What Most Property Managers Are Underestimating Right Now | Steve Hart

A Podcast | Steve Hart

Pete Neubig: Welcome everybody to the NARPM radio podcast. I'm your host, Pete Neubig, the voice of NARPM. Today I have Steve Hart, co-founder and CEO of PMI, which he launched in 2008 with a vision to build the nation's leading residential, commercial, and association management franchise. With a background in land development, construction, and real estate sales, Steve saw firsthand the market's ups and downs and recognized that property management remains a stable recurring revenue business. He built PMI around that model, helped hundreds of entrepreneurs create scalable, successful property management companies. Steve, we've been running around the same circles for many years. We have yet to actually really meet in person. Thank you so much for spending your time and being here.

Steve Hart: Hey, Pete. Thanks. That means a lot. And thanks for welcoming me on your show. I really appreciate it. I've been a NARPM fan for 18 years. I've been to many of the events, broker owner, and the big national one for 18 years, and really love what NARPM does and brings to our community of property managers.

Pete Neubig: So you're the CEO of a big franchise company for property management. So I wanted to get kind of a high level perspective from you. So my first question is, what major shifts are you seeing in the property management industry right now that most managers are underestimating?

Steve Hart: Yeah, the biggest shift that I'm seeing is this big onslaught of technology coming into our space. We didn't have it 10, 15, 20 years ago. We saw a little software, you know, pop up every once in a while, but now it's just a tsunami of technology. AI is changing the way we do things. All this tech influence is coming in. So it's changing property management big time. The other big thing that I see, and your listeners are probably well aware of, is there's these aggregators, these consolidator companies that are coming into our space. I don't know if everyone's inboxes is like mine out there, but I'm not kidding. I probably get an email almost every other day from some group that wants to buy my property management business. And these are these big financially backed aggregators is what I call them, or consolidators that are trying to buy up these mom and pop, and sometimes even large scale property management businesses and portfolios, and all put them under one big brand. And so there's a big movement to take our very, what's considered a very fragmented industry and roll it up into some big brands and big names.

Pete Neubig: We could do a full podcast on that, but just high level, why do you think that is?

Steve Hart: You know, it's my opinion, but I think people finally realize why our industry is important. I mean, we have a really sexy industry with recurring revenue. You know, we are pretty much recession resistant, and all these investors that have been pouring money into real estate for the last 10, 20 years, things have kind of gotten a little stiff for them the last few years, and they're looking at property management going, wow, why didn't we invest in this industry? And so I think it's a conglomerate of, you know, just slowed real estate industry, but also just how our industry is growing. And it's getting a little easier with the technology to do. And so I think it's just becoming a lot more appetizing for these bigger companies to come in and have a play at property management.

Pete Neubig: Yeah, I don't think anyone's cracked the code on how to do it with systems nationwide. I know there's a few that are obviously on the forefront trying. I sold my firm to one of those companies back in 2019. And I got to look behind, under the hood, so to speak. And you think these guys are way smarter than us that own mom and pop shops. And I promise you they're not, they just have access to money and are able to sell a big game. I just think that creating those systems nationwide, that's kind of the final frontier. Once somebody figures that out, then I think, you know, it can be successful.

Steve Hart: Yeah, that's kind of what the big secret is behind what we're doing at PMI. We claim that we have created all those systems. That's what we built. So the property manager that's the do-it-yourself, recreating that wheel, doesn't have to do it all alone and all by themselves. And here's the key. With franchising, we don't own the business. We're a huge fan of locally owned and operated businesses, especially in property management. I've seen these big guys coming and going, believe it or not. I don't know if you guys that are listening have heard of Vacasa, but Vacasa was a huge PE-funded vacation rental brand that was going up and buying out all the small vacation rental property management companies. And they just imploded over the last year or two. And you've seen some of these big guys coming in, gobble up these little guys, and sometimes it doesn't work out. Our model in franchising is, let's leave the power with a locally owned operator. It's really important in property management to have local owned operators, in my opinion, because it's just a tough business. And when you're working for the big man, you just don't have the commitment, in my opinion, that you need to power through what we deal with on a day-to-day as property managers. So we keep the power, the ownership with the individual owners, and we just help them, assist them with all the maintenance, the leasing, the accounting, the legal work, the utility management, and the list goes on. As you guys know, all the things that you have to be a really good provider at to compete in today's property management world.

