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Starting a Property Management Company? Listen to This First. · Short Term Rental Problems and Solutions

• Jeremiah Noll: Admit it, you expected guests to act like you, but expectations are not always reality. Now you've realized it's not all sunshine and five-star reviews. That means you're in the right place. Today, we discuss a topic for all of you hosts out there thinking of growing a co-hosting or a property management business so that you can benefit from scaling your systems and strategies. We discuss what to watch out for and what is going to break and how to get ahead of it. That's because this is the community where we talk about the gross. awkward and the operational messes, as well as the real strategies that help you keep going instead of quitting. Because you are not a quitter and this industry is somewhere where you can win. Welcome to Short Term Rental Problems and Solutions. Let's get into today's question. Hi, Jeremiah. Thank you for the episode on how to find a great property manager. It actually made me realize that there aren't any good ones in my marketplace. I'm located in a market that's pretty rural and there's only a couple property managers I was able to find in the area and none of them have high standards. I'm at a point where I'm either going to buy another rental or start a business to manage some of the other properties near me. What are the key considerations you recommend when making a decision like this? Thanks, Billy. Well, Billy, this is a great question. And I anticipated that it would come out of the conversation about how to find a good property manager because I did set the bar pretty high. I'm going to assume that you've already researched the regulatory requirements and met them, ⁓ or at least that you can meet them. Pennsylvania, for example, requires that you have a broker's license, but that was struck down recently with a new requirement. know this as the Sally Ladd decision. And this was Pennsylvania Superior Court determined that ⁓ it was undue burden to require her to get a broker's license just so that she could start managing other people's properties for short-term rentals. ⁓ that basically opened the gates wide so that people can start co-hosting businesses and property management businesses ⁓ for short-term rentals without any licenses or anything like that. But you know how the state of Pennsylvania is, they're going to require a license for this at some point. It's just not going to be the same level as a broker license, which is something that I have. I went through and got my broker license because I wanted to do this legitimately. And that was before the Sally Ladd decision came out. So we were in business for maybe a year the were flung wide open for everybody to compete in this marketplace. You know, every state is going to have their own requirements for what is and what isn't going to make you qualified to be a property manager. ⁓ could actually go down to the county. could go down to ⁓ city level as well, or the township. ⁓ you're going to want to ⁓ all of those things. It's very important that you have insurance because you bear a lot of liability that you are not really under control of. I'll get more into that later. ⁓ But also have to think about trust accounting ⁓ or the funds are actually going to move through your account. you have to think about your contracts and you have to get those all nailed down so that you have a property management contract that's not just fair, but it's not that far outside of the norm. You have to figure out if you're gonna have an LLC or not. And if you're going to have an LLC, I recommend you run it like an LLC, having quarterly meetings and taking notes and all those different types of things that a corporation would do. Because if not, then you're still liable just like you would be if you were doing this under your first name. You have to think about taxes. When you make money every month, you're going to want to put about 20 % away of your ⁓ income. About 20 % of that has to go ⁓ into a fund so that you're able to pay taxes. Being corporation, you're going to have to file quarterly your income tax, not just once a year. So you have to think through those things as well. And then also your business plan. I'm sure if you're going to start a business, you've already thought through your business plan and all those types of things. So we're going to get a little bit deeper into this later on. But ⁓ are those like basic ⁓ a business decisions that you want to make sure that you've gone through. How close are you to the marketplace? So Billy, with high standards like you're talking about, you're gonna wanna be near the properties in order to resolve these issues quickly. if you're not close, if you're like, you know, a couple hours away, then maybe you should consider how open are you to moving over there and actually living in... a property like a rental for example while these things are being managed or during the heavy seasons of holidays and things like that when it makes more sense to have boots on the ground. in the beginning ⁓ building a business the founder wears a lot of hats and I know this because I started with just me ⁓ ⁓ was days ⁓ I was painting and taking phone calls and you know just so many things and driving things around from house to house and like a simple paint job that should have taken two days, it ended up taking an entire month. And it's not like the hours were increased. It's just that all the starting and stopping and working while distracted, it really takes a toll. But it's an example of how many different hats a property manager ends up wearing, especially in the beginning of a business. So you are going to be the cleaner. when the cleaning team can't make it. I can almost guarantee that. So in order to fulfill your obligations, roles, commitments to the property owner, when the cleaners flake, when they're unavailable, when something happens, you end up going over to that property and cleaning it. That's another reason why you should be not that far from it. one is when the repairman can't make it to take care of something, you end up being the one who goes over. Like you're the backup repairman. And it's sometimes it's just to show the guests that you are