Building A Sales Division for Your Property Management Business
We had the pleasure of guest appearing on a recent episode of The Property Management Mastermind Show with host and Middleton Elite Coaching client, Brad Larsen. Brad owns RentWerx Property Management, one of the fastest-growing property management companies in San Antonio, Texas.
Brad’s podcast for property managers features industry-leading professionals speaking about best practices, new ideas, success stories, and lessons learned. The Property Management Mastermind Show offers useful tips and strategies to improve your business.
We recap the key points of our time with Brad in this article.
You can watch this episode of The Property Management Mastermind Show here.
RentWerx & Middleton Elite Coaching
Debbie Lariviere and Bill Middleton are partners and co-founders of Middleton Elite Coaching. They use a customized approach to building and coaching real estate sales teams, brokerage firms, property management companies, and other types of businesses that are tangentially connected to real estate.
Middleton Elite Coaching has been working with San Antonio-based property management company, RentWerx, since the summer of 2021 when Brad and his team made the big decision to ramp up their sales division.
RentWerx began this process by recruiting a couple of talented and dedicated sales agents who are training with Debbie (MEC) to create, launch and be successful at the sales side of Brad’s property management business.
RentWerx has experienced many moments when owners of the properties they have managed for 5-10 years would hire a sales agent outside of RentWerx to list their property; despite RentWerx having the ability to handle the sales side of the business.
Born from this was a need to get the sales division in front of RentWerx property owners on a more consistent basis. Capturing roughly 10%-20% of the sales, their goal was to drive that number to an 80%-90% capture rate. Brad understood that it takes a good agent with a good follow-up system to do so.
To put this growth into perspective, in 2019 Brad’s company closed 7 sales deals; and in 2020, 11 deals. In the time since RentWerx has partnered with Middleton Elite Coaching almost 9 months ago, they have closed 20 sales transactions. RentWerx is on pace for a very productive and profitable 2022; with Q1 stats showing they have already outpaced 2021, even if they do no other business this year.
How exactly are they doing this?
Layering In Additional Tools & Systems To Build Your Sales Division
Coach Debbie has given Brad’s sales team the task of identifying the things that are currently working very well on the sales side of their business and doubling down on them. This is where the team currently focuses its efforts. By layering in some additional systems, there is an exponential growth opportunity.
Some of the additional tools and systems Brad’s team has put in place are:
- Lead generation levers
- Identifying and improving the conversations the team should be having with owners and tenants.
- Owner surveys –
- Do they want to sell?
- Do they have any intention of selling?
- Do they know what their properties are worth?
- Do they want to purchase additional properties?
Knowing the intentions of your owner clients is important. As gut-wrenching as it is to realize that your owner client has listed with another agent, it is equally gut-wrenching when they come back and say,
“Hey Brad, here’s three more properties I just purchased and I want you to manage these for me.”.
It is important to discuss future real estate goals with your owner clients. Brad’s sales team currently has their owner clients complete surveys to help assess their short-term (90 days) goals, what they want to do with their specific property, and what additional buying needs they have.
It is also important to check in with your tenants.
- Do they have the dream of homeownership?
- How long will it be before they are ready to buy?
- Are they restricted by credit or down payment?
If you discover that your tenants are preparing themselves for homeownership, you can offer them incentive programs to help them buy out of their lease or purchase the home sooner.
Before you can reap the benefits of adding a sales division, you have to start the conversation. The dialogue is simple yet important.
It’s as easy as picking up the phone and saying
“I’m an agent with the organization that manages your home. Have you thought about buying or selling? Do you have real estate-related plans for your property in the future?”.
The WHO For Your Sales Business
Use the goals of your business, as well as the goals of your owners and tenants, to get a clear picture of the type of agent your sales business needs.
We recommend drafting a job description of the agent role, and also a compensation plan. With these, you can begin to advertise for your ideal agent.
Middleton Elite Coaching assists our clients in the recruiting, onboarding, and training of team members in every role.
Building a sales division is much more than just hiring a sales agent. Property management is a complex business. As the owner of the business, you have your hands in every aspect of property management and sales. You probably work with investors. It is more than likely that you have knowledge of listings that have yet to hit the market. Additionally, you may often find yourself playing matchmaker between owners that are listing and tenants who are buying. The list goes on.
