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Property Management Mastermind Show

#130 Franchising in Property Management Ft. Randall Henderson

Jan 24, 2022 by Brad Larsen

Franchising in Property Management can eliminate pain points and result in tremendous growth (and profits!). Randall Henderson of Property Management, Inc. explains the benefits of franchising in property management, how it works, and how to create growth with lead generation and even HOA!


Announcer: Welcome to the property management mastermind show with your host, Brad Larson. Brad owns one of the fastest growing property management companies in San Antonio, Texas. This podcast is for property managers by property managers. You'll hear from industry leading professionals on best practices, new ideas, success stories and lessons learned. This is your opportunity to learn about the latest industry buzz surrounding property management, as well as tips and strategies to improve your business.

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Brad Larsen: Welcome everybody to another edition of the property manager mastermind show, I am your host, Brad Larsen and today's guests, I'm going to be bringing us Mr. Randall Henderson. And so Randall is I got to give you some background. I've chosen him to be our emcee at the Property Management Mastermind conference in Twenty Twenty Two. Unlike me, I have a very good face for radio, but Randall has a very good face for on stage just presence. He's going to be able to tell some jokes, but I'm going to let him introduce us a little bit and the reason I'm bringing him on today, I want to have a conversation with him about the property management industry as a whole and how it relates to the franchise world because he's going to tell us more about his franchise business and what the role he plays in that. But I think it's kind of fascinating to see, and we'll talk about just the industry, the influx of money, the influx of interest and just kind of have a real good fun conversation with it. So without further delay to introduce Randall and let him tell us a little bit about himself. Randall, go ahead.

Randall Henderson: Hey, thanks, Brad. Thanks for having me. Right out of the gate, I just got to tell you guys, I am so stoked to see all of you at the Property Management Mastermind conference. You know, when Brad asked me to host, I was kind of I was kind of like, very interested as to why he might be looking to kind of get some more energy up on stage. But if you know Brad and you love Brad, then you know why he's looking for for a little bit of help up there. But at the same time, guys, if you haven't been to property management mastermind, it is an awesome experience with, in my view, the top property managers from around the country who are coming together and are sharing and learning. And it is going to be exciting. It's going to be pretty fun, I think, and it's going to be just an amazing experience. So sign up. Come, we're going to have a lot more, I think, hosting fun this year than we've ever had before, but just super stoked to to to do that. So thanks, Brad, for the invite on that front.

Brad Larsen: All right. Appreciate it. And we're going to need your presence because you have a really cool online on stage presence. You tell some jokes, you you wear funny outfits. I mean, it's, you know, we know how good you are. I remember the property where an event this would have been three or four conferences ago and you showed up in the eighties. Richard Simmons outfit. Man, that was so funny. We still have pictures of that today.

Randall Henderson: Oh man. Well, I've got some stuff planned already and we'll be working on some more fun stuff. And just the big thing is just to bring people together and just just to be able to learn and grow together. And I count myself blessed because who would have thought that that in the property management industry, you would meet such incredible people? So and that that goes for for Brad, his team and then everyone, that's just a part of this conference. So I'm really excited about that.

Brad Larsen: So give us some scale of your role and what you're doing for the company.

Randall Henderson: Yeah. So for those of you who aren't familiar with PMI, believe it or not, there's a group out there that decided that franchising property management was a good idea, and the name of that group is Property Management Inc or PMI. And I've been with PMI for about eight years. I'm the vice president of our residential and commercial portfolios now. Pmi is kind of a unique beast in the space because we are not just doing residential property management, we're also doing commercial HOA management as well as short term management. And to be honest, the HOA and short term in the last few years have really accelerated and skyrocketed. So what that looks like from for like a new person who's coming into PMI, it's like, OK, I'm interested in real estate. I want to start a company. I need a little help. I don't know what I'm doing. I need some extra support training and systems. So they they're led to PMI where they would buy a package that includes all of those things, but then they can choose right out of the gate. What business do you want to start and you want to start in residential? Well, great. You come into the residential pillar that's in my purview and we'll train you.

Randall Henderson: How to do it will help you grow your business. We'll help you kind of kind of go through that. And then in return in the franchise model, you pay us basically six percent of the the royalties or the gross revenue that you make. So that's kind of the way that that PMI works as far as the scale and the size. I'll go franchise size first. So PMI is now the largest franchising group in the space. We have three hundred and seventy operators all around the country. We're in about forty seven states. We've also opened in Costa Rica, Dominican Republic and Puerto Rico. And so we're starting to kind of broach into the international space. Although I got to tell you, man, that is a that is a different world. So we're we're very slow on that front. But when you look at our total portfolio, overall, we're managing around twenty seven thousand individual single family properties, about a thousand commercial. We're managing seventy thousand units of associations and then around five thousand five hundred short term rentals right now. So those latter two are kind of are our newer expansion areas,

Brad Larsen: Nominal stuff there because that's a great overview of what you guys do. And to give people some perspective on the six percent royalties, that's pretty normal standard even in any real estate franchise. So if you go by a century twenty one or a re max or a Keller Williams, you can get one or any one of those, they're all. A royalty off of a transaction. It's very similar, but I believe in that it's a pretty fair deal because you're taking potential operators who have minimal experience, no operational knowledge, and you're giving them the playbook on how to run a management company along with constant mentoring and guidance. And you're infusing your experience into their personal wherewithal and how they can do in their own market. So it's I just want to kind of throw that in there because some people think of that. I'm not going to pay that the entrepreneur people in us, right? We always want to do it ourselves. I'm going to do it better. But the other side of that is that's pretty fair. So I think that's an interesting I want to put that in perspective for you.

