According to Buildium’s 2022 State of the Property Management Industry Report, the number of property managers who plan to grow their businesses in the next two years is at its highest level since 2016.
In fact, 86% of those surveyed plan to grow their portfolios in the next two years. And 73% told us they had already added new doors over the last two years.
In our report, property managers listed these eight strategies they intend to use to grow their portfolios in 2022:
- Gaining New Clients in Their Market: 72% of respondents said they plan on recruiting new clients in 2022, making it the most popular growth strategy for property managers.
- Encouraging Existing Clients to Expand Their Portfolios: 44% of property managers intend to apply this strategy, and their timing couldn’t be better. More rental owners told us they intend to acquire new properties than in the previous four years of surveys.
- Soliciting Referrals from Current Clients: 47% of owners say word-of-mouth reputation is a top consideration when looking for a property manager. 53% of property managers plan to ask their current clients to provide referrals.
- Investing in Properties of Their Own: 38% of property managers plan to grow through property acquisitions. That includes 53% of property managers who already manage properties they own, and 31% who currently only manage other investors’ properties.
- Partnering with Other Industry Professionals: 28% of property managers plan to partner with professionals in other verticals, including real estate lawyers and brokers.
- Acquiring Other Management Companies: 24% plan to acquire other property management companies or investors’ portfolios.
- Expanding to Other Property Management Verticals: 26% plan to broaden the types of properties that they manage—for example, student or senior housing.
- Expanding to Other Markets: 22% plan to expand to new geographic areas.
Knowing where to look for growth, even if that means simply making changes within your own company, will be key to most property managers’ strategies in 2022.
In this article, we’ll pinpoint where to look for growth and which areas you might want to avoid. We’ll also discuss how to increase revenue even if you don’t have the resources to expand your portfolio just yet.
3 Places to Look for Growth
#1: Fast-Growing Secondary Markets
According to MarketWatch and Realtor.com, the hottest housing market in 2020 was Boise, ID. While major cities are expected to make something of a comeback, investors are still paying close attention to smaller cities, particularly those in warmer climates.
Of particular interest are cities in the Sun Belt (Florida, Georgia, Texas, Arizona, and other southern states). Those cities saw an uptick in population as newly remote workers, combined with pre-pandemic trends of residents looking for warmer climates, faster-growing economies and a more affordable cost of living. If the work-from-home trend continues, the Sun Belt could continue to see strong population growth. If you already operate in or near these areas, it’s worth looking into further expanding your portfolio to meet growing demand.
2. Emerging Tech Hubs
This year, Realtor.com’s number one city for growth was Sacramento, CA. It follows a trend real estate investors are seeing throughout the U.S that began well before the pandemic: larger yet more affordable cities, close to traditional tech hubs, experiencing a growing tech presence.
Those cities, according to Forbes, also include Tampa, FL and Austin, TX. It’s worth noting those cities fall within the Sun Belt. Other cities, such as Dayton, OH and Des Moines, IA, are also growing their tech sectors.
That provides an opportunity for workers to find jobs and move to areas less expensive than traditional tech hubs such as San Francisco, New York, and Boston.
While you may not be near these emerging tech hubs or cities in the Sun Belt, there are most likely secondary markets in or near your area that are experiencing similar growth. It’s all about identifying markets that have this growth potential and are close enough to be a viable option for your business to focus on. These are ideal spots to get your foot in the door and expand your portfolio.
3. Cities Where Home Prices Are Expected to Rise
The housing shortage has driven up housing prices across the country, forcing many first-time homebuyers to put off their house hunt and rent instead. Cities experiencing rapid population growth have especially seen housing prices rise.
It should come as no surprise, for instance, that Boise, the fastest-growing city in 2020, has the fastest-rising housing prices as well. Other cities, including Austin, TX, have shown sustained growth in both population and housing prices over time.
That combination is important for property managers. Investors should consider locations where demand isn’t short-lived and has been growing steadily over a longer period of time, suggesting that home prices will keep rising and aren’t currently inflated.