This scope of work requires a full-time agent, perhaps even two or three, to effectively launch a sales division that is equipped and capable of handling every aspect of these transactions; all while continuing with lead generation and follow-up efforts.
Working with a consultant such as Middleton Elite Coaching has helped Brad’s team to not only hire the right salespeople but to train these salespeople to be successful. Part of this success is hitting all of the metrics necessary for building and growing the team.
What Adding A Sales Division Can Do For Your Business
Adding a sales division for your property management business is beneficial in many ways. Doing so will help you maximize profits, capturing your fair share of the real estate market. One side of your business feeds the other, so to speak.
It’s important that your team recognizes that you are not just a property management company that has sales agents. You have staff members that have spheres of influence, too.
What is your entire team doing to bring in the people they know and to put them into the various systems that you are running?
“Where else can we layer in additional deals that don’t have to be related to property management?
Many of MEC’s clients approach property management from the sales side first and then backfill with property management. RentWerx has approached this in reverse.
Brad and his team have built a large and successful property management company and are backfilling with the sales side. He is super happy with the current direction of RentWerx, and wants everybody to learn from what he and his team have done, and to learn how they can apply that to their own businesses.
What Comes Next?
If you’ve already built a great property management division and you want to continue to grow it, you may wonder what it looks like to actually build a sales team? The process is sequential.
You’re eventually going to reach a diminishing return on market share in any market; whether that’s in a business vertical or that’s in an actual market itself.
Essentially, you’ll reach a point where you are excelling in one particular area and realize there’s a natural next business vertical where one hand feeds the other. It’s another set of people and another set of skills to unlock. The mechanics are largely the same.
Building a sales division is the same as building your property management division.
It starts with making sure that you have a predictable lead source or a way of generating business. Then you’re going to need to build some administrative support around your sales division. Next, you’re going to make sure that your training, coaching, and consulting of those people is really buttoned up. Finally, you wrap all that up in your corporate culture.
It is easy to get hung up on all of the necessary next steps far into the future. Sometimes it’s just about bringing someone in who understands how the puzzle fits together and says, let’s not worry about the next 52 steps; let’s worry about the next two or three steps that will get us to the intermediate or longer-range vision that we have for the company.
Fear Of Upsetting Referral Sources For Your PM Business
As an established property management company, you may have a fear of adding a sales division because you don’t want to upset your property management referral sources.
Making the decision not to add sales may be short-sighting the growth goals for your business. Before you rule out a sales division for your property management business, ask yourself:
“Do I want extra revenue at the end of the year?”
A great approach would be to assess how you can create a partnership with the agents you fear upsetting.
This may show up in the form of a referral fee or another opportunity to recognize the business they bring your team. Before you lose an opportunity for your business, consider this; roughly 20% of agents actually stay in the business. If you don’t have a sales side and you’re managing someone’s property for 5 to 10 years, chances are their agents are not even in the business anymore.
It is appealing to offer a full-service experience to your clients. If your clients love the way your property management company takes care of them and their properties, they’ll likely be confident that you could do the same with the sale of their properties.
Perhaps your client initially bought his or her property with agent X. If you provide them great service and happen to contact them about a great real estate opportunity that you can facilitate, there is a high probability that they will take you up on it.
The agents you fear upsetting probably don’t have a property management company, so they’re unable to offer full service the way you can. You can maximize this opportunity for your benefit. Agents are a great source of leads. There are many agents who don’t have access to a really great property management company that can help them buy another deal or help them turn another property.
Gaining Transactional Control
Transactional control on the owner’s side is important. You may inevitably have an owner who wants to buy another investment property and they to come to you and say,
“Hey, you’ve been doing a great job for me for the last five years and I’d like to buy another investment property. Can you help me?”
If you say “No, I can’t do that to Agent X”, then Agent X is going to sell your client property and could care less what it rents for or how much it will cost to make it rental-ready. Agent X cares about making the sale in 30 days and being done. Meanwhile, you lose complete control of what type of property your client will choose.