Randall Henderson: I really like that. You pointed that out, though, Brad, because like me, myself, I started my own company in property management. Many, many people who know me don't know that I actually came from the from the space myself. I mean, I started a company in two thousand three, initially just investing in my own rentals. I got my license in 05 and then in 06, became a broker and started managing for other people. And I built my portfolio and I ended up selling that business off in order to join PMI. But it's funny that you talk about like, why would someone choose to choose to go with the franchise versus doing it yourself? Like, I always say, Look, this business, it's not hard, but it is complex. There's a lot of moving parts to know. And so it works well in a franchise model where, like, a lot of that stuff is systemized and you guys know this too, just from from being operators yourself, if you spend the time working on the processes upfront, it's a massive investment. But then it pays dividends later on. And that's like kind of what the value is for a franchise model is that you don't have to spend the time doing the processes you don't have to to make every mistake in the book to learn because across all of our franchisees, we've already made all those mistakes and we've learned from those.

Brad Larsen: One of the things I really want to dive into is kind of the fascinating part of the conversation you and I had. This was in Austin at the Imen conference, and we're standing around the pool. I'm sunbathing my beautiful bald head. We're talking about the two outliers that have been very popular, the HLA management and the short term rental management. And so let's take one at a time because, you know, one thing that's unique about your business model that I feel is pretty fascinating is you kind of have the formula down for those two outliers because we all can do the single family homes or even the multifamily like it's all right there in our in our purview. There's a lot of state guidance for that. There's a lot of pre drawn up contracts for that, but there's not in the short term rental in the space. So let's talk specifically, how do you help your franchisees break into that market?

Randall Henderson: Well, and for those of you who are operators on the on the residential side, which most of you are, imagine the state of residential management like 10 to 15 years ago. That's kind of where home management is now. There are no good systems. There's not really great software. There's not a lot of great operators in the space. And when you talk to residential property managers right now, they're like, Oh, I don't want to do, Whoah. No, thanks, man. That's like too much of a headache, too much hassle for us. We look at that and see an opportunity. We're like, Hey, that if people are running from that space, we need to pay attention to to seeing what's going on there. And so like when when a franchisee comes in and chooses the way we did focus up front on processes, systems, workflow automation for hire, which by the way, was nonexistent and like a software that kind of tries to bring all that together. Unfortunately, the result is as a tech stack that's got like, you know, eight or 10 different platforms that you're trying to bring together. But if you use a workflow partner and you kind of try to bring those in, then you can deliver a good set processes just like you would on the residential side, but to the HOA board, and that's what they're starving for. They love that. So when our franchisees pitch, I mean, we have a very high close rate on on those those opportunities. And so that's kind of what we're selling out there and that's what we're seeing. I it would not surprise me, though, Brad, if we saw many more residential operators start to to move over into that space because it really is. There's not a lot of great people there.

Brad Larsen: It was talking through some of the challenges and opportunities here. So some of the challenges I've seen is you're trying to convince a group of volunteer board members to when they use other people's money to switch to you. So that's one of the challenges I've seen, you know, because you're pitching to a group of volunteers, you have your volunteer president, your volunteer treasurer and all the volunteer board members, and you're trying to tell them to go through the pain of switching using other people's money on a volunteer basis. So it's an extreme challenge because most of the neighborhoods that upon birth, upon their their consummation from the builder, let's say they already have an idea in place. So this drug deal was done decades ago or. Where the highway company and himself into the builder and there could be some drug deals going on, I mean, we're not going to sugarcoat that. There can be all kinds of weird stuff going on with the developer slash builder when they build and there always is, there always is. And they built this neighborhood of five hundred homes. And while they're building it, they hired their own little girlfriend of an Huaihe company over there and they get a sweetheart deal. Ok. I'm not pulling punches there. I think that's an actual real deal. That's what happens in almost every single market. Yeah. Again, the challenge is to get them to switch. So talk me through maybe some good ideas, stuff there that you've seen, stuff that's working, and maybe it can help some of us that are looking at that.

