From Small Towns to Big Cities: How PMI Franchisees Thrive in Every Market Type

Intro: Coming to you live from the Business RadioX studio. It’s Franchise Marketing Radio.

Lee Kantor: Lee Kantor through here. Another episode of Franchise Marketing Radio. And this is gonna be a good one. Today on the show, we have the CEO and co-founder with Property Management Inc. PMI, Steve Hart. Welcome.

Steve Hart: Thanks, Lee. Thanks for having me on your show.

Lee Kantor: Well, I am excited to learn what you’re up to. Tell us about PMI. How are you serving folks?

Steve Hart: Yeah, we are a property management franchisor. There’s not very many of us out there. In fact, when we started PMI 18 years ago, there were no real national brands in the property management space, and we felt like we could create an opportunity for all these people that were doing property management on their own, ultimately creating their own processes and systems to do it all under one brand. And so myself and my business partner put it together. And here we are 18 years later, the largest property management brand in the United States with over 450 independently owned and operated franchise partners through 48 of the 50 states. So we’re almost everywhere.

Lee Kantor: Well, so your intention initially was to build a franchise.

Steve Hart: It was yeah, we started out, uh, we chose that model. We felt it was the best model to really get this opportunity out there. We saw the opportunity being that, you know, there’s a lot of property management industry is over $1 billion industry and no national brands, no one really helping people start out and scale their businesses. So unfortunately, in property management, we have a lot of. In fact, 80% of the close to 400,000 property managers in the United States are small mom and pop shops. And I believe the reason for that is, you know, property management is it’s a tough business. It’s a business that has so many different aspects to it. It’s not just collecting rents. We provide dozens of services as a property manager, all under one roof, and you have to be really good at all those different services. And some of these people that get into our industry, they they think it’s easy and they think they just have to collect rents and, and they realize it’s a lot more than that. And that’s why they kind of get stuck. They can’t scale their business. They might not have that maintenance background or the leasing expertise or skills in accounting and bookkeeping, which is a big part of property management. And then of course, you got the legal side and the utility management and and the list goes on. And so our industry, more than any other service industry that I’ve seen, has all these different service levels. And we saw a need for an organization to come in, systematize all that, put it in an easy to follow training system and help people scale in property management.

Lee Kantor: So you mentioned that kind of the vast majority of folks in property management are maybe kind of that neighbor who bought the house next door and fix it up, and then is now renting it out. Like, is that kind of the, I don’t want to say prototype, but that’s an example of a common right?

Steve Hart: I’m smiling right now because that’s, that’s typically the case. You know, a lot of property managers didn’t choose to get into this. They kind of just stumbled into it or maybe, uh, you know, they’re a real estate agent and they’re buyers. Uh, said, hey, you know, I’ll buy this, I’ll buy this investment property, but you got to manage it for me. And, uh, so they just kind of stumble into it. And, uh, so we, we’re bringing some structure, a lot of structure and all the processes and systems, the technology, um, and the training that goes behind it all under one brand.

Lee Kantor: Yeah. No, it makes perfect sense to me because when I hear, um, like my, like, I have a neighbor and I have a nephew and both of them have a couple of properties that they do, they purchased and they kind of manage. And then it’s. That sounds terrible to me like that. I mean, I understand the opportunity and the math of things, but just from a lifestyle standpoint, that seems like not a great idea for me. And I live in a, in a neighborhood that’s an older, a nicer neighborhood established and, um, and I, I’m, I’m assuming I’m going to be the last person to live in my house and that I, um, that developers at some point will tear it down. But in the interim, if I were to move, I wouldn’t sell it. I would rent it. Mhm. Um, and so how would it work? Like, how does your like, as opposed to me trying to do it myself? And I say, you know what I, I believe in PMI, they make perfect sense. They have the systems. So how does somebody take their property and then hand it over to PMI?