trying, but it goes a lot and your property owners expect this. They expect you to just like go to the property sometimes like they would. but you, if you're not going to do these things, you have to set the tone right up in the front, right in the beginning until you one, you are the sales person. So how comfortable are you with sales? Because you're going to be competing with other salespeople. you're going to be negotiating contracts, you're gonna be doing a ton of things. And now you already mentioned there's not a lot of competition in your marketplace. So you might not be facing like professional salespeople, there's no way of knowing that right now. And the marketplace could turn into something completely different or you might wanna go into another area. I don't know, but it's something else to consider. Project So as a property manager managing your own property, When you manage the project, it completely feels normal and natural. But when you're the property manager for somebody else's property, and now you're overseeing contractors that they hired that they're going to pay, it's a completely different dynamic. You've got to think through how you're going to be in a situation where you're managing a project. And there's a lot of projects that need to be managed. And... this takes on a different level of liability because if it's at your house and you make the call, no one's gonna sue you for it. You're the one who's you know on both ends of that transaction. So you've got to think through like, when it's not your property, it's a completely different dynamic to manage a project. If there's going to be some things, some improvements that you want to get done at a property, you're still have to manage that project so think through how that dynamic is going to be before you get involved because it's not always what you expect. Now, besides that, you're going to have to think through logistics. So in property management, there's a lot of logistics. There's, know, cleaners need linens and paper towels and you've got to restock shelves and you've got to make sure things are organized ⁓ that you have consumables for your guests. And ⁓ those logistics of can't just send Amazon to the house because they might not arrive when the house is vacant. They might have arrived when there's a guest there. ⁓ You've got to through what's going to happen when things are shipped here. What's going to happen I send them you know, $200 worth of stuff or a TV gets delivered a day early, these are all the logistics you've got to figure out. So if you're willing to live there, like if you're willing to move to your marketplace, if you don't live there already, then those things become a lot easier because now your project management, you're right there. So you can oversee it on a daily basis. Now your logistics, you're right there. So you can have it shipped to your house and then you can take it, you know, courier style to wherever it needs to go. And being the salesperson, like people expect the salesperson to just be available like all the time and not over Zoom, but actually in person. So those are some reasons to consider being willing to move there. Also that last minute cleaning or maintenance is gonna be a lot easier if you're not that far away. So the second thing you need to think about in going from just managing your own property to scaling up and managing other people's properties is your cleaning team. Do they have the ability to grow? I know I've gone over this before in the podcast, but there's three basic types of cleaners. There's a complete full service where they have employees, they're giving people full time hours and they have systems and they clock in and clock out and normal stuff, right? usually have the ability to scale, but you're wanna talk to them first. They are going to want to hire a few people if they know that they're gonna be getting more business. So in touch with those. but the second type, and this is much more common, is just an individual. So there's a ton of really good cleaners out there, and it's just them. It's just or it's just Joe. ⁓ those guys are just busting their butt, cleaning and loving life, and they're cleaning for you. Now, lot of times these cleaners end up rushing through a property or they end up doing a halfway job because there's too much for them to do. If they are in that situation, then it's not necessarily their job to tell you, but at the same time, you wanna have that open dialogue with them because if you think that you can scale your operation because they can clean another house or two, then you're only gonna get your operation to three houses, right? Cause they can only do two more. So you've got to think about who's my second choice cleaner, who's my third choice cleaner, who am I gonna go with? can do what I did and start a whole cleaning service, The third type is an individual with helpers. And this is your most, I don't know, ⁓ pretty common. ⁓ like the thing about the individual with a few helpers is they're risky because they could end up going out of business tomorrow and they won't give you any notice or explanation. They'll just say, hey, I'm not able to clean it this week ⁓ I'm not able to clean it next week either because ⁓ folks are constantly handling ⁓ and love their property owners most. usually, ⁓ but they're relying on people who are not as reliable as they are. And they are sometimes running themselves ragged. They are stretched real thin and you've got to think through that dynamic when you assume that your individual with helpers is able to scale. Because if they could have a full service cleaning business with employees, they might already have that. And it's a completely different skill set. because in one situation you're managing an organization, hiring, firing employees, processes, and payroll. And in another situation, once you get paid, you're sending Venmo to somebody or cash app or whatever. So you've got to think through, is your cleaning team able to scale? And then the second thing goes for this as well. Is your maintenance team able to scale? Who is your maintenance team? Chances are, If you are handling just your property, then you probably only had to interact with a plumber or an HVAC tech or an electrician or maybe all three. But if it's going well