Randall Henderson: Yeah, honestly, it's more it's the sale. There is all about the pain that they're experiencing and the fact that they don't. They aren't aware that there's a better way. So the biggest problem that I see is just getting in front of them, just having an opportunity to show them, Hey, there there is pain that you're you're not popular in the community because you're the one that has to do the violations, right? You're you're you're spending your volunteer time and what do you get back? Is hate mail from your neighbors because you know, you had to find them for their dog crapping in the yard. And so there's just a lot of that that you can ease the burden administratively that they don't understand that that is the role of an HOA company. They are supposed to be the shield. They're supposed to be basically the secretary to the board. So you come in there and you're saying, Hey, look, we're going to make you rock stars, we're going to make you and drive the value of the community up and then credit you for those decisions. And so there's a lot of proactive stuff that you're doing. And it's more just like, in my view, communication in the world is three times more important than it is in the residential world of single family management. You have to be just constantly selling your value, selling your pitch and selling your, you know, the the relief of pain to these volunteer board members. And Brad, you nailed it. You have to keep going back to that. Hey, you guys don't have time to deal with that. That's our job. Let us do that. That's what you pay us for. Their existing manager is not saying those things. They're barely able to pick up the phone and respond to to calls and emails. It's that communication piece is everything

Brad Larsen: Or I see the opportunity in. This is the hyperlocal type of an operator. And so one of the one of our acquaintances, Scott Brady, he's been really growing the wayside in the California market. And a lot of it is because of the opportunity there where the current board is working with a giant conglomerate of a company based out of New York City or based out of Los Angeles. And they're 100 miles away in California. So they're coming across as not local players, and they don't have the communication there because of the number of managers or manager assigned to that board. There can be one manager for 20 boards, right? And they have no vested interest in that board success, really, other than just a paycheck. The franchise operator that you might be working with, they could be at a smaller scale. They may have five or 10 boards assigned to one manager, and then that manager is highly invested in their success. So I think the difference is to solve the problem the Shark Tank solve. The problem is better communication, as you mentioned, but a smaller scale type, direct point of contact and not coming across as you know, New York money, right? I totally

Randall Henderson: Agree. Yeah. You hit, you hit kind of the other, I think in your first in your first comment, you hit the the developer's girlfriend's company. That's the first company that we see. Absolutely. But the other one that we see is the is the out of state larger one. And you're absolutely right when you nail that because we we are local. We are not stretched as thin and we get a lot more attention and we just relieve the pain, remember? The key is they're volunteers. They don't want to deal with the problems. They just care about their community. So if you can kind of bring that to them and bring that level of communication and accountability and you automate a lot of that, then it's you win. And so again, when I hear people complain about how managers my like, my juices just start flowing, I'm like, How do we get more of that? Let's take more of that, you know?

Brad Larsen: One interesting part is you bring a level of professionalism to the management side that local operators may not have, inherently because I have seen local operators and their focus and it's like amateur hour is my mom and pop laughable amateur hour stuff. And so if a smaller operator can come in and say we're only going to manage five or 10 accounts, then they can come across as very local, but yet extremely professional. And that could be the point of difference that wins in the business.

Randall Henderson: Well, and Brad zooming out a bit, I think that's one of the reasons why the the franchise model works well in other areas of property management as well, because at the end of the day, people. Are trusting, and they're trusting their asset to someone, and if it's a local person that is tied to this national conglomerate, they love that they love that you're the local boots on the ground operator that's still part of a larger entity so that there's a level of trust there. So we're winning deals on the highway side based on that, but also on all the other pillars of property management as well.

Brad Larsen: Yeah, it's fascinating. So I think that's a really neat deal. I wanted to expand on that because, you know, we touched on it briefly in a few conversations, but you know, the opportunity there for the for the operator to break in. So let's talk that a little bit further. I'm kind of talking in circles, but I'm thinking of the next point. Do you offer some help in regeneration and growth on the wayside? Talk me through how that works.

Randall Henderson: Yeah. So lead gen and growth on the highway side is actually a little bit more complex than on the residential side because it's it's again, it's it's a matter of timing and it's finding the pain points. And so there's a lot of on the ground networking that has to go into that. There is some highway value and like the franchise at our level, we do provide like SEO optimization for home management searches. And there's a couple of third party legion that groups that we've partnered with to continue to to drive that. So. And I'll just share this with you. Give a little bit of the secret sauce out there for those of you who are familiar with APM and have used APM in the past. Well, APM kind of went off the rails for a while, but you know, where they never went off the rails is in a way they still dominated that whole term simply because the search volume there just wasn't as as large. And so that's been one of our secrets is that we've always been very active on the highway side in APM, and we're generating a fair number of leads per month. The cool thing on the highway side is that it doesn't take as many as many contracts to equate the same money. So we usually kind of use a math. A quick math, quick and dirty would be like an HOA is typically 10 times more valuable, then a been in residential. Now that varies across the board because the scope of work changes and every deal is a custom deal in the whole world. But when you look at that, you're like, OK, if I'm generating four or five or six leads a month, that's that's damn good that you're actually have an opportunity to close a lot of business. If you're if you're getting in front of these boards. And that's the key.

