A Story of Successful Transition: Departments to Portfolios

A Story of Successful Transition: Departments to Portfolios

In 2015, Service Star Realty switched from a departmental property management style to a portfolio-based management style. It was a very successful step for us financially and in the free time it afforded to us, as the owners. The secret of our success was due to thorough preparation and the prompt execution of our transition

Such a massive transition takes time and effort, so it may seem strange that we wanted to undergo so much work. It made sense for us because we wanted to be less involved in the business and have more time away from it. We like to travel and wanted more time to visit new places. Even when we are at home, we prefer to visit our office only once or twice a week, so that we can spend time gardening, cooking, and going to the movies and such.

During the company’s early growth, we spent years defining and redefining the roles of each staff member as we acquired properties and hired new help. This led to our exceptional early growth, but also led to internal conflict about employee responsibilities at each weekly staff meeting. We wanted to create a quieter office that could be self-reliant as it ran itself. After talking to several fellow NARPM^® Members at networking events, we began to believe that giving one property manager the full authority and responsibility over a portfolio would help us achieve those goals. In addition, it would increase the level of customer service and production.

Service Star took the giant step of converting from individual departments to a portfolio-based model last November. It took four months of preparation, and we had to do our research in advance. Beforehand, we flew out to San Antonio to meet with property management offices and fellow NARPM^® Members. We had previously met Brad Larsen, RMP^®, and Kevin Knight, RMP^® MPM^®, at Conferences.

Kevin’s company is exceptionally well organized and is a model operation. Likewise, Brad had converted from departments to portfolios just four months earlier. Brad’s personal experience provided invaluable insight and information for us.

With their input, we defined our goals. We wanted an office where property managers would have full responsibility over their portfolios. Virtual assistants would help us streamline the support staff and create a higher profit margin. Meanwhile, the owners would be able to spend less time intervening and managing the company.

The planning process began by evaluating where we could employ virtual assistants and the types of tasks that they could be given. One of the best things about virtual assistants is that they do not require employee payroll tax or additional office space and equipment. We would simply file a 1099 and hire virtual assistants as needed. This would allow us to step our labor force up or down, as needed.

As we went through the work processes, we realized that virtual assistants would be able to take over everything that our leasing agent and application department were currently doing. Beforehand, the leasing department had been our biggest headache because it was hard to scale to size and had constant staffing challenges. We decided to take the plunge and have all of our leasing inquiries answered by virtual assistants.

Our applications would also be processed out of house. We used a NARPM^® Affiliate Member, specializing in these services, to handle both of these departments. When we were ready, two employees would be let go. To make sure that the new systems and communication channels were functioning perfectly before we let go of staff, we kept our current employees until everything was perfected.

Once we delegated tasks for support staff, we had a list of remaining tasks for our property managers. Basically, they would be in charge of owner communication, tenant communication, new property sign ups, writing advertisements, signing leases, the move-in process, 30-day notices, lease renewals, move-out notices, and owner cancellations. Applications, leasing, and maintenance would be handled by virtual assistants and support staff. To keep everyone on the same page, I took up the challenge of making an all-inclusive employee manual for property managers to use as a reference and a training guide.

Now that we had defined the tasks for the property managers, we had to determine how many properties each manager could reasonably handle. This step is where networking came in handy.

Through talking with fellow NARPM^® Members at conferences and events, we learned how many properties their managers could handle. We estimated that property managers, with support, could handle 150 to 200 properties. For our organization, would need three property managers. Our current tenant coordinator and accountant were both interested in the new role, so we enrolled them in school and waited for them to get their license. In the meantime, we hired a third property manager to help out until the others were done with school. We also found a new accountant.

After the staffing was figured out, we had to determine the pay structure and orchestrate the sequence of events needed for a smooth transition. We could give the property managers a salary, commission or bonus structure. Out of the many options, we decided to place our property managers on a commission schedule where they would receive a percentage of any fees that they would collect for our company. Our goal was to leave no fees uncollected. All late fees would be enforced, and notices would be sent out. Plus, extra services would be offered to owners and tenants regularly. By paying the property manager a percentage of the fees, we were able to get them motivated in selling and collecting the fees.

To streamline the process, we made a list of ledger codes that the property managers would use to get their percentage. We worked backwards mathematically to calculate the exact percentage of the fees that would be needed to make up the Property Managers’ annual earnings. From there, it was basic math.

We just had to figure out the annual income they needed, the number of properties they managed, and work from there.

The Grand Plan of Implementation

Month One: A new property manager was hired, as two employees returned to school for their licenses.

Month Two: We hired and trained a new accountant. We let the application department go, and the new property manager took over processing applications until all of the changes would be completed. The new property manager was also responsible for miscellaneous tasks, while the current accountant trained the new accountant. While this made us overstaffed for a couple of months, it ensured that our customer service level would remain consistent.

Month Three: We created an employee manual and figured out the details with the new virtual teams for applications and leasing calls. The applications team was taught our expectations, and we designed a script for the leasing answering service. At the same time, we set up a system with another NARPM^® Affiliate Member, so that our leasing department would be automatized through self-showing. We ordered lockboxes, learned how they work, and put all of these tools in place in a single day to replace the leasing agent. While we were ready, the leasing line was busy, so we had to wait until the fourth month for the line to start taking our calls.

Month Four: Our goal to start a portfolio-based company was set for November 1. In this last month, we dialed in the details, such as individual fax lines and an updated website. We got each employee a new business card and a cell phone that they could use for calls when they were at properties. The hardest part was determining the breakdown of which team member received which property. We had to make sure that they received properties that were geographically convenient, but the properties also had to have lease expiration dates that were staggered throughout the year. Finally, we listed the addresses in each of the three portfolios.

November arrived unbelievably fast. Sitting in the conference room, we went through the written plan to make sure everything was perfect before we put it into action. Properties were earmarked in the new portfolios, and the property managers returned to their desks to claim the buildings in our property management software program. An hour later, this step was complete. We sent out a letter introducing the new property managers to the owners and two handymen were sent out to change the lockboxes on the units to SMJ lock boxes. By the time the handymen returned that evening, our SMJ system was ready to go. We forwarded the leasing phone extension to the virtual assistants and redirected our alerts in the software system to the application team. The most exhilarating day in the history of Service Star Realty officially came to a close.

The Results

The first three months were spent monitoring the property managers and virtual assistants. Initially, our weekly meetings lasted for up to three hours, as we tweaked their working relationships. After three months, the office was quieter as each individual became self-sufficient. Each property manager was able to look after their own properties according to the parameters we set in their new employee manual, and inter-office communication occurred only by email.

Ultimately, we saved the cost of an entire employee’s salary by using virtual assistants. Other than saving money, we actually increased our income. Our property managers were more motivated by commission, so they found ways to sell fees and services, which propelled our company profits to levels we did not expect. Best of all, we were able to go on a 10-week vacation in Europe this past summer. While we traveled through Spain, France, Germany, and Hungary, we did not spend a single moment working. After starting Service Star Realty five years ago, we had finally reached our goal of more freedom with the portfolio style of management.

Current editions of the award-winning Residential Resources magazine is sent eleven times a year to members. Join NARPM to receive all of the benefits of membership and receive current editions.

Residential Resources: December 2016 Issue: Volume 27, Number 11