for you, then you probably have a property that's already taken care of and you don't need a whole lot of these, a lot of these people here. But you have to think about, you're going to need all of them. If you start growing a property management business, the expectation is that you're not able just to find a good property maintenance person, but that you have them on speed dial, that you have a relationship already established with these folks that can in and take care of things when needed. ⁓ you have to think through this list. ⁓ gonna need a general handyman. That way you're not paying electrician prices for something that a handyman can do. You're need a pool guy or a hot tub guy. ⁓ In marketplaces, there's a lot of short-term rentals that have pools. and it's a big draw for guests. So you're gonna have to think through, who am I gonna contact if we need, you know, something done with the pool? And do not say the cleaner. The cleaner is not a pool guy. The cleaners, in my experience, the cleaners have not taken a course on how to maintain hot tubs and it turns green. They can't figure out why it's green. They just wanna empty it and refill it. But if they empty it and refill it and it still turns green, They throw their hands up in the air and say, I'm sorry, I don't know what else to do. This is not included in my service. So now you've got to find an actual hot tub person that understands the chemistry of your hot tub and why that's happening. you have to think through who can I call in that situation? So the next one would be a plumber. Now plumbers are all over the place. You can usually find a plumber who's available. They usually are like an emergency call on call kind of service. So that fits really well. Electricians, same thing, but I found a lot of variability on electrical work. So recently we asked an electrician to quote us for installing an electrical service for a hot tub and they quoted us $2,000. And then the next electrician quoted us $600 to $750. I'll tell you what the final number is when I finish the job. That's a big range. And both of them are gonna pass inspection. Both of them are gonna be done correctly. And both of them have insurance. So you've gotta have a good electrician that's a decent price, not just the ones that are like bidding jobs like two grand with a $1,300 profit. next one is HVAC. So air conditioning, guests are not going to forgive you if the air conditioning is not working and it's hot outside. come to your location, sometimes it's tropical or whatever, to get away from the heat or to get to the heat, right? So air conditioning to be comfortable inside is very important. ⁓ this is one of the most common things that if it's an issue, it shows up on the reviews. If your house is in the mountains and you don't need AC, your guests are going to complain that you don't have AC. ⁓ likely to happen. So you have to have some form of air conditioning. And then sometimes your guests feel obligated to disclose to future guests how many air conditioners you have, ⁓ there's only one window unit or there's one window unit per bedroom or that there's central air and it worked fine. That's not what they're going to talk about. you're gonna also need some general contractors. You're gonna need somebody who can do landscaping, like cutting the grass and shoveling snow. And you're gonna need somebody who can do like kitchens and baths because at some point you're gonna want upgrades, you're gonna want projects to be done. And your clients are gonna expect you to refer them to somebody who can handle those things. And if you can't find one of those folks, you don't wanna have a plumber do your whole kitchen. Now, are they capable of it? Yes, but they're gonna charge plumber prices. So still want to quote for them. ⁓ ⁓ going to want to have a general contractor, somebody that you can rely on for projects that's not going to overcharge your property owners. So next, after you figured out that you've got a good service that can scale for your business, ⁓ once you figured out that you have a boots on the ground kind of contractor handyman team that you can refer people to, that you can rely on, ⁓ you've got to think about what's your plan for quality control. So who's gonna be there for inspections? If you're doing inspections, I highly recommend inspections. You know about that, because I rant on this all the time. Don't... go into business being a property manager who doesn't care about quality. That makes your standards lower than the ones that you're competing with. And that's not a good kind of business to run. But you've got to think about who's gonna be there for inspections. Now consider hiring for this position if you're not gonna be there because they spend a lot of time in the car. Some people who might be looking for part-time work that aren't actually looking for part-time work is like Uber drivers, Uber, Lyft, ⁓ DoorDash. A lot of times you can get in touch with these folks by doing deliveries and things, and then you can ask them if they're interested in also taking a job. So hiring for this position This might be the first position that you do end up hiring for, and I don't recommend starting a cleaning service. I don't recommend starting a maintenance team. Neither one of them is particularly profitable. it's really more like for your property management team, here's the person to hire. It's this person to, I guess you could call them like an operations manager, but you need somebody to do inspections. You need somebody for those logistics because at some point you're gonna get very busy and this is probably the first role that you're gonna hire. But until you hire it, you're gonna need to do that job yourself, right? need to also figure out what is your non-negotiable standard? ⁓ like there needs to be something that defines your brand. You have to think through what am I not going to compromise on? you know, because you can only pick one thing to be top in and it's either cleanliness or communication or maintenance. If you try to do all three, you need to remember where your priority lies and that's your branding. And this goes back to your business plan. You can't be the best in all three categories because You're not gonna make any profit. You're just gonna keep spinning your wheels, spending