Brad Larsen: Yeah, I'm a firm believer in the APM platform, all property management platform. It's has changed hands now twice since I've been working with it for 10 years, started off as its own entity and building and bought them and then Real Page bought them or merged with them. And now they're one big giant conglomerate, but they do have a very good platform. The key to success there is be Johnny on the spot first to respond and just keep the follow up train rolling. You just can't like ping him. Oh, let the voicemail and forget about him. You've got to follow up, follow up, follow up.

Randall Henderson: Yeah. And I was just going to say, Brad, we also train on like the again. The big challenge is timing on boards because if they don't have pain, they're not going to be looking proactively. If they have pain, then you've got to wait for that moment of where they're out of contract and they're looking for another another operator. So the the big key thing is to get out in the community, to network and to to be in front of those volunteers before. And there are some resources that you can tap into to kind of help on that Legion side as well. But that's that's a lot of what the franchise is providing, as well as just kind of how and where to be, where to go to find those leads in the case.

Brad Larsen: Keep going on the wayside. Do you guys have a solution for banking that you partnered with or have it OK? Who is that?

Randall Henderson: Yeah. And so on the banking side, we're with South State, which I think used to be center state, and that has been easier to find a national solution on the on the highway side. There's a lot of money that you're dealing with in reserves, and there's a lot of opportunity for banking credits and other types of relationships on that front. So if you're looking at that space, I highly recommend looking at South State or another another kind of large, just a highway focused bank because it is very different and the benefits are very different as well.

Brad Larsen: Yeah, we recommend enterprise as well with enterprise enterprise there. Yep, they're good. The other side of that is I wanted to stress on that point because that's where a lot of the operators that kind of look at you with the sly little grin and they say, Well, yeah, I've got 10. Ten million dollars in reserve, though, and it's bringing in this crazy amount of bank credits that I use to help fund all the stuff that I do with software in the business and all the other side. And that's that's what we miss out on the short. Assuming the single family realm is, we don't have that. I mean, literally, they have probably four or five times the reserves that that the single family homes does. So if you're if you're bringing over a two hundred unit account, they might have a million or two million bucks in reserve. And it's just it's baffling the amount that they carry for all these different reasons. So I mean, talk me through a little bit more of that because I want you to elaborate on some real case numbers.

Randall Henderson: Well, I agree with you, and it's not just the banking credits and you're talking big money there, too, Brad, because as you mentioned, the reserves are four to five times higher and many times higher. When you when you start scale up and you talk about like 10 or 15 communities for one manager, that can equate easily to millions of dollars that you're holding it in one account. And that's kind of the difference in the in the in the trust accounting side and the way that the banks handle that. So in other words, the credits are multiple higher. I mean, you can't even it's there's no comparison between that, but that's just one revenue stream that people don't think about in HOA. There are a lot of opportunities for cross-pollination of different programs that you might have on your residential business that you can bring in. Remember that like a third of the units in an HOA, they're rentals and there's an opportunity there for marketing, for both sales and for for the management on the residential side. So we actually feed a lot of our business between home and residential. And if you're not thinking that, then you're missing out. But there's also other revenue streams on the home side that you've got to take into account. You know, people always talk about Resident Benefit package and how that's progressed and developed on the residential side. Similar things are happening, guys on the home side, and that just means more of an opportunity, more touches and you're touching a lot more units on the home side than you are in the residential side. So just think about what those might be. It's a big opportunity

Brad Larsen: To some of the operators well, how many doors you manage now and they say ten thousand doors and how many accounts is that? What's five? Exactly. So you made five sales. You didn't make ten thousand unit sales, but we always go back and forth is the fun ribbing on that because everyone's so concerned about your account, it's agreed. We always giggle about it. It's just a sidestep in the in the management world. So let's say, you know what

Randall Henderson: You might does the same thing. I always say, Look, we're managing one hundred thousand properties right now. Now, given seventy thousand of those are association units.

Brad Larsen: Yeah, yeah. So let's switch gears a little bit because what I want to talk about, too, is the short term rental opportunity because, you know, the way we kind of talked around pretty good. But short term rentals is really something that's it's up and coming. And, you know, it's nothing new. Let's say it's been around forever like waste management, but more people are looking at this, especially with the influx of Airbnb and VRBO. They're making the short term rental business much more attractive, especially when you start talking, you know, 20, 30, 40 percent management fees. Yeah, that's that's what some of their charges. So talk me through what the short term rental offering looks like with PMI.

Randall Henderson: Yeah. So I compare. I compare the short term kind of market to to the eighteen forty seven gold rush, right? Just there's a ton of money coming into it and it is new and up and coming. No one really knows what's going on. It's kind of the Wild West and you'll see it's hyper local as well because, you know, cities like, I don't know, Austin, for example, have really tight, strict rules about what you can and can't do inside of their city. So depending on the market and we're again, we're in forty six states, we see so many different legislation happening around short term right now that communities are trying to deal with it because of the influx. So the offering for for PMI is, you know, as you mentioned, you typically the management rate is anywhere from 20 to 30 percent. And the problem is that if you are not a hospitality minded person, you're going to get rolled in that business. You're competing against people who have one to five units and who are dedicated, that's their lifeblood. So I'll give you an example. You've got to have themes you've got to have like differentiators, things that make you stand out as an operator to attract that client into your into your unit. And then it's hospitality and guest services all the way.

