After a year and a half of uncertainty, growth has once again become a topic of conversation amongst those in the property management industry. One of the most effective and lucrative ways to achieve growth is to expand into new locations. Of course, it’s not as easy as simply landing a new client in a different city or region. This type of growth must be strategically planned in order for it to be sustainable. Below, our experts weigh in on the best steps to enlarging your portfolio by location.
Determine your expansion plan.
There are three main ways to expand a property management portfolio to include properties in new areas. The first and easiest is to simply acquire new clients in the area(s) you are targeting. The second option is to purchase or partner with another existing property management firm that is already established in the location(s) you are trying to reach. And the third option is to set up a franchise and bring on other property managers to work under your brand. (Obviously, the last two are more complicated and costly, but they should be mentioned nonetheless.)
Do your homework.
The next step in the expansion process is to determine which areas would be best to focus on. Obviously, you don’t want to end up in an area where the market is saturated, or where the properties are undervalued. It’s also a good idea to evaluate whether the properties and/or area you are considering will fit well with your current business model. Keep in mind that you may need to adjust your marketing and other business strategies to better align with the new location. Do your research.
Assess your current capabilities.
Another important point to consider is whether or not expanding to new areas will require you to make some internal adjustments to how your business operates. For instance, will your current staff be able to handle the additional workload that will inevitably be incurred? What about your infrastructure? Is it time to move to a bigger facility?
Now’s also a great time to consider the various tools that are available to help in this area. For example, automating with property management software can enable your existing team to do more with less, possibly negating the need to hire additional staff while simultaneously allowing you to go paperless, reducing the size of office space you’ll need.
Determine your budget.
Adding properties to your portfolio should ultimately increase your revenue, but there will inevitably be some investments required before you start seeing that return. Before taking the leap, take a close look at your current operating margins and determine how much those will go up as you start to expand.
Calculate the necessary budget required to grow your team, purchase more equipment, invest in additional technologies, etc. Obviously, the projected income from the expansion should exceed any anticipated expenditure, otherwise it won’t be worth proceeding.
Assess and adjust as needed.
The last step should occur after you’ve successfully moved into new locations and grown your book of business. This is never a ‘set and forget’ kind of thing. Just because the new area you’ve expanded into proved to be a lucrative investment a year or two ago doesn’t mean it’s still profitable today.
You should regularly evaluate your portfolio and assess your costs and profit margins to ensure that you’re still on the right path. At certain points, you may find it wise to move out of areas where profits are down and focus instead on other locations that would be a better investment.
If growth is on the plan for 2022, expanding into new locations may be a worthwhile strategy. Just be sure to do so in a way that is smart and strategic. The steps above should help you formulate a plan that will put you in the best position to grow successfully.