Steve Hart: Yeah, we’re we’re professional property managers and there’s a lot of professional property managers and almost every city and town across the United States. It’s not a new industry. Like I said, there’s over 400,000 of us, uh, property managers throughout the United States, and we fall into lots of different categories. You know, you have your residential property manager, you have a commercial property manager. Your HOA that you live in. Uh, if the board’s not cheap and trying to do it themselves, they probably have a professional HOA property manager taking care of the community. And then you have this new thing called Airbnb, which has created a short term rental property management industry. Uh, you have the big, huge apartment complexes and cities that, uh, require larger scaled, what’s called a multifamily property manager. And so there’s lots of different levels of property management and there’s property managers everywhere. And if you wanted professional management instead of you trying to just rent it out on your own, find a tenant, um, you know, maintain the property while you don’t live there, collect the rents, um, and all the things that go along with that, um, dealing with the tenant issues and and things like that. You would probably want to hire a professional to do that for you and a good property manager charges anywhere depending on the type of property. Um, but let’s just speak that single family residential, uh, scenario that you posed, you know, a good property manager will charge anywhere from 8 to 12% of the rent collected, but the value they’re able to provide and all the different services they can, that they can provide, you know, for most investors, make it well worth that, you know, 8 to 12% of rents.

Lee Kantor: Now, for the franchisee in a market, you mentioned several different types of property management. Does that unlock if they become a franchisee with you that unlocks all of those?

Steve Hart: Yeah. You just, uh, asked a great question. This is what makes PMI unique. And the reason why I feel we’re the fastest growing and largest property management brand is because we don’t just offer one sector of property management like some of our competition. They’ll just do residential property management, franchising or short term rental franchising. The PMI franchise, with the purchase of one franchise allows you to expand if you want, into any of those five sectors that I mentioned. So it’s a full service property management platform that allows our franchise partners to do one of those sectors or all five.

Lee Kantor: And what is kind of the background of a typical franchisee? Are they coming from a real estate background?

Steve Hart: Many of them, yes, but not all of them. We do require all of our franchise partners to get their real estate license in the state that they’re planning on operating in. And so it does require that little bit of, uh, real estate, um, not necessarily background, but licensing requirement. And that’s not just because we require it. Most states in the United States require property managers because we’re showing properties, we’re collecting deposits and, and rents, of course, um, they require property managers to have a real estate license in their state and whether the state requires it or not, just to keep our processes and systems all congruent, we require every one of our franchise partners to have that real estate license. And we, we do that not just for, to make the system smooth, but our property managers also make quite a bit of revenue from brokerage transactions or listing and selling these properties. Because as you can imagine, if you’re working with all these real estate investors who are constantly rotating their portfolios, if they know that their, their, um, property manager, uh, is licensed and can buy and sell properties, they’ll typically in a lot of situations use that property manager over a realtor because we already know the property, we know the rental market. And sometimes they’ll say, hey, the market’s really hot right now. Um, I can get a lot of money out of my property. Lee, throw a for sale sign up on that property, let’s liquidate some of my portfolio or, hey, the market’s hot right now. You’re a great property manager. You make managing all these rental properties just such a piece of cake. You take all the headache out of it for me, I want to expand my portfolio. Um, can you let me know any good rental properties that you see available on the market? Uh, and I want to buy ten more in the next few months. So, uh, brokerage is a big part of our revenue streams as property managers too.

Lee Kantor: Now, is there, um, like an ideal territory? Is it better to be in a big city? Is it better to be in a suburb or exurb? Like, is there kind of a sweet spot?

Steve Hart: Great question. You know, we see success with our franchise partners in any type of real estate, uh, town or big city or small little resort community across the United States. Uh, like I said before, their property management opportunities everywhere. You could be in a little small resort town and just do, uh, vacation rental property management. Um, or if you’re in a big city, you might be surprised how many short term rental opportunities there are. If you were a short term rental property manager, even in a big city. And so, um, yeah, you can do property management and there’s equal opportunities everywhere. There’s a lot of competition in the bigger cities. Um, not as much in the smaller towns across the United States and our franchisees, because they have all these professional, um, programs, the marketing and the branding, uh, in our, in our franchise that they really stand out as the professionals in the area. So they typically are able to go out and gobble up properties and build their portfolio quicker than your average mom and pop.

Lee Kantor: So what is a day in the life of a franchisee and say like a city, uh, in California, like a, let’s say, uh, Pasadena or Altadena that have been maybe ravaged by the fires and things like that when they’re in a transitional state.

