5 Tips to Run a Profitable Property Management BusinessPosted on by admin
Property management business seems like an exciting idea to every entrepreneur in the hospitality industry. If you fall into this category and you are waiting to start a property management business, please take note that you won’t just be a property owner anymore. Apart from being a landlord, you will have to double up as a property manager very soon!
“Having worked for about three years as a property manager prior to starting your own property management company is a very good idea.” – Howtostartanllc Seems tough? Well, hire a professional property management company! They will happily take care of your partial or complete responsibility and do a good job too. But that would be a truly expensive affair.
As the owner of a property management company, your goal should be to reduce risks and cut down on expenses. For that, you must focus on maximizing income for all your properties. How can you do it?
To help you find the answer to this question, we have covered some of the most valuable tips for you to run a profitable property management business. Let’s dig deep by reading the pointers below.
- Do your homework – It’s not easy to turn a lemon into a cash cow. So make sure you are investing wisely from the beginning. How do you do that? Well, running a successful property management business obviously starts with the right background study. Start your investigation by checking the financial viability of this property.
In-depth occupancy records of most lodging businesses such as yours (like B&Bs, hotels and motels) can render specific insights into how popular the property is among customers. These records can further offer clues on how often people stay at the property, exactly when and for what duration. This data can be compared with business expenditures to figure out the potential profitability of your property.
To get more granular data, investigate financial records that are pretty old, to understand trends in the past, present and future success of a property.
- Boost your distribution – Distribution is a driver for both revenue and costs. In the hospitality industry today, every property like hotels and B&B businesses are facing a constant struggle of generating direct bookings. Properties like yours should strive to be findable and bookable through online travel agents or OTA sites, which are presently dominating hotel websites.
OTAs have actually evolved into information and review platforms. Hence your property is facing tough competition. You have to, therefore, optimize your OTA distribution by implementing an optimal strategy to leverage an OTA’s vast global exposure. You need to understand what regions your guests are coming from. This data can help you better serve your guests. Further, you can experiment with new OTAs to get a foothold on different (and new) markets.
However, to run a successful property management business, you cannot overlook technological advancements in channel and revenue management. You must tap onto a smart property management system to benefit from the strong development of room rate levels. Having a high degree of centralization through a PMS can ease the complete process of quick expansion and broad allocation of fixed costs to achieve these distribution goals.
- Location is everything, so package it! – As a property manager or owner, you have the power to create promotional packages. Agreed! But what are you doing to market your location in the same? The exact idea is to package so that you can mask your actual room rates with value-added features so that guests prefer to stay at your hotel. Market frills like fitness classes and spa treatments, and ensure they are packaged together with accommodation. The whole idea is to market an awesome deal to encourage guests to indulge in services that they never thought about before.
For the records, you can collaborate with local tourist attractions. Try and submit advertisements or editorials in the local papers, magazines and websites. Ensure that you are including locations in the vicinity like bus tours, wine tasting trips, flower shows, fashion parades, live concerts etc.
- Grow Revenue – On the revenue side, focus on driving food-and-beverage revenue at your hotel or property. You can also encourage guests to come out into public areas to order snacks and drinks. Try and rent out your F&B space for events, to drive better profit margins. To run a successful property management business, you have to think out of the box. If you can render F&B offerings to the local people, you can bank on visitors as well as the local population. This is a channel to generate more external revenue and in turn, become all the more profitable.
Hotel restaurants and bars are today more profitable because more people eat at a property as compared to those who sleep in.
“Each year, IHG hosts 37 million guests in our restaurants and bars globally, and concepts like our Open Lobby design across the Holiday Inn estate in Europe have successfully increased [food-and-beverage] revenue by an average of 20 per cent.”
So, incentivize guests so that they make more direct bookings, which will actually lower your online-travel-agency costs and therefore grow revenue. Incentives that you can include are complimentary drinks, special member rates etc. You can also add costs post-booking to keep the profits in-house. For instance, packaging breakfast with internet access can come at a minimal charge per day in your property. This is a profitable route to generate more revenue.
- Ensure your property management system is the best in the industry – If your PMS isn’t cloud-based, you’re missing out on serious benefits. With an automated cloud-based system there’s no need for an IT expert to maintain or operate it and it will save you a lot of time, especially when integrated with your other technology systems. Upfront costs will also be reduced without the need for any physical hardware. This will let all your staff operate more efficiently. For example, housekeeping can communicate directly with the front desk system from a mobile device and check which rooms need cleaning or servicing, and which ones are occupied.
Now that you are done reading the above pointers, let’s learn all about day-to-day property management business owner’s activities.
A typical day in a property manager’s life
As the owner of a property management company, you should manage properties remotely.
This is especially for routine matters, but make sure you are on-site for critical matters that need personal attention.
For instance, if your property management company manages a large group of rental units especially homes, you should constantly check on them. Once you start working with vacant ones, you need to get them on rent asap. Keep inspecting other properties constantly to ensure all is well.
You also need a good list of to-do items. Some industry-specific property management software solutions can track all of this and more. They help you multitask to get critical things done asap.
Also, certain rental properties require constant maintenance. While some vacant properties should be cleaned or need repair, others do not need much attention except for a coat of paint, to find a renter.
Some of the most important responsibilities of a property management company are to ensure everything is in good condition. As the owner, you also have to smartly manage guest and tenant relations as well as show the vacant places by making them look attractive. This will reduce ‘down time’ especially when your rental property is unoccupied.
Now let’s learn how to identify a typical target market with ease.
What is the target market?
While most of your clients would be real estate investors, others would be small property owners who want to put their property or properties on rent. You especially need to take extra care and pay more attention to the large Real Estate Investment Trusts (REIT) because these are the guys who own thousands of properties. But that does not mean you neglect the small sized property owners. Having a lot of them on your clientele list could mean a beneficial and profitable business for you too.
As you know by now, through this article, we have tried to cover all the essential information to help you decide if property management is a good business match for your ideas. Hopefully moving forward, you can identify the growth potential in your property management business venture, so as to successfully estimate all the startup costs, learn about legal considerations, and figure out all the consequences in the long run.
If you already have a team, you will face a lot of difficulties to get rid of bad tenants. As a skilled property manager, you will have to be thorough and meticulous in your professional life. Organized work methodologies will make your job a whole lot easier, as you will be able to respond quickly during issues with tenants and properties. Lastly, be comfortable while dealing with all kinds of people.
Only then you will eventually become a successful property manager who would be running a successful property management business. Don’t let your investment go to waste. All the best!