Bigger Isn’t Always Better

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Hey friend,

Welcome to the 17th weekly edition of Pillow Talk! This is where I share my personal thoughts on property management topics.

This week, I’m talking about why bigger isn’t always better.

Recent reporting from ResiClub on a BatchData analysis shows that 89.6% of all single-family rentals are owned by mom-and-pop landlords (folks with 1-5 properties).

When you do the math, those mom-and-pop landlords own over 14 million of the 15.7 million single-family rentals in the US.

This insight helps us understand why scattered-site property management is one of the hardest businesses to scale, why the industry is so complex, and why Wall Street is still struggling to make a dent in third-party property management.

In one word: Diversity. Every single mom-and-pop landlord represented in that chart is meaningfully different. And so are their 14 million+ rentals. They all have different goals, risk tolerance levels, cash positions, property conditions, etc. This makes it incredibly hard to create a scalable business model, which is what Wall Street depends on. They don’t usually touch things that can’t scale.

In addition to being diverse, mom-and-pop landlords also put a premium on trust, which can only be generated by the thing large players can never offer 👉 A relationship.

This is why the local property manager has a deep and wide moat. No one can manage such a wide range of unique clients with unique goals and unique assets with the level of personalized service owners want quite like small operators can. We’ve seen that when large operators try, half their business churns.

Being small usually means being at a disadvantage. But in property management, it’s a competitive edge.

Don’t take my word for it

Mark Brower puts it perfectly in this LinkedIn post.

I love the line “In property management we must standardize processes. But we must also customize relationships.”

I believe only the small operator can deliver both.

Good night 😴

Lior Abramovich
Co-founder, CEO