If you say “Yes, I’m willing to help you.” then you would have the opportunity to help them find an absolute gem of a rental property. You will have your owner’s best interest in mind when finding a property. You can also help them choose a property that will have minimal expenses and maximize revenue potential.
Transactional control on the tenant side is also important. When a tenant wants to buy a home, it’s better that they work through your company. You can help them control their exit more smoothly. Working with you will also help your tenant avoid any early termination fees when vacating. You can also replace them with another tenant sooner because you’ll have a heads up on their move.
Without transactional control on the tenant side, they are eventually going to send you a 30-day notice, and by that time you’ll be scrambling to find another tenant because they shocked you with this news.
Assessing Your Profit Potential
Your property management company probably has a great recurring revenue model. The initial phases of building a real estate sales team are going to give you up-front home-run potential followed by recurring revenue potential.
If we’re just talking profit margins of the sales side of the business, it’s not out of bounds to run a real estate sales team at a 30% to 50% net profit margin.
In this environment, you’ll have big commission checks on the top line and, depending on how you build out your org chart, 30% to 50% net profit at the bottom line. Everyone wins in this scenario. You are delivering a great end-to-end experience that is made better for the consumer because you’ve already established a relationship and trust. You can stand behind the quality of work that you do, and the seamless end-to-end high-quality experience.
If they are receiving a high-quality experience, there’s no reason for your owners and tenants to take their real estate transactions to anyone else.
Goals and Planning For Years 2,3 and Beyond
With RentWerx’s current end of Q1 numbers exceeding their goal for the year, Coach Debbie explains that it’s time to layer in additional people to hit the goals they have set, and the goals they are going to add.
Brad’s team is currently managing about 1000 doors. They’re experiencing about a 10% turn on that. In this case, a goal of adding 100 homes bought and sold would be the minimum.
If the team set an achievable goal of adding 150 to 200 homes bought and sold, it would currently stretch beyond the bandwidth of the agents that we have. In this case, a growth goal of ours would be to add additional talented people.
Finding Talented Agents
Recruiting can be difficult without the proper guidance. How do we go about finding agents right now?
This is one of the reasons that Brad emphasizes connecting with Middleton Elite Coaching to not only help strategize, plan for, and execute on building a sales team, but also to help recruit.
Recruiting is one of Coach Debbie’s favorite things about building a sales division. She once recruited over 300 agents in a span of three years for a large real estate franchise. To her, recruiting is a relationship-building business.
As business owners, we want someone that’s talented, who shares in our core values, and who is a do-er that’s going to get the job done.
It is important to look for the people who are willing to step up to the plate, get the job done, and do so with exceptional communication skills. When you’re looking at the ideal candidate for your business, you are evaluating the skillset, the knowledge around the category, the return on investment, return on rents, etc.
Finding the right people for your organization can take time. Oftentimes we get to a point where we hire out of desperation instead of hiring from what we are future casting; or what our org chart looks like down the road.
Successful recruiting is about how well you deliver your value proposition.
Recruiting That Aligns With Your Value Proposition
We aim to build relationships with agents that are on the other side of deals. We want talented agents with experience. By us showing up and delivering a high-level service, we are going to find ourselves doing deals with agents that are also delivering a high-level service.
A sales agent that is committed to delivering a high-level service is likely going to align with the value proposition that your property management business can offer; instant leads, coaching, support, systems, and training. You can offer expedited growth.
If I were a highly-skilled agent who is newer to the business, I am going to look at a value proposition like yours with excitement.
Potential, Emerging, & Proven Talent
When recruiting talent for your business, you will want to place each potential team member in one of three buckets; potential, emerging, and proven.
Potential Talent –
This is someone who has never done the job before (or perhaps is newer to the business), however, you think they have the potential to be successful in the role. Someone with the potential level of talent has a pretty high ceiling. They’re going to require a lot of training and development early on. They are generally easiest to recruit because most people are looking for either the emerging talent or the proven talent. Additionally, their compensation will be less than someone with emerging or proven talent.
Emerging Talent –
This is someone who has done the job before, possibly only for a little while. Someone with emerging talent has a track record of success in this role and they will require minimal training. They will typically be a little more difficult to recruit and will require a little higher compensation.