Randall Henderson: So we've built out a model that that kind of takes that hotel standard of quality, cleaning and delivering consistency, and we spread it everywhere across our franchisees. So we have about eighty five of our franchisees that are operating in that space out of the out of the three hundred and seventy. And again, we're only managing fifteen hundred units right now. But from a revenue perspective, it is mind blowing because it's not just the 20 percent management fee, Brad, it's also the fact that you're you're more than doubling what you could make on a on a regular rental rate. So it's 20 percent of two hundred percent of the monthly rent that you would normally get. So just the revenue works, the systems are different. The again, the software is is really messed up right now. There's just a lot of different players coming into that space. And so that's one big thing that we add is we've and we tried six different softwares on it. We're now in this core software called booking automation, which we love that kind. Two brings together the ability to manage multiple calendars and turnovers and all that stuff, but it's a huge offering and it's a very detailed business.

Brad Larsen: What's interesting is we're talking about three levels of service, and the most profitable ones might be arguable in that realm. But hey, like you could be nine to five banker's hours and there's almost never going being wrong. I mean, you're not responsible for somebody's water leak in their home.

Randall Henderson: One hundred percent.

Brad Larsen: Yeah, long term rentals, you have your twenty four seven maintenance call centers and they'll take care of a fire now and again. But it's, you know, I'm not I'm not coming over on a Saturday afternoon to fix a fence, right? We'll get to it Monday or Tuesday. Then you have the short term rentals, man. They'll call you seven o'clock on a Saturday evening and say, My remote doesn't work and I want you to come over right now to fix it. And so the levels of touch just just just just descend from that, from the way down to the long term rentals and short term rentals. And to your point, the short term rental game, that operator has to be ready to be a concierge. They have to be ready to drop everything to answer a phone call because one bad review can sink their ship. Yeah, they could get a one star review on some property, and the next thing you know, they'll never recover from it. And it's it's really kind of a sad it's sad in a way that the consumer has that much power. But to your point, I mean, let's talk through some of that how you've seen this effect, operator So sure.

Randall Henderson: And it's a bit of a theme of this call so far is that look, hyperlocal is the way to go, but it matters more in short term than anything because you have to be so involved in on that guest experience. You have to know the community. You have to be able to provide value above and beyond what they could get anywhere else. And so I've absolutely seen it backfire when companies have tried to go remote on that type of service. You can't do it. You have to be localized and be able to provide like, for example, in your town, San Antonio. We manage about 60 short term rentals right now, but it's a hyperlocal office that is doing that and that has a great grasp. And that guy, when he on boards a new property, he puts all this the surrounding neighborhood, the best places to eat, the the wine that's from the local area. All that stuff goes into that. And so you can really miss that. And so in today's world where where travel has taken on this whole new feel, especially during the pandemic, where people are even just getting out of their own town to the next town over to work for a couple of months, you've got to have that ability to service that client as well. And yet it is 10 times the work, but it's also 10 times the revenue is about how the numbers work out as far as as far as what it could mean to an operator.

Brad Larsen: But it is our deep into that. So I want to go. I want to go through the experience side and on the revenue side because I want people to really have an understanding of this as I understand it and you understand you're doing it in reality, I'm just watching it from the outside because I'm not going to be the person taking that phone call Saturday at seven o'clock for a remote control. But the experience is the big deal. And so let's talk through this because the experience starts with is it easy to book? Can you find it? Can you book it? Can you pay for it online? Can you reserve it? Do they allow animals? Can you do a two or three night stay? Do they have everything you need? Do they have coffee makers? Do they have the refrigerator? Everything? Do you want your home? And of course, the easy in, easy out they give you a code you get in. There's no you that all the experience that just makes it easy to book, easy to show up

Randall Henderson: And cleanliness too. Don't forget about that. Like what they expect to walk in, how does it smell? How does it look? Does it have like what we do now and we do what's called the PMI standard as far as cleanliness and we do the triple white sheet on all of our beds. So any, anywhere you stay in the United States with PMI is going to have that, you know, that hotel like triple white sheet kind of mentality that people expect to see. This is like one of the thousand details that it takes to do it.

Brad Larsen: Yeah. And an experience book you walk in and say or see, there's a book on the counter that says all the places to go, eat all the places to do this and that and the other.

Randall Henderson: And well, you've got to have an iPad sitting there too with like the local experience, right? So so that people can go on there and they can just be like, Oh, where should I eat? And they click a button on this little iPad and it shows them the best areas right around them.