Pete Neubig: Yeah. So let's dive into that a little bit. So I'm always surprised, especially in NARPM events that a lot of people have not heard of PMI. Most have, but there's still quite a few that have never heard of PMI. So let's talk about what are the advantages of being... You touched on it a little bit, but let's go a little bit deeper on what the advantages are of being part of a franchise.

Steve Hart: Yeah. We talked about companies coming in and buying existing property management companies. We do that. I'll maybe talk about that a little bit later, but where we really focus is people that want to do property management, they have two choices. They can go figure it out on their own, which most of your listeners probably have done. They figured it out on their own. Maybe join NARPM to help them figure out some of those processes and what companies to work with and what to do, what not to do. There's not been in the past before we started really an opportunity for someone to join a brand or a franchise that has built out these processes, these systems that allow a new user, new owner to come in and scale their business by plugging in those existing programs and a brand without having to do it all by themselves. And that's what we've done. We've created those processes and systems so a user, a property manager can do it quicker and more efficiently.

Pete Neubig: So if I'm ABC manager company and I'm ABC PMI, you're getting that brand name awareness by just having that PMI flagship behind you.

Steve Hart: Yeah, absolutely. If you're starting a property management company, the first thing you do is think of the name that you're going to go by. Well, our franchise partners, they use a version of our name. PMI usually starts with PMI and then they come up with their own. If they're in the mountains, they might be PMI Mountain Country or whatever it is that the DBA they want to run by. And then we build their website, put together all their marketing around that brand. And most of this is already pre-created by our marketing department. So literally they plug into a marketing campaign that they can exercise and utilize in their own territory and roll forward. Then we bring them into training. We have literally a three-month training program. Most of it's done online where it teaches them how to do property management. It teaches them how to do all the different components of property management, the eviction, the lease ups, the preparing the property and the list goes on. And we make sure our franchise partners have all the tools they need to. And then it's a ongoing learning process. We encourage all of our franchise partners to join groups like NARPM so they can plug into that elevated expertise and the high level of education that goes on with groups like NARPM and the regional events and all the fun stuff.

Pete Neubig: And then talk about the systems, right? Do you guys have documented systems and do everybody run the same system or because they're in different markets, they have to run kind of a similar system, but they have to kind of make it for themselves for their market?

Steve Hart: We have a set process, which includes set systems. We have a set CRM that all of our franchise partners use, a set software and accounting processes that they use. So yeah, all of our franchise partners, for the most part, utilize the same programs and processes. And that way makes it really easy for us to be able to coach them. We have coaches that our franchise partners plug into regularly to help them with all things property management and what they need. Maybe they need motivation. Maybe they need help with marketing and scaling and growth. Maybe it's more they're a salesperson, but it's the operational side that kind of is hard for them to really get a hold of. And so they work with their coach on the operational components of running their business and scaling and maybe it's the accounting. And so we're able to provide support at a very premier professional level for all of our franchisees at the needs and at the level that they need to.

Pete Neubig: Yeah. And so you also, if I recall, because I talked to Trent Bray, shout out to Trent on the show. He actually does all of the coaching for BDMs. Is that correct? So if you're going to hire a BDM or you are the BDM, now you get coaching and all that is kind of packaged in. Is there additional costs for the coaching?

Steve Hart: That's just one program of literally hundreds that we offer to our franchise partners. And the BDM is a good one. It's something that people are talking about in property management nowadays, where you need someone to go out and help you market and bring in new doors. And that's one of our hottest programs. Trent Bray runs that and he does a phenomenal job. And our franchisees love having that in-house, built-in program that they can plug into. And guess what? Trent trains their BDM. Trent's the one that keeps them motivated and holds them accountable to getting a new door every week or whatever their goals are. And that's what I'm talking about. Being part of a franchise is a community of professional property managers all working together to elevate the brand. But they're operating at that local level. They own their business. They're building their needs. They're adding the components to the business that they want. And they can do that without, I know I'm going to sound like a broken record, but without having to come up with it all on their own.

Pete Neubig: Well, what I like is you also have all the tech, right? You have the tech stack as well. So it's like, I know when I first started, I didn't know Appfolio versus Buildium versus Propertyware. With you guys, you just say, hey, here, we've already figured it out. I think you guys are on Rentvine now. Is that correct?

Steve Hart: Yeah, for our residential pillar. And remind me to talk to you guys about pillars in a minute, because it's the one thing that really makes us unique and what we offer is we don't offer franchising solutions for just residential property management. We actually have five different categories or sectors. We call them pillars that we provide service and support to.

Pete Neubig: So let me guess, single family, short term, HOA, commercial?