time and energy doing things and then realize at some point it's not worth it. So you have to think about your branding and what it's going to be. So what are you gonna do when the owner says you need to let them clean the house themselves? Is that negotiable? Are you okay with the owner messing up a few things and causing your guests to leave a bad review on your profile? Are you okay with the liability? that the owner might've left some windows and doors unlocked and blame it on the guest. Are you okay with them doing the hot tub? If they do it wrong, now it's gonna go back on you. So you have to think about like, cause I do have situations where property owners were like, oh, I'll just clean it from now on. that's like a $225 cleaning fee, just send it to me. And half the time, they're not even cleaning it. They're just calling their sister to go clean the house So what are you do in that situation? is non-negotiable for you? You have to make sure these things are in your contract. ⁓ What are you gonna do when your focus shifts from the property and it loses its sparkle? So the house that you're currently managing, sounds like it's going really well. If it wasn't going well, I don't think you'd be looking into managing other people's properties. ⁓ So if your focus shifts away from that house, gonna happen gonna lose its sparkle. ⁓ know I already said it, ⁓ like you're gonna have to think about, you know, now you're managing all these places ⁓ with yours, ⁓ you're the only one who's gonna suffer if you take away some of your attention from it. ⁓ the other ones, you've got property owners who ⁓ gonna complain if it's not getting your attention. So you kind of like your own children kind of get like, I don't know what to call it. Imagine like you own a daycare and you have your own kids there, but the parents are going to complain if you don't take care of their kids, right? So you're, you want to be like impartial and take care of everybody's children, but you've got your own too. So they usually end up taking a backseat. It's like a pastor's kid. They sometimes get ignored for the benefit of the community, right? So you have to think about that dynamic and what's going to happen with it. so something else to know that everyone ⁓ starts off in property management, all high standards, fair price. But then when it's like crunch time and you're tired, you're short staffed because somebody quit and ⁓ you're behind schedule. And then a chooses to arrive early. Like that stress level really goes up. You go into like fight or flight and ⁓ the cortisol and everything. And it's for you to just exist in this situation for the rest of time. but it is really unhealthy and you're setting yourself up for stroke, you're setting yourself up for heart disease. And if you start blaming your business for your health concerns, that's a bad place to be. Cause you're gonna end up not following through with your exit strategy. You're gonna end up just quitting. And that's not good for your property owners. That's not good for the properties that you own either. So you have to think about the sustainability of this. So. What happens to your quick responses when you're shoveling snow because somebody can't make it and you don't notice that the messages from the guest are just blowing up your phone? I can't tell you how many times I've been engaged in something that required both of my hands and maybe like in heavy equipment and ⁓ everything's vibrating. I can't really feel my phone vibrating and I don't know that I'm missing a call. I don't know that I'm missing a guest message. ⁓ Now, fortunately have a whole team that sees all those messages from guests, but there's situations where I need to receive a phone call and I'm not getting that phone call. For you, the most common situation is you're in the shower. So you're in the shower for, I don't know, 20 minutes, half an hour, whatever. But during that period of time, nobody's answering the guests. So you have to think about that as well. And you could just go with like AI that'll tell them to hold on, they're checking with the team, or you could go with a VA who will answer the question for you. But then there's a lot of training involved with both of those systems. And if you're going to scale, it's very good for you to get that training done right up in the front. but that is time intense and it is expensive. again, you have to figure out non-negotiable. have to think about what's going to be your brand differentiator because in the property management space, it's the same as pretty much any other business. It's price, quality, or speed. Now speed would probably just be limited to communications, right? So messaging back guests quickly, messaging back homeowners quickly, or calling or whatever, ⁓ So ⁓ probably I would relegate speed to. But ⁓ when we're about price and quality, there's this scale, you're either really good price or really good quality. if you're gonna go with really good quality, you've got to ⁓ a higher price. If you're gonna go with really low price, then people have to be okay with lower quality. ⁓ actually know of a property manager in this area that does property management at 15%. And because of it, they've actually accumulated a ton of these like really high dollar properties. But what... those property owners are getting is very bad property management. It's good communication with guests, they're getting good reviews, but the properties are going downhill fast. And I've been in some of these homes, been for sale, ⁓ there's all kinds of delayed maintenance issues that nobody is paying attention to. And these property owners are sometimes calling me because they're looking for better quality. and they're willing to pay the price for it, it's just that that property manager was real flashy and sounded good, but they actually don't have the right systems in place. They're building their business on a weak foundation. So your brand differentiator, you've got to figure out where you're going to be right now. If it's quality, if it's high standards, then you've got to be the kind of salesperson who can sell them on spending more. Now this is a problem for me, and I don't mean to get into my own psychological issues. but I grew up in a family where every dollar was assigned, right? The old