In a previous edition of the newsletter, I listed 4 ways to improve owner cash flow: Help them appeal their property taxes, claim tax deductions, find cheaper landlord insurance, and refinance their mortgage.
The caveat here is that none of these directly benefit property managers. They line the owner’s pocket, but don’t necessarily result in greater cashflow for you.
There is a method to this madness 👉 When you create value, even when you don’t directly benefit, you earn the loyalty of your clients, and you’ll reap the rewards later through greater retention, which leads to higher customer lifetime value.
Tactics that boost your bottom line
With that in mind, I want to use this edition of Pillow Talk to point out that there are plenty of ways to simultaneously create value for your owners and your 3rd party property management business.
Here are two things that improve owner cash flow, AND directly benefit your bottom line:
- 1031 exchange. If an owner has a poor-performing property, maybe it’s time to trade up for a better one.
- Benefits for the owner: Higher rent, better appreciation potential, and fewer headaches (from repairs, bad loan terms, etc.)
- Benefits for you: Potential for buy and sell commission, higher RPU, potentially two properties to manage instead of one if there is enough equity in the property being exchanged.
- Renovations. There are many benefits to improving old/neglected properties.
- Benefits to the owner: Higher rent, increased property value, and better cash flow from fewer maintenance events moving forward.
- Benefits to you: Higher RPU and more revenue if you’re charging markups on renovations or if you have your own construction company.
Don’t take my word for it
Eric Höglund, CEO/Broker of Estey Real Estate and Property Management, is an advocate for 1031 exchanges in property management.
He describes the model in this interview with FourandHalf Marketing:
“Maybe you’re having a lot of trouble with an owner’s fourplex… If you can get your owner thinking about selling that property, you don’t necessarily have to lose the business of those four units.
You can suggest your owner do a 1031 Exchange and buy a multi-family building with eight units. You can run the numbers on estimated rental values and occupancy rates. Your owner’s Realtor can take care of the sale and the purchase. You can look at deferred maintenance issues and help the owner decide whether the investment makes sense.
First, you’ve provided a valuable service to a client. Second, you’ve developed a deeper relationship with a local real estate agent who just closed a sale. Third, you’ve grown your own portfolio. Instead of managing four units for this owner, you’re now managing eight.”
While Eric gives a multifamily example, the idea applies equally well to single-family rental property management. The only thing I might suggest is setting up in-house brokerage so you collect the commissions.
About Blanket
Blanket is transforming the property management industry with its innovative platform that helps property managers grow their portfolios and retain owners. By combining AI-powered insights, automated lead generation, and seamless integration with existing property management software, Blanket provides property managers with the tools they need to succeed. Blanket is backed by leading Venture Capital Funds like Foundation Capital, Symbol, Operator Partners, RE Angels, and industry-leading Angel investors. Together, we’re shaping the future of property management.
