beginning of the month—and providing depth should an unforeseen absence occur.
The savings from this approach can be significant, which means more opportunity. In fact, in our case, it has allowed us to acquire properties we would otherwise not have been able to justify.
The same approach can be applied for a mid-size multi-family property.
Take, for example, a 50-unit apartment building. Buildings of this size require a lot of attention but do not have the revenue to support full-time leasing and full-time, on-site maintenance.
This is the main reason buildings of this size struggle to operate well. Owners are typically forced to staff the property (and bear the costs)—or go without staffing and neglect the property.
An experienced property management company will be able to give plenty of support to the property on an as-needed basis, while limiting the burden of payroll.
Effective Communication
As you’re learning how to scale a rental property business, another important consideration is consistent and clear communication, so residents know what to expect at every step of the way.
At Epic, we have clear roles, high communication standards, and custom software systems to keep everyone in-the-know in real time.
No matter your system, clear expectations and processes around communication are essential as you scale.
Click here to learn more about our services.
Pass It On: How to Scale a Rental Property Business and More
Know someone who needs to know how to scale a rental property business, or who would be interested in the Epic newsletter or our property-management tips? Please share a link to this post or encourage them to subscribe.