Steve Hart: Yeah. You know, that’s an interesting question. You know, there is always, it seems, transitional states in real estate. You know, markets get hot, markets get cold, interest rates go up and down. Um, you know, for short term rental property managers, there’s, um, busy seasons and not so busy seasons. And so as a property manager, you’re always, you know, adjusting to the market that you’re in and the type of property management that you’re doing.

Lee Kantor: So what is your day to day in an environment like that? What what do you recommend one of your franchisees do every day to kind of grow their business and nurture their existing clients and sustain their business?

Steve Hart: It’s exactly that. You know, first off, we take care of our existing clients. Uh, our, uh, our number one priority is that customer, which is the owner of the property. But we also have to keep in mind our other customer, the tenants that are living in those properties that we manage. Or if you’re a short term rental property manager, it’s those guests that are checking in and out every four days, and you’ve got to get the cleaning crew in there to rotate, clean up that property before that next guest arrives. So depending on what kind of property Management you’re doing really dictates the activities of your day. Um um residential property manager, um, is going to be doing a lot of bookkeeping and, uh, also, you know, property inspections, making sure that those tenants are, are, are moved out or after that tenant moves out. We got to turn that property, you know, make sure the carpets get cleaned. And if there’s a, you know, a problem with any of the, the utilities that those get updated during that turn time. No, we’re not we’re not doing the carpet cleaning and the painting and, and things like that. But we’re hiring, we’re that middleman. We’re that management manager that brings in those contractors to make sure that property gets turned and fixed up. So it’s ready for that next tenant to take over.

Lee Kantor: So how did they build their book of business? Like what is the activities you recommend to build a book of business.

Steve Hart: Yeah. As a new property manager, you’ve got to get the name out there. You’ve got to get the word out there. And you don’t make money if you’re not managing properties. And so we help our new franchise partners go out and get their very first door, you know, to manage. And that includes our full suite of marketing services. We do a lot of online marketing. We do a lot of social media marketing. We do a lot of boots on the ground marketing campaigns where we’re just out there networking with real estate offices and agents and investor groups and all these service providers that may happen to know where the rental properties are. And so we have a suite of services that help our franchise partners really dig in and get those properties and do really good professional marketing campaigns.

Lee Kantor: So within any given market that your franchisees are serving, there are certain, um, like alliances or partnerships they have that, you know, like they want to know every real estate, uh, professional in town. They want to know every, um, you know, real estate investment company in town. Like there are certain groups in every market that you have to kind of be the go to resource for.

Steve Hart: Absolutely. You know, those realtors, they, a lot of them don’t want to manage properties. They’re not managing properties. And most real estate offices throughout the United States, they don’t have property management. So here these realtors are listing and selling and working with, uh, investors that are buying that property to be a rental. They’re the first ones to know that this new property that just got purchased is going to turn into a rental. How nice would it be if you’re a property manager to have that agent in your back pocket? Uh, you pay them referral fees and so they, they’re incented to toss those leads your way and, uh, and, uh, you get the, you get to meet those new investors right when they first invest in that property.

Lee Kantor: So is that one of the early activities your franchisees are doing is just kind of kind of shaking a lot of hands and meeting a lot of folks, um, in those industries.

Steve Hart: Absolutely. It’s the best way to get business. You can get out there and compete on Google AdWords and do that type of marketing, which works. It’s a part of our marketing campaign, but the very best leads are those organic leads. You know, that you get out and develop and, and get, uh, referred to you.

Lee Kantor: So now you mentioned that real estate, they have to have a real estate license to be a franchisee. But if they’re a working real estate professional in a market, is this something that can be kind of done also?

Steve Hart: Yeah. In fact, a lot of our franchise partners, um, are, uh, as real estate agent’s full time. And they they do property management on the side to start out. Yes, we allow that to that to happen. And as their property management business grows. Um, they either need to slide in full time or hire staff to run it for them if they’re going to stay focused on the real estate side. The cool thing about the tie between real estate and property management is exactly that they feed off each other and, uh, what I call cross-pollinate. A good, uh, property manager gets a lot of real estate leads, and we do a lot of brokerage transactions. And, uh, a good real estate agent sees lots of property management opportunities. So it really makes sense, uh, for a realtor or real estate office to have ties to property management, if not own their own.