envelope system. And so my family would sometimes drive like 30 minutes to get a better price on gas because ⁓ it them even with the extra travel, it saved them like a buck. ⁓ And kind of frugality, that kind of, ⁓ you save a dollar ⁓ where can, like it led me to be the kind of salesperson that just wanted to save people money and. you have to realize that people are willing to pay for quality, they have to be presented with what the difference is. So you can be the kind of salesperson who sells a premium product, but it is a completely different salesperson than the one who's trying to just lower your payments or save you money. that's that you have to figure out with this brand differentiation ⁓ is is your brand gonna be known for? Is it the cleaning service? it the way your guests review? it like, is it kind of boutique style where you're really, really hands-on and you're communicating with the homeowners, like just cause you thought of them, right? is it going to be ⁓ like price oriented where everything's cheap and you're getting them the biggest profit possible because not everybody gravitates towards the price. It's good reason go with a good property manager, but like people are looking for value. right, for what they're paying, they're at the end of the day, they're not just looking for, you know, price and they're not just looking for quality. You gotta figure out what you're gonna be and start begin with the end in mind, right? So one is this market big enough for elasticity? And what I mean by that is like only about 20 % of short-term rentals are actually professionally managed. So you might look your marketplace and find that there's, I don't know, 1,000 doors, 1,000 rentals in the area where you're willing to expand to, right? you might look and see that there's like 15. And that would explain if there's 15, then that's like three that are managed professionally and you're going into a marketplace where everybody else is kind of like happy just managing their own place. And ⁓ very legitimate reasons for them to do that. Sometimes it's what their CPA told them they had to do for tax advantages. ⁓ it's because It's a family home and they can't trust anybody else to it or their brothers and sisters delegated that they will be the one to manage everything. Just because they exist doesn't mean that they're open to property management. a lot of people who aren't. So the elasticity is going to come in to your business model and your business plan ⁓ ⁓ got to, if you're going to be one of like ⁓ other property managers, you've got to think about how many doors they've got. ⁓ while you probably can just take over all of their accounts. that means that there's a limit to how far you can grow this thing without moving into second and third markets. And then if you do move into second and third markets, you've got to also figure out all those other questions we're talking about, but for those areas as well, like your cleaning service and your maintenance team, because you can't just assume that they're available or that they can scale. And then the last thing I have to say about elasticity is the turnover. So in a lot of short-term rental markets, it's like a vacation area, it's a secondary market where people are buying second homes. a lot of turnover. So when somebody sells a house and somebody buys a house, that's a potential customer. And if you're one of the top three options on Google, then gonna call you and you get the opportunity to pitch ⁓ your differentiator. The thing that makes your property management service better than the rest. and this is your chance to make a connection and to make a sale and to get a property under management. But not every property is worth managing. So you're gonna have to figure that out as well. And it's not something I know how to train, you know? dynamic between the property owner and you. Like ⁓ I that I don't do well with micromanagers because ⁓ I to feel I like to feel like they trust me. I like to be in a position of like a partner. ⁓ soon as somebody starts micromanaging, it flies in the face of all of that. And feel like I'm not being respected. And I feel like they don't value my opinion. And as soon as they make decisions and say, there's no dialogue on this, I'm not willing to listen to you. It makes feel like I shouldn't be managing this property because they obviously don't appreciate what I'm bringing to it. The next thing you have to think about is what kind of software you're gonna use. So when you're managing just your own property, it's perfectly viable to only use Airbnb or to use VRBO or to have their calendar syncing. And you can integrate other softwares like Price Labs into Airbnb and VRBO directly. But then once you start scaling up, you're gonna have to find technology. You're gonna have to find Guesty or HostAway or HostFully or Hospitable. there's all these decisions that you're gonna have to make. And all of those property management software, salespeople are very interested in having a conversation with you. Just know that they all pretty much do the exact same thing and they all say the same thing ⁓ in their pitch, that they are very easy to use, that they integrate with all these different platforms and the blah, blah, blah, blah, blah, blah. It's all features and benefits. And then you look at pricing and features and benefits and you have to choose one. And I recommend you choose one and stick with it for 10 years. because it is very challenging to transfer, to go from one to another. And they'll tell you that it's not and that they hand hold you through it. But there's so many issues that you're gonna run through if you'd go from Host Fully to Host Away like I did, or from Host Away to Host Fully like I also did. None of those are good. they take up a ton of your time to learn the new platform and Guesty Hospitable and all of them. They're very good. They're good property management softwares. but you've got to figure out which one you're going to go with and make it something that can scale with you. tip I can tell you is as you grow more doors, you have to renegotiate your price because they are negotiable. They're not going drop their price for you if you only have like one house or like three houses. But once you have like 10 or 15 or 20, like they're going