Proven Talent –
This is someone experienced with an extensive background in this particular role. Someone with proven talent can quickly plug into your systems and into your organization. Proven talent is usually the most difficult to recruit, and usually requires a more favorable compensation plan or a more favorable opportunity into the future.
Recruiting talent at the appropriate level requires determining what type of agent is needed for your sales team and the time horizon on which you are going to build. Once you’re clear about what your value proposition is, you can use the same mechanics that you used to build your property management business
You need prospects who match your desired recruiting level and your value proposition. Assuming that the timing is right, all of those things will come.
Middleton Elite Coaching has partnered with WizeHire, a recruiting platform for the real estate industry.
How To Win The World Series
The very first thing I’d ask you to do is to consider your time horizon for building out your sales division. Presumably, it took you a while to build your existing property management company, and it’s going to take you some time to build a sales business as well.
I’ll use a baseball analogy. If I’m going to build a business of any kind, the first question I want to ask myself is “In what year do I want to win the world series?”
Based on my answer, I’m going to build an intermediate or longer-range vision for when my business is going to win. Your answer is going to be different based on several factors; your time horizon, your risk tolerance, your personal financial situation, etc.
WATCH COACH BILL IN ‘HOW TO WIN THE WORLD SERIES’ (IN BUSINESS)
If my intention is to win the world series next year, I will need to find an agent or agents with proven talent, and I have to figure out a way to recruit those people today. Essentially, If I’m going to sign several free agents, I know I’m going to need to pay a lot of money to do that.
If my goal to win the world series is a longer-range goal, I’m going to go build a solid plan for winning 5 or 10 years into the future. In this scenario, I will make some different recruiting decisions right now. To stay with the baseball analogy; I would go build a farm system.
I’d go recruit talented young people with potential or emerging talent and develop them over time.
Freedom of Choice Moment
At Middleton Elite Coaching, we approach the Freedom of Choice Moment with each of our clients as if there’s a point in the future in which they will have the ability to choose whether they work or not. If you want to sit on a beach in the Caribbean and drink umbrella drinks, great. And if you want to stay in the day-to-day of your business because you love it, great.
In either of these scenarios, there are mechanics, financials, and org charts to get you to where you want to go. It’s about picking a point on the horizon and then let’s backfill to today from there.
We’re going to help the attendees of PMMCON2022 design this Freedom Of Choice Moment for themselves.
The Property Management Mastermind Conference 2022
Bill and Debbie of Middleton Elite Coaching will lead a half-day educational seminar at The Property Management Mastermind Conference 2022, which is taking place at the Red Rock Resort & Casino, Las Vegas May 16-18, 2022.
The seminar will take place the afternoon of Monday, May 16th, from 1:00 pm – 5:00 pm, and will cover the business development basics for building the sales side of your property management business.
We’re going to help you with the A to Z of building out your sales division:
- How to set it up correctly
- How to recruit the right agents
- How to compensate
- How to put your vision in motion
If you’re someone who is just kind of thinking about starting a sales division, we’ll have some thought-provoking key points on:
- Putting together team agreements
- What you’ll need to have in place for onboarding
- What your checklist should look like before getting started
If you currently have a semi-sales division where you’re working both property management and sales, we’ll cover:
- How to grow a stronger team
- What actual systems and tools you’ll want to implement to reach the next level
- High-level recruiting – The When, The Who, & The How
If you currently have a property management company with a sales division and you are trying to figure out how to exit, we’ll cover that, too. And, if you’re ready to get started with coaching, we’ll discuss this in more detail.
About Middleton Elite Coaching
Middleton Elite Coaching specializes in consulting the top 5% of real estate agents, real estate sales teams, and real estate brokerage firms in North America. MEC currently has clients in over 20 states and Canada. We pride ourselves on a customized and thorough approach to working with our Clients. We do that through 1-on-1 consulting, virtual training courses, group coaching, brokerage coaching, keynote speaking, and live events.
In 2021, our Clients sold more than 5,300 homes for $2.3 Billion across multiple States and Canada.
Learn more about us and the work we do.