Steve Hart: Yes.

Pete Neubig: You're only missing one. I'm only missing one.

Steve Hart: It's kind of unique. It's not quite single family residential.

Pete Neubig: RV parks? Is it multi-family?

Steve Hart: We call it multi-family. Each of those five pillars of property management, as you know, are very unique. I mean, a short term rental property manager uses different software than a residential property manager. They use different marketing. They use different sales tactics. The customer is not a tenant. The customer is a guest and an investment property owner. And so we have different pillars that we offer to our franchise partners. Now, it's important that your listeners know most of our operators just pick one pillar and we require them to pick one pillar as they start their business. Most of them start with single family, but then they're able to add on. We call it bolting on additional pillars. So if they want to get into HOA management, it's easy. They come back out, do training on HOA management, and we plug them through that whole process and line up the tech deck for HOA because it's different. You're not using RentVine for HOA management. And that list, that tech deck is very unique and very different for each of our pillars. Yeah.

Pete Neubig: I'm a huge fan of like niching down, getting it right. It's growing without you. You got the team in place. Now do the bolt on. That's kind of my, I made the mistake early on where, especially when you're first starting out, it's like, we'll just do, we'll take anything, right? Hey, multifamily, sure. We'll take it. HOA, we'll take it. We don't know how to do it, but we're going to take it.

Steve Hart: I'm laughing because we learned that same lesson. We started rolling out these pillars just because our franchisees wanted them. And so we're like, yeah, we could offer HOA management. And so we let anyone that wanted to, Hey, I know a little board that needs new management. So we let anyone that wanted to just start dipping their toe into that sector. And it ended up being a mess. We realized we've got to have these guys professionally trained, all of our systems and processes dialed before we can send them out to the market saying that I am an HOA property manager. And so we built out each one of these five pillars. They're very unique. They're literally like five different businesses.

Pete Neubig: And let's be honest, like when you own a property management firm, building out the systems is probably the most tedious, painstaking thing to do. But having somebody say, here's the system, you just have to learn it.

Steve Hart: Yeah.

Pete Neubig: Is a huge advantage.

Steve Hart: Yeah. It's probably the biggest reason why our franchise has gained so much in popularity. We've got over 450 franchise partners throughout the US. And like you said, Pete, most people don't even know who PMI is yet. And we're growing like crazy because these property managers, they're tired of doing it on their own. And a lot of them see a lot of value in wanting to bolt on another pillar to what they're doing now and create additional revenue streams and things like that. And so they will join our franchise, even though they're an existing property manager, they may be doing property management for 10 years. And we call this a conversion where they literally come in and we convert or co-brand, like if they're ABC Property Management, now they might be PMI ABC Property Management. We co-brand together and we bring their business in, help tighten up any areas that they want. But then they bolt on that HOA or that commercial pillar or get into short-term rental and they don't have to do it all on their own.

Pete Neubig: So at what point should a solo proprietor consider joining a franchise versus staying independent? What pain points would they have that like, man, you should probably look into franchise?

Steve Hart: Yeah, that's a great question. I see some really big, sophisticated, what I'd call strategic property managers join our brand and they do it because the community, they're tired of just being their own independent brand. And they want to be part of something that's a national brand where we're referring business to each other. Our franchisee in Atlanta is going to refer any leads that he get that are in Knoxville or something. Wherever, yeah. And so we've got this community of professional property managers all helping each other build their business. And again, they still own it. This is the big difference between us and a pure and a Rome and a mind. You're selling your business to those brands. And they're still wanting you in a lot of cases to stay there and work, but you don't get any of the upside.

Pete Neubig: Well, they also change everything you've built.

Steve Hart: That too. And with us, we're saying, hey, come on in, bring what you built. In fact, we're going to even lower your cost to entry because you're already a property manager. And let's scale this thing to another level together. And whether that means just elevating what you're doing now in that one pillar or bolting on a pillar that you've always wanted to get into, we can work at all those levels.

Pete Neubig: Yeah, I think I've heard this so you can confirm, but you guys get some good discounts on all the software as well because you have the scale.