Brad Larsen: Well, that's cool. I didn't have seen that yet, but man, that's through my chain of thought of now I'm thinking like iPads in the units. Are they going to get stolen or are they going to get, you know, I guess it doesn't really happen. I mean, people, you have a credit card. You know, that mindset, too, is also in kind of infusing the thought process in the long term rentals is you move in, you're treated like an adult when you move out, we're going to send you the bill for the damages. That's right, because because security deposits are eventually going to go away in the long term rentals or they're going to basically kind of come up as a different animal, they're going to rebirth themselves and. But back to the short term rentals, the experienced side making people happy and given, you know, like having them, not if they need to call somebody, is there somebody that they can call that will answer? Yeah, right. Is there somebody that might call them when they're leaving at 10 o'clock in the morning the next day and say, Hey, was everything good in your stay? How was your experience? How can we make it better? And you know, the online surveys are OK, but the phone calls, man, those are really those are great.

Brad Larsen: I think those are great. It's a different level of experience, and that's the level that you have to go to. And the competition is stiff because you're dealing with somebody who owns four or five Airbnbs beer boss. And that's their livelihood. That's like their focus, and that's all they're worrying about. Twenty four seven is getting those renters in and making them happy. So having said all that, you agree with me and I'm just kind of elaborating on it, the revenue side. I think we glossed over that pretty quick, but I got to talk through it with you. So let's take short term rentals versus long term rentals. Let's take let's take for the baseline. A fifteen hundred dollar home long term rental and that homes probably were two hundred and fifty thousand or three hundred thousand whatever market you're in. Fifteen hundred dollars a month rental home as a long term, year over year lease agreement. We're seeing that in a short term rental revenue side. Bring in what?

Randall Henderson: Well, if you want to know the details on that, I'll give another one of our little secret sauce, which is free. Go to air D.N.A. and do a search on your local zip code and you can pull up and see exactly how much and what percentage is full of a fifteen hundred dollars a month long term rental. Now what we're seeing statistically is, you know that. Ok, first of all, double the rent to kind of get just a rough guess of how much money that would bring in a month. So fifteen hundred dollars is going to bring in a three thousand. And this this is very market specific. But if you're just looking at the rough numbers three grand a month on that and then you're going to get paid somewhere between twenty and thirty five percent in most markets were closer to the twenty side. But there is a concern that that might be going down as more competition enters the space. So we're keeping a close eye on that, but we're still above 20 percent on average. And so you start to do the math and you're like, Wow, this makes sense, especially if you can solve a lot of those, those kind of operations side support stuff and get great reviews every time, but it can go up from there.

Randall Henderson: As far as doubling the rent, it can be even more than that. It could be three times. We're seeing many places that are renting for two hundred 200 bucks a night. Even in San Antonio, we're seeing properties that are going three hundred four hundred dollars per night in San Antonio, guys and San Antonio. Not not what you would consider a vacation destination, but it's not about vacationing as much anymore. It's about just an alternative to hotels. You're traveling anyway, or you want to get out, you want to go to the next town over, as I mentioned earlier, and you just want an experience, right? You're not going to get that in a hotel. So I don't know how much more detail I can go on on the revenue side without giving away too much. But suffice it to say, it is significantly more.

Brad Larsen: Now you kind of finish the sentence for me because that's exactly where I was going to go. I was thinking it's about doubling the revenue. So a fifteen hundred dollar home brings in three grand. But remember, you're getting a double digit fee, right? And so you're bringing that the higher level of revenue in, not to mention the fees that go on. I mean, we could talk about that. I mean, the fees that on a rollover.

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Brad Larsen: Here's an interesting twist on the investor side, the second home market for loans for getting financing is much easier than investor financing, sure. So if you're talking to a homeowner that is out of state and they're looking to invest, they say, Why don't you buy a home in my market as a secondary home? Go to your local lender, get a secondary vacation home loan, buy a vacation home in my market and then we'll manage it as a short term rental for you nine months out of the year or 11 months out of the year. And then you can come visit like a timeshare one month or one week out of the year, and we'll just block off that time for you to come get it. The investment side of that is different because the lending side is very much different, and I think it's almost like half of what you'd have to put down. It might be only a 10 percent down payment instead of a twenty five percent for a regular loan on an investor side. So there's an interesting twist on that.

Randall Henderson: Yeah. And the other thing, Brad, is that like and I think your listeners probably are knowing about this already, but guys, you need to fish in your own pond. Those of you who are property managers who are already working with investors, you already have a path to touching the investor. Why are you not offering them the opportunity to buy a second home and manage it as a vacation rental? That could be a great way to start to open up that portfolio for you, because investors like the ones that you're working with, typically the small guys who have one to two maybe have some outliers with five or 10. They're always on the on the hunt for additional ways to invest without the massive down payment. And that second home is a great opportunity to do that in your market outside of your market. I mean, you can you can definitely create some value for your own pond there. You need to fish there.

