April 2015 | By Michael Antoniak
The current state of the housing market should be enough to convince you why many real estate professionals consider property management as another source of income. More potential home buyers are staying renters longer, which is pushing up rental demand and creating more need among landlords for services. But even if this weren’t the environment today, rentals will always be in demand because they are usually the first stop for young adults stepping out on their own. So while sales are very prone to the ebb and flow of the market, managing rentals promises an ongoing, reliable revenue stream.
Whether working it as a lucrative side job or a full-time calling, property managers all rely on some system to run this business. Property management software — increasingly becoming a cloud service — provides structure and tools to organize details about rentals, landlords, and tenants; track rents, income, and expenses; automate some management activities; and communicate with multiple parties.
“The only way you can be successful is with a system and processes in place to make property management easier and more profitable,” says Joseph Holbrook, associate broker and managing partner of HPE Property Management, a division of Keller Williams Realty in Reston, Va. “Done right, property management can be a good way to make a living.”
About 10 years ago, Holbrook agreed to manage a rental home for a client as a favor. When the housing market slowed and more homes sat empty, others inquired about management services. Within two years, he was overseeing 30 rental homes. Today, his portfolio includes nearly 100 homes, and managing them is his full-time responsibility.
“I decided early on to focus strictly on single-family rentals, with rent rolls between $1,500 and $3,500 [per property],” he says. Holbrook chose the cloud-based Buildium as his management system, but that came after some trial and error. Initially, he relied on his wife to manage his inventory of properties with small-business accounting software called Quickbooks. But as he took on more rentals, he became overwhelmed and started exploring dedicated management systems.
Holbrook turned to Buildium because of its robust suite of tools: full-fledged accounting, the ability to process electronic payments, e-mail alert capability, customizable reports, and easy setup and operation.
“One thing I considered critical was an online portal where owners [landlords or investors] and tenants could check in any time, and any information they need would be available,” he adds. “And I wanted clear pricing for all features, not something where I had to choose from several options priced separately.”
For Stephen Long, who partners with his sister, Kristen Bodford, to run The Carolina Crew, a property management firm within the Keller Williams Realty office in Winston-Salem, N.C., the search for a management system ultimately led to AppFolio, another cloud-based suite.
“When we started offering [property management] services in 2009, we were keeping records with paper and pencil — then transcribing them into an Excel spreadsheet,” Long recalls. His wife kept the books while his siblings focused on management duties. He describes the process as “a lot of work for not a lot of money.”
Still, they persevered, growing to a point where they had to invest in a specialized property management system. “By the time we were handling between 30 and 35 homes, it was too time-consuming,” Long explains. “It was taking a week just to collect and process rents, and another week to get payments to owners.”
They cobbled together a system of systems for a while, still relying on Excel for accounting. But Long eventually decided they would be better served with one integrated management suite. In late 2012, he started comparing solutions approved by the North Carolina Real Estate Commission. Some were too expensive or powerful for his needs; others were too cumbersome.
“The user interface and the fact AppFolio is Web-based was a big draw,” he says. “Now, someone can apply [for a rental] online, and the system does a background check and makes recommendations. Tenants can pay their rent online or order a repair. The system handles accounting: We set it up for direct deposit to owners, and we can pull any report we want in a matter of seconds.”
It’s been a worthy investment that has allowed Long and his siblings to focus on growing their business. The Carolina Crew recently added its first multi-family dwelling, and Long is also exploring commercial rentals. He advises those considering a similar venture to first make sure demand for their services warrants investing in a system. “Lead with revenue,” he stresses. “Don’t go jumping in for software until you have the income to pay for it.”
In Rolling Rock, Texas, Jim Smith, broker-owner of The Property Management Company, says property managers should decide what help they need before using any system. “Take time to figure out exactly what you want software to do, then go out and find the best system,” he says.
Smith relies on two different programs: Yardi Professional for commercial rentals and housing associations, and PROMAS for residential units. He recognizes the benefits of cloud-based systems, but these are stored and backed up on his computer, which assures him that they are under his control. Last year, he started exploring migrating to a new system which supports both a cloud service and site license, but he found most solutions lacking.
“A lot of them are really good for the basic residential manager with 50 to 100 houses,” he says. “But they don’t support the in-depth accounting, complex formulas and reports I require for working with multiple investors in multiple properties.”
Smith hasn’t finalized his choice yet, but has recommendations for anyone in the market for a new system. “Create some management scenarios which are real for how you work, and see if the software can handle it and deliver what you want,” he says. “Then talk to active users — not the owner of the business but the ones who actually run that software every day. Their experience can be the most help when deciding if it’s the right system for you.”
Reprinted from realtor.org, April 2015, with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright April 2015. All rights reserved. http://www.realtor.org/