Steve Hart: I love that you brought this up because most people don't know this. People that don't know franchising are probably thinking, well, Steve, what you're talking about sounds great, but what about the cost? You franchisers charge a royalty and that's expensive. And I barely get by without paying a royalty. How am I going to do this? Well, Pete, your question that you just asked, we are the largest property management brand in the nation, 450 operators. So when companies like Rentvine, LeadSimple come to us, they want our user base. We're managing a couple hundred thousand homes, a hundred billion in assets in management as our brand right now. And these tech companies want PMI and our franchise partners in. And so they're literally some of these softwares we, or I should say our franchise partners get for free. Say it again. We get these technologies so deeply discounted that our franchise partners never pay retail. They always are saving money on the tech. And in some cases they get it, like I said, for free. And so this is big. If you're managing 200 doors and paying $3 a door per month for your, just your software alone, let alone your CRM and things, that's the price of owning. That's a chunk of the price of your royalty right there. So it's almost like you could be part of a national brand with all the savings that you get from the tech, the marketing, and all the other areas that we provide support in. You're going to basically get all of that at the same price of the royalty. And it's a wash in cost from what these guys are out there trying to build this thing on their own with no community.

Pete Neubig: Steve, do you think that's the biggest misconception about joining a franchise like PMI is that it's just the royalty and the cost or are there other misconceptions out there?

Steve Hart: Yeah. The biggest one I touched on a little earlier, I think, you know, these are entrepreneurs that are listening to this podcast right now. They've worked their butts off to build that property management business. The last thing they want to do is lose any kind of control over their largest asset. I mean, they've been working hard for that. They don't want some brand to come in and tell them what to do and tell them how to do it and or take control of their business. And so the biggest misconception I think that people have with franchising is we don't own your business. The owner continues to own it. We are a partner. They're literally just leasing our brand and our systems and processes and professional team that supports them. That's really the way to look at it. And we do have a term in our franchise. We have a 10 year term. Sometimes that can be negotiable, but we really want to say, hey, we're going to help you out, but we want to lock in for this amount of time. Now, you can sell your business at any time during that term. And we've got a nation full of buyers that are wanting to buy a PMI systematized business. So it makes liquidity really easy for our franchisees because we've got instant buyers that want to buy them. In fact, we love to say we're the largest buyer of property management companies in the world because we've got these 450 franchise operators that love to build their business through acquisition. And so we have an entire acquisitions department that helps them value.

Pete Neubig: That's another value add. If I am looking to buy more property management companies and somebody wants to sell inside the PMI, it's not going to even go to the public. It's going to go inside.

Steve Hart: It goes to our inside community first. In fact, some of our largest franchise operators, they have just purchased other PMIs as that owners wanted to exit. And we're not talking discounted exit prices. We're talking market prices. And they're able to exit when they want, how they want. And our franchisees love buying these things up.

Pete Neubig: And corporate helps with that whole process of the sales process?

Steve Hart: We help value their business. We don't help them finance that acquisition, but we help them through that process. And we have resources for the franchisees to accomplish that.

Pete Neubig: Yeah. I think that's one of the biggest misconceptions. People think that once I'm in a franchise, I can't get out. I can't sell. And you just disproved that one.

Steve Hart: Same as owning your own business. You can exit the franchise. You can sell your franchise. You can transfer your franchise agreement to a son or a brother, if you want, and let them operate it.

Pete Neubig: So can you share an example of a franchisee, maybe one comes to mind? I know I'm putting you on a spot here, who's really changed their trajectory since joining. Maybe you had somebody that was stuck at a couple of hundred doors, but once they got into the PMI family, now they got Trent behind them, they got the systems, and now they're at four or five, 600 doors or something like that. Anybody come to mind?

Steve Hart: Yeah. We have a whole list of these, again, we call these conversion franchise partners that have converted their business from an independent brand to PMI. And I won't use a name, but man, we have some great success stories. I love this question because we had a franchise partner come in about three or four years ago, and they'd been in the business for 10 years. They'd just been stuck, literally just stuck in their growth around 150 doors. And for 10 years, they just could never scale it. Sometimes they get to 180 and then they go down to 120 and they just kind of were stuck in this process of trying to get to that more strategic level operator stage. And your listeners know, 120 doors is that death zone where you're not really making money. I mean, you might be making- Yeah.

Pete Neubig: And you can't hire people because you're not making really that much money.

Steve Hart: It's that tough, tough stage in property management. And so this operator came in and and converted their business to PMI. And immediately, we didn't add a pillar. We just kept them in that residential pillar that they were in, but we added marketing strategies that they weren't doing. We added coaching to motivate them to do things that they didn't want to do. We added accounting. This conversion I'm talking about had some pretty bad accounting practices that were hurting their profitability. And we helped them look at their P&Ls and recognize what they were doing wrong and what they could focus on. And within the three years, this partner is now over 600 doors. Now, I've got a list, Pete, dozens of franchisees that have the same model. And they love being part of something that is bigger than just their little independent brand that they were growing before.