Brad Larsen: Great because of the out-of-state owners that we have that could be anywhere out of our market. They can look at buying a secondary vacation home again into the San Antonio region and then visit it whenever they need to after tax purposes. That's a really, you know, that's the concept. I'm trying to really nail home with the audience here. So I mean, there's so much to talk about in that stuff, right? It gets kind of exciting.

Randall Henderson: So we worry that we see that that buyer exists, they're there and they just need the opportunity to be presented a property that makes sense. And that's where you as a as a property manager, should be able to add significant value. You have eyes on the property, your license just just start to present and show the the investment that what it can be. And it's a bit scary. But again, start with DNA, go on there and figure out what the prices are in your area and what the what the vacancy rates are.

Brad Larsen: Yeah. So let's talk big strategic stuff now. So we've talked hyperlocal franchising management, long term, short term. What are you seeing now in the industry as far as coming in? What's going on in your world? Because you guys are operating at a very high level, you have people that are analyzing all the different numbers from all the different players and you're seeing stuff at a high level. What are you seeing out there that you want to talk about?

Randall Henderson: Well, I got to tell you that that's that's been something that's been on our mind for the last six months to a year now because we know that single family investment has gone mainstream. What does that mean? It means that you've got millennials who are buying property as investments prior to their own property as as live. We've got an owner occupancy rates that are lower than they've been in 30 years. Right. We have we have this market that is attracting big money. And guys, if you don't believe me, go attend an immense event and look at the money coming in on the institutional side. Ok, so so then you play that out. What does that mean for the residential property manager? It means you've got to be careful. You've got to start to be more competitive and you've got to look at at providing a better service than you have in the past. Again, some people say that I'm pessimistic or doom and gloom about this. But guys, you you should adjust because as big money is attracted, what do you think is going to happen to the small mom-and-pop property management company? And we're already seeing consolidation that back PMI itself is out there buying contracts, buying properties, buying property management companies as much as we can. So if you're out there and you're like wondering what's coming change, in my view, you've got to you've got to look ahead and say, OK, how do we start to add more value? And Brad, this is one thing I always like to talk about companies like us and you guys and others in the space.

Randall Henderson: We're always trying to widen the gap between what a a self manager can do by themselves managing their property versus what a third party manager can do. But guys, there's just as many, many operators and groups trying to squeeze that gap, trying to close that gap. Groups that you have heard about, large groups that are coming into the space with a lot of money. So you've got to continue to innovate and create ways to add value to the self manager. That's something that I ask myself every day. Is it? Is it Brad, if we were to take our management fee down to zero? Well, how can we do that? What could we? Create in our space that would keep our revenue going, keep our operations going, but make a story that's so powerful to the self manager that they have to hire PMI. Right, what does that look like? And so again, I don't have that solution yet, but I do believe that's where we're going and that's where I'm driving to from my level.

Brad Larsen: Yeah, there's there's that is very concerning, of course, because a couple of things there. We do see a little bit of maybe commission compression because of the just basically the influx of other players in the market and the fact that you can still make money and not charge a large management fee if you're running the operation well. So there is some of that a little bit.

Randall Henderson: The thirty five percent of people who choose a property manager, a third party property manager, and you guys know that statistic, right? Thirty five percent of the investments in the United States are managed by a third party. Those people, they're always going to be managed by a third party. They're going to continue to be managed by a third party. And so like and they'll pay for it. So I'm not I'm not saying we're going to lose those investors. What I'm saying is that that sixty five percent number, if you want to start to add value there and create a story that can attract them. You have to have a different offering. You have to look at what you're providing and it's either you add it on the value side or you remove it on the cost side. So which one are you going to go after and which one are you going to play with? And we're kind of doing a little bit of both right now and trying to figure that out.

Brad Larsen: Yeah, one of the biggest changes that we've been seeing this is this is years in the making is the influx of using more remote team men, remote team members, right? Virtual assistants, remote team members. They're helping to manage the properties just by offering a different level of customer service with constantly being on the phone to email the text messaging, all that stuff, running maintenance. They're running applications. They're doing anything that anybody in the states can do, sitting at home or in their office. So it's been it's been very successful for us and we're seeing more and more of that. Enter into the space and scary side. Right on the scary side is there's lots of big legislation right now going on with the real estate community, the realtor community, where if they change some of these commission structure offerings, we could see a bunch of realtors is up and be switching into the property management world. I agree. And so not that. I mean, a lot of us started there. I started there. Probably you started there or we know people started there. But imagine just triple the number of operators in your area all of a sudden because all of a sudden they can't go out and do buyer's agency any longer because of the commission compression or the way that the real estate market is just kind of decentralized a little bit. It's interesting. Kind of scary.

Randall Henderson: Or just that the secret's out and investment is the new fashionable thing to do, and they need property managers. And so I think real estate agents are going to get smart. I agree. And so, yeah, what are you going to? How are you going to compete in a space that's been around for for 50, 60, 70 years? And what are you going to bring? How are you going to innovate? I hope that you're that you all are asking yourselves that question because the industry is changing, and if your company is changing slower than the industry is, you're going to get left behind.