to drop it to sometimes half the price. So ⁓ that's important to at the end of the day, it's software. and they price you based on the number of units you have. question you need to be asking yourself is how you plan to ⁓ ⁓ to market your services. So, ⁓ a really good way to do this is real estate agents. So when a house is being sold, a is usually involved. So if you can network with real estate agents, if you can offer them some sort of a deal, they're, likely to refer your services. Another thing is when somebody buys in the area, they usually only have one person in the area they know, like, and trust, and it's their realtor. So leverage that network. I'm not saying bribe them, but maybe give them some gifts, maybe do something friendly, take them out to lunch, whatever, like network with the top agents in your area, find out who they're referring people to, and see what would, you know, cause them to refer people to you. thing that's not used very often, that I feel like would be really valuable, and I've considered doing this myself is a refer back guarantee. Now what this would mean that it is literally in their contract, the property management contract, that if they decide to sell or if they're considering selling that you will notify the real estate agent that refer them to you. So real estate agents just want another transaction. They don't care if it's because the person's buying another house and they're scaling to three or four or five. and they don't necessarily care if they're just selling that house. They just want another transaction. So if they're going to refer business to you, they wanna know that you're gonna refer business back to them. Now, if you're gonna work with multiple real estate agents, which I highly recommend, then you're gonna have to think through, how do I make this fair? And how do I keep these guys from thinking that I'm referring people to somebody else? Now, unless you're a real estate broker, you cannot get a cut of the commission. Don't even ask for it, don't look for it. Don't do anything there. Just do favors for favors. If they refer somebody to you, then you've got loyalty, you're gonna bring them back. So that's something I've considered, but I literally am a real estate broker. And while I feel like I have that relationship built on trust that my clients are going to communicate with me if they're interested in selling, and then I'm gonna refer them to talk to ⁓ person who referred them to me, a lot of real estate agents don't trust that. actually is gonna happen. I see it coming eventually, but anyway, so ⁓ can also network and market your services with hot tub and pool guys. A lot of times those people have a close relationship with the property owners that are managing their own property. ⁓ And they can tell you ones are exhausted, which ones are frustrated, which ones are taking a little while to pay. And you can actually kind of yourself in there. You tell that hot tub guy, hey, you know, if, I was managing that property, you'd be getting paid like the day after the service is provided. You give me an invoice, you're gonna get paid right away. So why don't you recommend me to that property owner because it sounds like I could increase their revenue by 20 % and that would cover my fee. So you say something like that and now the hot tub guy is gonna put a good word in for You can also network with cleaners because they're in the same exact position as the hot tub guys. They know which property owners are good and which ones aren't. They know which houses are performing and which ones aren't. They know which ones keep their schedule busy in the slow periods and which ones don't, right? So they can help refer you and cleaners are often found before a property manager is found. Or they know which homeowners are getting frustrated and anxious and want to just quit. And a lot of times those are the property owners that you'll start managing for. And then you can also network with other property managers. Now I'm not talking about the ones that you're directly competing with. I'm actually talking about the ones that are outside of your marketplace. think about like all the ones that are not that far away or nearby. You can actually build networks and build relationships with property managers in the Smoky Mountains or, you know, in like Bow or, you know, Big Bear. can find property managers from areas. A lot of times investors own in multiple marketplaces. When it comes to long-term rental property managers, oftentimes it's geographically like, I don't know, you're not willing to go too far in long-term rentals. in those situations, like the town over or the county over or the city over, Those are often really good property managers to network with because they've got clients that usually own in other auxiliary markets ⁓ or they're ⁓ interested in expanding into those marketplaces as well. ⁓ You've got to think about the networking side of this. It's a very network heavy kind of business. And if you're going to grow, then those are some things that I recommend putting in your business plan. So remember we mentioned that you're not always gonna be available to handle guest communications. So about having AI step in. If you go with like a company like Hospitable or Host Away, they probably already have AI built in. AI can be to respond to the guests. you also have to decide if you're going to disclose that it's AI that's responding to them or if you're gonna act like it's just you. I don't think guests respond well to inauthenticity. And so would probably encourage you to ⁓ disclose that this an AI chatbot that's responding back to you right now. And very soon, my trainer is gonna be online, something like that. You can also use a VA. A VA is a lot more capable of actually acting like they're you. So ⁓ again, like think what is your exit strategy? So nobody gets into business to ⁓ run it until die, right? So ⁓ what does retirement like? I know ⁓ you're not necessarily of that right now because you're just thinking about starting a business, but there's a couple of ways that people get out of business ownership. One is to sell the business. or to sell the contracts for the business. But then you've got to think about like the length of the contracts. You've got to think about your churn rate, like