Lee Kantor: So now what is the typical. You mentioned that there’s different sectors. What’s the split of business that in a given market. Um one of your franchisees has.

Steve Hart: Um most of our franchisees just start out with one sector, we call them pillars. So, uh, typically a new franchise, see if they don’t have property management experience and they don’t live like in a beach town or a ski town where obviously they probably lean toward doing short term rentals in those resort towns. Um, if they don’t have property management experience, we typically will start them in the residential pillar. Uh, just because it’s, it’s the easiest, it’s got the lowest hanging fruit, you know, 1 in 3 properties in the United States is a rental. And so it’s, it’s easier to get a start in that pillar typically than maybe HOA pillar or commercial pillar. And so, uh, most of our franchisees start in that sector and do residential, and then they typically will expand from there. So residential pillar is the largest, um, HOA pillar is actually our fastest growing pillar. Um, there’s just not that much competition and a lot of opportunity in the United States right now for HOA property management. But the cool thing about our industry that I haven’t mentioned yet is that we’re talking about a business, an industry that’s based on recurring revenue.

Steve Hart: If you’re a good property manager and you’re taking care of that property and that owner, they’re probably not going to go away and they’re probably going to let you keep managing their property. And that management fee that you collect every month is residual. It comes you don’t have to earn, you don’t have to go out and sell and close a deal every month to get that money. And it’s awesome, uh, to have a building portfolio of recurring revenue. And on top of that, we’re talking about an industry that’s literally recession resistant when we when the economy, you know, improves or decreases. People aren’t, you know, they don’t stop needing a property manager. And so the demand for property management is always there. Even through Covid, we didn’t see, you know, any slump in property management except in the short term rental category. Obviously, people weren’t traveling during Covid, but we’re in an industry that’s recession resistant, recurring revenue. And it’s, it’s just a great place to make great money.

Lee Kantor: So is there a story you can share of maybe one of your franchisees, um, don’t name who they are, but maybe how they came to you and how you were able to help them become a business owner and really build something of substance in their market.

Steve Hart: Yeah, I have 450 stories I could share. That’s how many franchise partners we have right now. And everyone has a unique story. But to just list just one, you know, we have a franchisee that was from Canada that was wanting to move to Maui, used to travel once a year, a couple times a year to, to Maui to travel, and decided that he wanted to move there. And as an E-2 visa recipient, he utilized our franchise to help him get that visa first off. Um, so we helped him get to Maui legally and, and have a business there from day one. And he’d never done property management before. And we, we were helping him do residential property management. This is about 15 years ago. And he said to me, he said, hey, Steve, there’s this new thing called Airbnb. And, uh, I want to do short term rental property management here in Maui. And I said, well, I don’t know anything about it. And we don’t support that type of property management. But I said, if you see an opportunity there, as long as you do it through our brand and, um, you teach me what you learn. Uh, I said, I’ll let you play around with that sector. Well, Lee, he became one of our top ten producing franchise partners in this new space called short term Rental Property Management. He’s built an extremely profitable business, top ten, like I said, in our entire franchise. And he had no prior, uh, real estate property management experience.

Lee Kantor: Now, what is if you were pitching somebody in real estate that maybe hadn’t considered this, what would you know? What’s your elevator pitch to somebody like that, that, you know, they’re maybe they’re new into real estate and they want to, um, you know, kind of build their empire in their local market. And to me, this is a great way to differentiate yourself.