3 Places Where Growth May Not Happen
While many areas are poised to benefit from the recent upheavals in the real estate market, others are not doing so well. Here are some places property managers and investors may want to avoid.
1. Disaster-Prone Areas
2020 was the most active wildfire season in California history, with nearly 10,000 fires. Meanwhile, in the Atlantic, there were 30 named storms and 13 hurricanes in 2020, making it the most active hurricane season in recorded history as well.
As parts of the U.S. face disaster more frequently, residents are reconsidering where they want to live. Disaster-prone areas pose a risk to both property values and insurance policies, making investments in those areas tenuous at best.
2. Primary Markets
Major cities such as New York and Los Angeles are set for a population resurgence, but as jobs allow for remote work more affordable cities are becoming attractive alternatives to primary markets. While traditional hubs will still keep much of their appeal in the long run, smaller, emerging markets may still offer more for investors’ money.
3. Rent-Control Cities
According to experts, while rent control does help low-income households find more affordable housing at first, it also causes problems down the road. When people have capped rent, they are less likely to move, making affordable housing harder to find.
It also makes profitability difficult, at best, for owners and property managers. Expanding in a market with rent control isn’t necessarily a deal breaker for growth. It does, however, add limitations and a layer of complexity to consider when deciding where to invest.
Restrictions make these cities unattractive to developers, compounding housing shortages, while owners that may already be stretched thin find it difficult to invest in their rental properties and keep up with the rising cost of maintenance, taxes, and other expenses.
In 2019, Oregon was the first state to pass rent control regulations. Since then, other cities and states have discussed introducing rent control or already passed legislation of their own. St. Paul, MN passed strict rent control policies in November, extending to new construction, causing many developers to pause construction and shift investments to other locations.
4 Ways to Grow Revenue Without Expanding Your Portfolio
Expanding into other markets, or even within your own market, is certainly one way to increase profitability. If you don’t have the resources to do that, however, there are still other ways to increase your cash flow.
1. Adjust Rents
Setting rents at the right level starts with a clear understanding of your market. We’ve already covered many of the criteria that make areas desirable, with strong potential for growth. For a more detailed understanding, use analytics software like Buildium’s Analytics & Insights Leasing Performance dashboard. These tools, coupled with your own expertise, provide the context needed to set the right price given market conditions.
2. Update Properties
Speaking of raising rents, you can certainly do so if your properties are newly renovated and updated. Consider adding amenities that residents are clamoring for. According to our latest Industry Report, the top amenities this year include air conditioning, in-unit laundry, high-speed internet, and private outdoor space.
3. Expand Services
Consider adding new services (either through your own staff or through partnerships with vendors) for which you can charge a fee or raise rents. These can include anything from changing HVAC filters to offering renters insurance and walking dogs when residents aren’t home.
4. Look Within Your Own Business
Are there opportunities for expansion within your own business? Here are a few ideas:
Get a Real Estate License
If you don’t already have one, consider getting a real estate license. By adding brokerage services to your business, you can bring in a new revenue stream while setting up your business for new property management clients.
Pare Down Your Client List
Take a hard look at your clients. Are there any high-maintenance properties or stressful owner relationships that have become a burden on your time? It may be time to end those relationships in favor of more profitable ones with properties that are easier to manage.
By removing burdensome properties, you also open yourself up to the possibility of expanding to new verticals within property management, or perhaps investing in properties yourself.
Property managers have plenty of options to expand their portfolios and increase revenue in 2022, which means they can play to their strengths and focus on markets that work for them.
Bottom line: It’s all about building a flexible business that can adapt to the changing demands of the market.
86% of property managers plan to grow their portfolios in the next two years. 73% have already added new properties recently. Learn more about the latest trends in portfolio growth, rental market opportunities, and how to stay ahead of the competition in the 2022 Industry Report.Read more on Industry Intel