Prepare for and Manage any Recessionary Threat
Quite a few property management people feel rental property ownership and management is a recession proof business. That’s a key attraction for property management startups.
Rent prices tend not to fall much, cash flow is consistent, demand remains strong, housing supply is constrained by the governments (NIMBYs too), and there’s tax benefits to boot. It’s a wonderful life!
Yet recessions do happen and they create surprises. They spawn changes in business models, pricing models, digital solutions adoption, staffing, tax strategies, and how properties are maintained. In this post, we discuss the challenge and opportunity for property management companies.
Seeking the Best Management Tools
Staying current with industry trends can help you deal with economic challenges. Digital solutions are the first goto resource for managing any economic or business challenge. We got through the pandemic recession, and we can beat this one too.
But Underlying Fundamentals are Positive!
Will a recession kick in this year or next? No one seems to be certain.
There are a number of experts who believe there won’t be a downturn. RSM chief economist Joe Brusuelas on Yahoo Finance Live said “Right now, if you take a look at the data, it says a 15% probability.” And a recent survey of CFO’s by CNBC CFO shows a 68% probability by 2023 yet not one CFO said we would escape unscathed.
Robert Hahn speaking in a NARPM podcast, says current inflation is pushing a lot of money into the rental property sector. It may be out of economic turmoil, could come new opportunities.
Other experts cite strong economic fundamentals and say we’re not in the same dangerous waters as 2000 or 2008. And if the Republicans come into power in November, they will likely move to increase supply (thus lowering material costs), resume tax breaks and lower business taxes. But we’re a long way from 2025.
One note about professional management providers and property management systems is that they’re designed to reduce future costs. This is one benefit not promoted well. Users of ManageCasa™ for instance enjoy the confidence and optimism of what might be termed “preventative management.”
How to Prepare for Tighter Property Management Budgets
Landlords care about your efficiencies, capacities and reliability.
Landlords seek more efficient property management companies who take cost-effectiveness seriously. Landlords will explore how you manage the budget and how efficient your operations are. Showing them your digital management tools and strategy is the way to impress.
16 Ways to Recession-Proof Your Company
- refinance assets and equipment now to avoid fast rising interest rates (inflation won’t be tamed for some time)
- adopt and use ManageCasa™ to streamline, control and automate workflow — practice now so you’re proficient in 2023/2024
- use easy to learn and utilize software to ease any potential staffing issues (complicated software that’s hard to learn is no asset during tough times when you need to lower labor costs)
- actively market your brand and services to attract new and high quality landlord leads
- adopt digital solutions such as online unit tours, online rental applications, online leasing, and more virtual property management tools
- don’t raise rents and consider lowering them to stay competitive
- perhaps drop landlord accounts with major work challenges, razor thin or negative margins or renegotiate with them now
- keep your marketing website optimized and social media accounts fresh and updated
- be ready for higher churn and turnover costs — streamline/automate to cut workloads
- focus on your key geographic markets and win those first
- encourage tenants to sign longer term leases — and ease tenant churn
- avoid big capital expenditures on equipment, renovation, flips, repairs, upgrades, etc.
- focus on maintenance and repair services most likely needed in the next two years (landlords won’t spend on the others)
- use your reporting tools to communicate future trends and action plans to landlord clients
- focus more on cheaper B and C class properties where more work will be required from your property management service business
- focus on building a strong tenant experience to keep tenants under lease
It’s All About Optimization
The point of preparing for a possible downturn is to open your mind to improving your business, something you might not do otherwise. Think of it as a blessing.
Please do check out our property management blog for more tips, insights, news and trends that keep you on your toes. 2023/2024 might not be a bad time in the rental property business. Yet, we don’t know what 2025 will bring. Political battles could bring danger at any time (rent controls, import restrictions, high interest rates, high taxes, migration out of high cost states, etc.)
Choose a modern, cloud based affordable property management solution and you’ll be more confident you can manaage any economic downturn.
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