Steve Hart: Yeah. We get a lot of real estate agents, real estate investors that have tried to do this, but, you know, just have struggled creating those processes and systems on their own. And so it’s a perfect partnership. Uh, whether even if you’re an existing property manager that’s stuck in that slump of, you know, transitioning and scaling to a more strategic type of property manager, we do a lot of what we call conversions, where someone’s already kind of in the space trying to figure it out, trying to scale their business, um, joins our, our brand and we help them scale it and grow it from there. But, uh, real estate, uh, and property management, as I’ve already mentioned on this podcast, it’s just, they’re a great fit. They feed each other. And, uh, uh, if a realtor or a broker of that office does not have a property management arm of their business, I’d highly recommend taking a look at what property management can offer. And it’s just going to increase the number of real estate transactions they do. At the same time, it’ll stabilize their revenues. So when the real estate markets like today, where it’s a little slow and stagnant because the interest rates are so high, um, you’ve got that property management arm of your business to lean in on or to lean on as bringing those stable revenues in every month. They’ll cover your office lease, maybe cover the front desk, you know, worker, you know, things like that. Uh, um, while you’re transitioning through those slower months or years in real estate.

Lee Kantor: Now, what do you tell the person, like you mentioned, that it’s such a fragmented market that there are so many people that are doing this, you know, with 1 or 2 properties and they think they can do it themselves. Like, what’s your, um, I know you mentioned the different pillar sectors, um, and specialties, but and the systems behind each of those, but what is kind of the aha moment these people need to kind of say, you know what, maybe I should be partnering with a national brand rather than just sitting here trying to, you know, create this wheel on my own.

Steve Hart: Yeah, it’s an easy thing.

Steve Hart: For me to talk about because people ask this all the time. They’re like, why do I need a franchise to do property management? I mean, property management has got to be so simple. It’s just a simple service. But here’s the thing, and I touched on this a little bit earlier. We don’t just provide one service as property managers. We provide a dozen, you know, all under one roof, under one company name. We call it property management, but it’s really multiple businesses all rolled up into one. It’s maintenance and all the things that come with maintenance. It’s leasing. You know, how do you get that property leased if you’re not doing a good job, you don’t have the right marketing channels. That property is going to sit empty for two months, and that owner’s going to be ticked off that you haven’t rented it for two months. And they’re showing that mortgage payment on their own without any assistance. You know, it’s accounting. Um, you’ve got to have processes and systems to, to do that bookkeeping properly. If you mess up an owner’s books on their property, you’re going to get let go. And it’s utility management, it’s legal work and the, and the list goes on. So this concept of, oh, it’s just property management that is a thing of the past. There’s so much technology involved in our business. A typical a really good property manager will use sometimes 6 to 12 different tech decks or technologies to their deck that help them accomplish all these different processes. With our franchise, we lay this all out to our franchise partners and we train them on this. So they plug in to literally this process and system and are able to scale their businesses so much quicker than anyone trying to do it on their own. I would never recommend anyone to start a property management business on their own, unless they really felt they were very entrepreneurial and proficient at some of those things that I just listed.

Lee Kantor: And then how important is the access to a community of, like you said, 450 other people doing a similar thing in their markets.

Steve Hart: Oh, Lee, I love that you brought this up because it’s my favorite thing about what I get to see in our, our Community of professional property managers every day. This is. This is a tough business. You know, property management’s tough. And it is so cool to be part of a group, in our case, 450 plus like minded entrepreneurs all working under the same brand. And our vision is to become the world’s premier property management brand. So every one of our franchise partners elevating their efforts, their service, their systems to that premier level, and they help each other out and share secrets and what’s working over here. And, and hey, you should try this. It’s it’s working. And, and even we here at PMI corporate, we listen to our franchisees. They’re part of the reason why we have the five pillars that we do in that example, that story I told you about our franchise partner in Maui. Because of him, we rolled out an entire short term rental pillar shortly thereafter. And so this community, this part of our PMI brand is what’s what makes this business so enjoyable and so fun. And it really fuels our entrepreneurial franchise partners to grow bigger, better, more successful businesses.

Lee Kantor: So if somebody wants to learn more, what’s the best way to connect with you or somebody on the team?

Steve Hart: Hey, our website’s got tons of information. It’s PMI corp.com. Or you can also go to Property management inc.com and check us out there.

Lee Kantor: Well, Steve, thank you so much for sharing your story today. You’re doing such important work and we appreciate you.

Steve Hart: Thanks, Leigh. Appreciate it.

Lee Kantor: All right. This is Lee Kantor. We’ll see you all next time on Franchise Marketing Radio.