Editor’s Note: The following is a conversation from the video series, The 2020 Industry Report Explained: The Property Advisor, which features interviews with Robin Young, Sr. Researcher at Buildium. In these sessions, we cover the major trends from Buildium’s 5th Annual Industry Report in partnership with the National Association of Residential Property Managers (NARPM).
Tony: Tony from Buildium here, the software that helps property managers control the chaos, sharpen their operations, and ultimately grow their business. Thanks for joining us for this three-part video interview series, the 2020 Industry Report Explained. Today, I’m here with Robin Young, Senior Researcher at Buildium, and she’s really the person that is responsible for driving the 2020 Industry Report across the finish line each year. In this series, we’re going to break down the findings and distill the key trends that we identified. Now, this is quite a launch, quite a report that takes months of research and preparation.
Tell me a little bit about The 2020 State of the Property Management Industry Report.
Robin: Sure. I’m excited to talk about it today. This year’s report is actually our 5th annual. We’ve been doing this for five years, for the last three or four in collaboration with the National Association of Residential Property Managers (NARPM); and this year’s report is bigger, but also better than ever. It combined surveys of almost 4,000 respondents, and that includes property managers, renters, and rental property owners from all across the U.S. This year, they represented 340 different metro areas, which allowed us to get local market research for 50 different cities and every region in the U.S. So there’s really nothing else like it in the industry, and we hope property managers absolutely love it.
Tony: One of the things that you talk about is how the definition of a property manager is changing. What do you mean by that?
Robin: Property managers know that their job is no longer just taking care of the physical property and answering residents’ questions. In 2019 and into 2020, property managers are increasingly being expected to act like asset managers, too. There are more investor clients rather than Accidental Landlords that are seeking property management services. These are people who are super focused on profitability, and that changes how a property manager has to spend their time.
Tony: Why is the role of the property manager changing and what are the forces that are impacting this change?
Robin: As I alluded to, Intentional Investors are now property managers’ major client. They actually represent 55% of property managers’ client base these days—and this is a big change. It used to be Accidental Landlords who really didn’t want to run their rental property—they just wanted the income, and to not be stressed. And today, property managers’ clients—because cap rates have been hovering around 5% since early 2016—they’re really focused on making sure that their properties are profitable.
And that also leads investors to question the ROI on hiring a property manager. When there are technologies that can automate so many parts of running a rental property, they really need to see that property managers will help them increase the profitability of their properties in a way that they can’t do on their own. And that’s leading property managers to double down on really human-centric services like local market expertise and customer service—things that apps can’t do.
Tony: That’s so interesting. And I know a lot of the property managers that I’ve talked to are really feeling this in their day-to-day.
What are the services that are showing the most growth?
Robin: So, the services you expect, like maintenance, rent collection, leasing, vacant units—those are always going to be at the top of the list. That doesn’t change. But we have seen a lot of growth in services that really center around services that landlords need as they sell rentals in our current sellers’ market, as investors acquire new rentals and as owners watch their properties’ profitability. So these are services like property sales, property brokering, financial reporting, investment advice, building renovation—these are things that really matter in a seller’s market. And at the end of our current economic cycle, when cap rates are really compressing, we actually saw a 14-point increase across the board over the last three years in those services.
Tony: Wow. That is significant. And of course, a lot of those things that you’re talking about, those different services are new areas, new territory for property managers. So not everybody will be able to adapt to them because it’s a lot.
If you can’t do that as a property management business or if it doesn’t make sense in your market, what can you do instead of adding new services?
Robin: We definitely recommend turning to property management organizations like NARPM or NAA for continuing education on picking up new skills that can help you expand the different services that you can offer. But it’s also important to keep in mind that a lot of these services are advice-based. These are things that you don’t have to put in a lot of money in order to start offering them to your clients. So you can prove value to your investor clients right away by staying up-to-date on rent and occupancy rates between different kinds of properties in your area; which amenities are competitive; the outlook for construction, job growth, population growth in your city. Those are things that anybody can look up and just have ready to go when your clients are asking you for information to help their decision-making.
Tony: That’s a great point. And it’s good to have that mindset across the board because as the industry adapts, so do we. We really can’t exist inside of our own bubbles. We have to really adapt with the market changes. And really, one of the big things of this report is the local approach that we’ve taken here. A lot of interesting regional and local information specific to the property management industry.
How do property managers know what’s right for their market?
Robin: Shameless plug for the report: We have resources for not only 50 cities across the country, but every single region. And so when you open the report, you’ll be able to see for New England—and for Boston—here’s what’s going on with rents, vacancy rates, price growth for both homes and rentals. Also, how local property managers’ businesses are doing and which amenities renters want most. We have all of that information pulled for property managers in our report. So we highly recommend reading that.
But I’ll also give away my secret, which is where I get that kind of information from. I really recommend subscribing to real estate publications’ newsletters. There is a lot to be said for getting information in your inbox every morning that tells you which changes are happening in the markets that you care about. I also use Google Alerts, Apple News—resources like that that will pull breaking news for you based on keywords that you’re interested in. And then of course, we really feel strongly that property managers can benefit from joining local organizations. A lot of organizations like NARPM, NAA, IREM have local chapters, and property managers in this year’s survey told us just how helpful these are for them in staying up-to-date on a regulation changes and just hearing advice from property managers in their area. So that is a huge asset for a lot of property managers that we talk to.
Tony: Keeping those ties is huge. All right, that about just does it for us. So thanks again, Robin, for joining me here. And for those of you watching, you can get these insights and more in the 2020 State of the Property Management Industry Report. And keep an eye out for the next video in our series that will cover how property managers can keep their local edge as owner and resident preferences rapidly evolve in the face of these monumental changes.Read more on Property Management Trends