Growing the business as fast as possible can prove detrimental. Independent rental owners must walk before they can run.
For people coming into rental management from outside industries, the real estate world can move very slowly.
Curtis Hains, owner of Vende Capital in Houston, arrived in the rental housing business from a staffing company. The first thing he noticed was how long the closing process took.
“At my previous company, it was a 90-day sale cycle,” Hains says. “In real estate, it takes six, nine or even 12 months. I could not understand why people did not close faster. Closing takes a lot longer than many would expect.”
Anticipating a slower process and having the patience to build your business can set a small owner up for success.
Steve Lightner, a small rental owner in Jefferson City, Mo., says many new rental owners do not have the patience for the long term. This manifests itself in how they operate real estate.
“There is a problem that new real estate owners have when they get into the business,” Lightner says. “They only look at the short term. They buy buildings, don’t do anything, want to get out in five years and hope their properties increase [in value]. I recommended people get into the business for the long term.”
Slow also is a recommended pace for portfolio growth. For Joe Bryson, Managing Partner of Stellar Equity Management in Katy, Texas, that meant developing repeatable processes.
“If you are a start-up rental company, you don’t begin with an operating plan,” Bryson says. “And even if you did have one, it is borrowed from someone else and therefore likely it is meaningless. You should develop a plan on your own.”
For fledging management companies, moving slowly sometimes means turning down potential business. Lisa Pelloni, CEO of AdaLease Property Management, in Summerville, S.C., says many new management companies must fight the urge to constantly take every piece of new business that they are offered. It’s a lesson Pelloni learned the hard way.
“We have lost a couple of management contracts because I didn’t put a pause on growth,” she says. “Just saying yes and taking on a property after a property is not a recipe for success.”
This experience taught Pelloni to build structure into her business, starting with providing the proper training for her employees.
“Make sure you have a strong foundation to be successful,” she says. “A good foundation is where it all starts.”