Pete Neubig: You also have a yearly conference as well. Talking to Trent, I heard that you guys have the yearly conference. It's PMI Summit.

Steve Hart: Yeah.

Pete Neubig: But you also talk to the franchisees monthly, weekly, and even daily. Yeah, we do. You can get as much as you want to put into it. You can get as much out of the franchise as you want.

Steve Hart: Yeah, exactly. We've got all of these great resources for franchise partners to gather, get together. You mentioned the big one, PMI Summit. We do it at the end of September every year. And it changes locations. We want to bounce it east, west coast, central, south. So the franchise partners don't have to travel as far sometime. But we'll bring in 500 people to these annual conferences. We bring in all of our vendors that we work with and all the different pillars. Our corporate team will come in. We'll bring in guest speakers, just like being at Naropa National and Broker Owner. It's the same type of concept. But this is a group of people all wearing the same brand. And our vision as a brand is to become the world's premier property management brand. Now, what that means is every one of us, all 450 and growing, have to scale. We have to step up our service. We have to elevate the way we're doing property management now. So these gatherings, Pete, turn into all these owners that are wanting to improve what they're doing. And they can go to all these breakout sessions and learn mostly from other franchise operators. We're teaching each other how to do this business and scale and grow their business. We do that annually. We have quarterly events. Just last week, I was in Southern California. Fifteen of our franchisees in Southern California on their own efforts gathered together just for a little lunch and just to talk about what's working, what's not working, and how they can help each other out. And I popped in for that lunch just to celebrate with them. And that's the thing I keep mentioning. We call it community. It's just so invaluable. And that's that part of property management that I think gets overlooked. That's what NARPM does well, is it creates a good community for these property managers that they need. It's a tough business, and it's even tougher when you're alone. And so I love that NARPM provides that. PMI is like that. We don't compete against NARPM. In fact, we encourage all of our franchise partners to join NARPM. But our communities, it's a level, if you will, that's almost deeper because we carry the same brand and we're working for that same goal of elevating this brand nationally. So when a investor has a successful experience with PMI Park City, they contact PMI Aspen for their vacation rental there too. And that's what we're talking about, just elevating a brand nationally to help everyone out.

Pete Neubig: Yeah, I think the whole mastermind thing, it's becoming itself a business. So like people are paying money to be parts of mastermind. Like I was part of something called the Hampton Group, pay $9,000 a year to be part of that group, right? And so again, that's another value add-on that there's no extra cost for that, for you guys to create a mastermind group with 450 something proprietors where you're in the same industry too. So it's invaluable.

Steve Hart: That's our vision, and it's a real simple one, but we found it's hard to achieve because of our industry, property management's tough. Our vision is to elevate to that level. Can you imagine a national property management brand where we can do national marketing campaigns, just like REMAX or just like Chick-fil-A does, but for property management? And that's when we're able to help our owners really scale the value of their business. And that's what we're pushing for. We've got a long way to go.

Pete Neubig: I gotta tell you, what I love about it is, you know, I don't have to become the marketing master. I don't have to become the sales master. I just need to master the art of property management. And then PMI basically helps me with the marketing by having the website, by doing the marketing, you know, in conjunction with me, by having the salesperson like Trent, you know, training my sales team, and then having that plugged in community. All right, we're up against it, Steve, but actually, let me ask you- We'll get you back on. How's that? We'll get you back on. How many states are you guys in, as far as having franchises?

Steve Hart: We're in, I think, 47 or 48 of the 50. We don't have a franchise in Alaska yet. I think we're missing West Virginia, but I think we're in almost every other state, but we're looking for more partners. We're looking to expand. So, you know, if anything that I've talked about resonates with any of your listeners, man, we'd love to talk to them about what their needs are, and what's hurting them from scaling their business to the next level.

Pete Neubig: Which is a great segue. If somebody's interested to learn more about PMI and the franchise, where do they go?

Steve Hart: Hey, if any of your listeners want to see how we're scaling things here at PMI, just head to PMIFranchising.com. PMIFranchising.com, or our corporate site is PMICorp.com.

Pete Neubig: And if you're listening to this and you're not an NARPM member, shame on you, go to NARPM.org, or give them a call at 800-782-3452. And if you are in the market for a remote team member, go to vpmsolutions.com, or email me directly, pete@vpmsolutions.com. Steve, thanks so much for being here today.

Steve Hart: Thanks, Pete, appreciate it.