the number of properties that you're adding to your portfolio every year and the number that are dropping off of your portfolio. So both of those things are going to factor into what the value of the contracts are and what the value of the business is. It's not just your EBITDA, but you definitely want that EBITDA to be good, especially if you're going to be considering selling another thing that you can consider doing is bringing in a strategic partner, like an operator. Now, remember I talked about hiring somebody who'd be like an operations manager. might be somebody that you promise one day, hey, when this thing is scalable, when it's ⁓ to a certain point, I'm gonna put you in charge of the whole thing and we're gonna split the profit 50-50. So ⁓ that situation, they don't have to ⁓ make an investment based on the value of the business to get a percentage equity, ⁓ but you can them like shares, I guess. I've got a dream to someday turn my property management company into one that is employee owned. And I just like to retain, you know, a certain amount of equity in the business. you've got to think about if you're going to sell the business, you want to start setting that up now. ⁓ Cause the detailed records you can keep from the beginning, ⁓ the more and more turnkey it's going to be for your business to be purchased. And that's going to ⁓ translate later into higher prices. Another one is to partner and then retire. And we kind of touched on this with the operations manager, but you could find a strategic partner or another property management service that wants to start managing your property management service as well. And now they get a good percentage of the profits for running everything. And you get to have just like, you know, a percentage of the profit every month in order to, you know, keep up your, retirement. Right? you have to think about what your exit strategy is going to be because the exit strategy that is the most tempting. at any given moment in your business is to quit. And you don't want to just run away from it because you've built something that's actually valuable, I would assume. it's ⁓ just a little bit tempting. ⁓ wanna begin with the end in mind again. ⁓ is something that you shouldn't be thinking or considering for like the first five years. But at some point, you wanna know that there's a light at the end of the tunnel, that there is an off board. you're not just going to get busier and busier and busier until you explode. this sounds like a ton of work, right? ⁓ we didn't even talk about risk. ⁓ let's make it worse. You inherit ⁓ everyone problems. ⁓ The that you're managing become your issue and you didn't buy them, you didn't inspect them. There's delayed maintenance, there's various tech problems. There's different types of tech. There's owners. ⁓ not even the property ⁓ there's just bad reviews on your profile that are just because of the property. So I've guests before about some of the stupidest stuff that has absolutely nothing to do with the property manager, ⁓ but you're trying build a brand, right? Your brand on Airbnb be like, you know. CMB property management. ⁓ now you're starting to get a bad reputation because there's a one star review on there because somebody didn't like ⁓ guard at the gate, you know, for this ⁓ community, ⁓ they didn't like that, you know, the farmer next to your property spread manure. And now it smells like, you know, manure, ⁓ is a terrible smell for a guest to have to endure. And there's nothing that you can do about it because you didn't buy the property. You just had agreed to manage it, not realizing that's an active farm next door. And not every guest is gonna understand that. or you decided to continue managing a property in the summertime knowing that the owner was not gonna put air conditioning in there or that they were gonna put air conditioning in, ⁓ but that it was be a bad unit that was a lemon. And now this is your problem. You also take on the risk because if somebody slips and falls at the property, they're looking for who they can sue. And I think there's this perception out there that property managers are just wealthy. Like they just make money hand over fist. And some of them do. I don't think they're going to be in business for much longer because they're, they're watering down the stew. you know, there's this perception that if they are going to sue somebody, it should be the property manager. And so they slip and fall on ice. ⁓ now they want you to pay for their physical therapy. They want you to pay for their wages while they were out of work. And you could be quickly looking at 50 or a hundred thousand dollars for something like that. Physical therapy and wage loss, like those are legitimate claims and they go back on whoever's responsible. And remember, you've got insurance for this, but your insurance, I don't mean to scare you, but I spend $3,000 every month. Every month I spend $3,000 on insurance. And that's just workers' comp insurance. Every week I spend $3,000 to $4,000 on payroll taxes. And that's just payroll taxes. When you scale your business, you're signing up for liability, you're signing up for premiums, those premiums change. I was talking to a cleaning service, the owner of a cleaning service the other day, and she told me that her husband owns a trucking business. And that trucking business, the insurance per year went from $20,000 up to $100,000 because there was one claim. one claim and it was covered and the insurance company decided to raise the premiums that high. So she was shopping around for other insurance, but at with an open claim, none of those insurance companies were willing to talk to them. So you might think that truckers make a ton of money, like 60 cents a mile, they go across country and make a lot, but there's a liability there. And sometimes the insurance companies are not reasonable at all. So in property management, I think my liability policy is not really that bad. It's probably like $4,000 a year at this point. But then we've got the vehicles that we have and I wouldn't need all those vehicle policies if I wasn't, you know, also a contractor. there's some massive and especially if you're going to ⁓ be one of those property managers that looks legitimate, has an office a area, ⁓ you're gonna have to