Brad Larsen: Well, a key solution there. I'm not trying to plug the mastermind conference, but you've got to get to conferences and it could be any one of them that are out there. There's lots of good management conferences or lots of good, good investment conferences, all the board. I mean, just you've got to get to those in person because the stuff that we don't talk about online because we just don't want to mention numbers, we don't want to talk about people in particular. You're going to hear about that at the bar, at the buffet and you're going to people will give you real numbers when you're eyeball to eyeball and they'll give you real assistance. I mean, we're talking generalities right now because we're on the air, we're doing a podcast, but that's where you really can pick up things that are extremely useful and little groups will form out of that. You'll be able to call up somebody in a different market and say, Hey, can you help me with this for 30 minutes? And that's where this mastermind concept came in and why this conference really has come to fruition is bringing those together. And so I am firmly encouraging people to attend as many in-person conferences as you can, especially if we get this COVID world kind of sort it out, which I don't even know if that's ever going to happen. We might have to live with this forever and ever. Yeah, which which makes things that much more weird and that much more opportunity for management, right? If we're dealing with these COVID issues.

Randall Henderson: And guys, whether or not COVID goes away, the policies and procedures that you put in place as a result of COVID, many of those will stay. They'll continue to to to be just the new way, the new form of doing business. You think people are going to want to go back to meeting in person at a property if they can self show that if everyone's self showing, no, of course not right, they're going to want to continue that. And so, so that's interesting. But I do want to just just echo Brad, what you said on the mastermind set side of things, because guys, as you as you attend, like I go to a lot of Ironman events, which is a larger investor, that's there. They don't see the everyday mom and pop manager as a. At all. But let me tell you what, guys, the mastermind concept of getting together and understanding what's happening and getting out there and connecting with your peers, that is what will push us forward. Those types of meetings, those types of conferences allow us to react to that money that's coming in and create an offering that they fail to. There's a reason why most investments are managed by mom and pop investors or mom and pop property managers. And so the institutional investment side will never be able to touch that market or service that market the way that we can. We just need to start widening our scope a bit to to understand what's coming and what's changing and provide a little bit of a better offering for today's investor. And that person, that COVID person, that coat investor, they're not going anywhere. They're here to stay.

Brad Larsen: Now, one of the comments that was made at the Ehman conference just recently and I kind of giggle that was a large entity, was on stage talking about, you know, acquiring management companies. And they said all these mom and pops are going to fail, and when they fail, they're going to turn to us to purchase them. And we're based out of New York City or Los Angeles. And I'm like shaking my head laughing. I'm like, No, they're not. They're going to go to the local competitor and say, You know, I'm done, I'm going to go sit on a beach and retire. I'm going to nudge you at the at the buffet line or the local chapter, or just see you at the grocery store and say, Hey, do you want to purchase my company and we'll work a drug deal and be done? You know, they're not going to reach out to those large entities and try to sell them. And I thought that was just lifeless, like so out of touch. But you get the perspective that we are still insulated to a certain level. I mean, the fragmentation does provide a little bit of insulation. So there's things that are are influencing the management world but not domineering, overtaking the management world. So I don't want it to be gloom, doom and gloom. But it was just interesting that comment. I thought I wanted to rebuke that in a way that kind of made sense to people that are listening.

Randall Henderson: And I 100 percent agree, and I personally believe, I mean, we're at PMI. We're made up of three hundred and seventy small businesses. We really are like more than half of our franchisees manage less than a hundred doors. And so we're still kind of I love that hyperlocal model, and I think we talked about it earlier in the call. But that's what we're seeing is the future and my view of property management. It's continue to be hyper local because people are not turning into those big guys. They can't get what they need. They still want their neighbor to care for their property, right? That's the important thing is that the relationship and so we're still in the relationship business, guys, but we just got to think about how do we make our offering more attractive? That's my view.

Brad Larsen: Exactly, exactly. Randall, this has been a fantastic call. I really appreciate you taking the time to be on the mastermind. I look forward to seeing you at the Property Manager Mastermind conference in May of twenty twenty two at the Red Rock Resort in Las Vegas this year. So again, much, much kudos to you for being on the call and I can't wait to see you as the emcee. Excited.

Randall Henderson: I am stoked. I mean, I can't promise a Richard Simmons outfit with short shorts, but we'll do something creative. We'll get we'll get crazy up there. We'll have a lot of fun and more importantly, we'll move this industry forward. So I'm really looking forward to it. Brad, thanks for the call today.

Brad Larsen: Appreciate Randall. Thank you.

Randall Henderson: All right. Take care, guys.

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About The Host

The Host of this Podcast is Brad Larsen from San Antonio, Texas. Brad is the founder and owner of RentWerx, one of the fastest growing residential Property Management companies in Texas that currently manages over 700 single family homes.