These tips will help you figure out how many properties under management your real estate agency should take on at one time.
The fastest way to scale the property management side of your real estate agency is to purchase a rent roll. This approach saves your team from constantly being in sales mode and working around the clock to onboard rental property owner clients one at a time.
When you start the process to buy a rent roll, one of the first decisions to make is how many properties under management (PUM) you want to have. The answer depends on a few different factors.
Calculating the magic number
Figuring out the ‘sweet spot’ of PUMs for your agency comes down to your capabilities and your goals.
Headcount and team structure
In the past PMs have struggled once they reach 150 PUMs however, since COVID and the Victorian legislation changes in 2021, that number has dropped. Agencies with outsourced support and who take advantage of the latest technology and innovation in the real estate space can manage 150-200 PUMs and stay profitable. Agencies who do not have well run property management teams will find 100 PUMs difficult to manage.
However, with technology and offshore employability it is now possible to boost portfolio count. You may employ one local PM and an offshore individual to work alongside them, giving you two people to manage a larger portfolio of up to 150 or 200 properties together at only slightly more than the cost of an Australian headcount.
You can give offshore team members responsibility for administrative and more basic tasks, freeing your ‘on the ground’ PM to spend more time interacting one-on-one with clients. This will take some adjustment so people can apply the right systems and work as a team. There are also costs associated with offshore team members such as the office they will work from, the tools they will use and any training you provide. You may even need to budget for international travel.
The biggest mistake you can make is purchasing a rent roll and not having enough people to provide the right level of service. If you’re buying a large roll and don’t have the headcount to manage it, you will need to explore either bringing PMs across to your business or recruiting quickly so you can hit the ground running.
An exception to the standard PM/PUM ratio may apply if you are purchasing a rent roll with a number of properties in one building. The similar properties and the geographic proximity may allow you to succeed with a higher unit per manager.
Revenue and profits
Right now, rental yields are at a peak in Australia, with Victoria experiencing all-time high rental costs and all-time low rental vacancies. As reported by Smart Property Investment, Melbourne’s median rental asking prices rose by 9.6 per cent to $570 per week in the year leading up to March 2024.
This is good news for anyone who owns a rent roll because it delivers the breathing room to provide better service while still generating healthy profits.
The size of rent roll you buy is likely to depend on the profit margins it can generate. A smaller collection of premium properties may prove to be more profitable, or you may find a larger rent roll is the best move to be cash flow positive from the start.
Before you make a purchase, work with your accountant and rent roll broker to understand exactly how your investment will start to pay off. Factor in all the costs of overseeing your rent roll and do some financial forecasting. This will help you understand the right number of PUM to purchase.
Don’t forget about strata rolls and commercial rent rolls
Purchasing contracts to manage individual properties will give you access to property owners and renters but a strata roll can connect you with plenty of new PUMs as well. The role of a strata manager is different from a rent roll manager but it can open the opportunity to be the provider of choice when it comes to property management.
See more: Are strata rolls a growth opportunity for your agency?
There is also the potential to explore purchasing a commercial rent roll. Again, this can give you a new source of revenue but you will have to find individuals with specific skills to manage it for you.
See more: Commercial property portfolios are changing
Talk to an expert
If you know you have the ability to manage a new rent roll, your decision will come down to the actual numbers. Work with specialists to calculate out how much your investment will deliver over time and how many PUMs you need in order to be profitable in the long term.