think through that perception factor in things like rent you know and in this area, rent is generally a dollar per square foot per month. ⁓ the smallest unit you're able to find that's in a commercial space like that out here is 300 square feet, but that's still 500 bucks a month. You can find other places that are less expensive, but like know take it for what it's worth. have to think through all these types of things. As scale, you're gonna need a location for like logistics and ⁓ maybe you're staying. And you can't always run a property management company out of your garage. Like there's times when your clients actually wanna find you, meet you, ⁓ see in person. and then the last thing I would say start small, start with low start with just your brand right at the front of your mind and doing everything yourself. Because once you've done it, you can usually train other people to do it. And you've done it, you kind of know what's expected. ⁓ And you can also just buy another house. Think like there's a way exit strategy if you just buy another property and the income that you make for that property is completely controllable by you. It's not controlled by other people like we are when you're in property management. Because when you're a co-host or you're a property manager and your income is tied to the rent that you're able to charge for that property, then that's all determined by that property, not by you. Your income's actually out of your hands. And if they skip something in compliance, their insurance lapses, they stopped making a couple mortgage payments, then all the investment that you've made into that property goes away. And you're gonna end up in a management agreement with somebody and you realize like you don't wanna manage the property anymore. And that's happened to me so many times. In fact, I need to write an email later to a property owner that I don't wanna manage the property anymore. it's like the property owner is fantastic. It's the property that's the problem. I don't want that property associated with my brand. ⁓ we, know, Fortunately, we can drop them. It's not like we can't, it's a business decision. at the end of the day, it's way easier for you to just buy another house ⁓ buy three houses or four houses and five houses ⁓ scale everything that you're doing just for that. Because in those situations, you get 100 % of the rent, you know, and then you can cover your expenses. ⁓ co-hosting, if you think it's gonna be easy money, you are misled. I'm sorry. but I hope I've gone through a few things here that'll you know kind of make you realize. Now, if all of this work sounds like fun to you, hell yeah, go it. ⁓ Let's become property management buddies, network. I might have some property owners that like an opportunity in your marketplace and I wanna be able to refer them to you know also realized that you could watch through this episode and realize like... this is really a lot more than you thought it was gonna be and that you had this impression that managing other people's properties was gonna be just like managing your own property. But the dynamic completely changes. So the other thing that you might've thought ⁓ you might've thought like, well, I already have like good connections with like three property owners and if I offered, I'm sure they would let me do it. And I like those people. Well, your relationship is gonna change with them. Once you become a service provider, once you become a property manager or co-host for them, that relationship is going to change and you have to be prepared for that. And if you're going to scale and if you're going to make this something that's worth having, if it's going to become like a system and not just another service that you're providing on the side, then you have to think through like how they're going to feel when you pick up another 12 houses and they no longer get the same attention that they were expecting and what you're going to do about that. Now, if this sounds like it's not going to be worth the money you invest or the time that you invest to get to your exit strategy, then just buy another property. Build a brand and own every house. when you have complete control, ⁓ think there's a lot more peace, there's a lot less stress. One of my workers, well, one the people in my team and my long-term rental team, he owned like $11 in real estate at one point. And he had loans on all of that. It was all leveraged as much as possible. And it was high stakes, but it wasn't stressful because he owned it. He was in control. And when you feel like you're in control, a lot of times that stress is gone, but in property management, you are not in control. You're like being influenced and pushed by all these different forces. And that has to be a dynamic that you're okay with if you're going to build a property management business. you're not going to have that dynamic if you buy another house. So if you figured out the secret sauce for your marketplace, you figured out what it takes to be the top 1 % earner in that marketplace, then buy a second house, do it again. There's a demand for it. If you can replicate what you did with the first one, do it. And do it again and do it again and do it again. You're not necessarily gonna be able to replicate that secret sauce by taking on properties to manage. Now, if today's episode ⁓ sounds you're not alone. These are the challenges no one talks about when they sell the dream of easy passive income, but they're exactly the problems that make or break your operation. If you've got a situation you wanna share, then please email me your question, info at galvanizedmanagement.com. If you've got a good joke for property managers, I'd love to hear that too. Please email it in and I'll read it on the air. So your problem might be the next one that we break down and chances are, You'll help a lot of other hosts in the process too. If this episode helped you, share it with another host who's in the trenches. Like and subscribe too, so we can organically reach more people. That's how we make the industry better. love to see you follow on TikTok at Galvanized Investments ⁓ and and YouTube at Galvanized Management. Until next time, stay steady, keep learning, and keep building something real. This is Short Term Rental Problems and Solutions.