Welcome back to The Property Management Show. If you joined us on Part 1 of this podcast with Ray Hespen, you learned about why it’s important for property management business owners to pay attention to churn. You need to do more than pay attention – you need to measure it.

We’re back to talk about how you can prevent owners from leaving in the first place.

If you’re not measuring your churn, you don’t know how big of a problem it is.

Owners have different goals. Whatever your business goal is, owner churn should be a KPI. It impacts your growth and profit. We cannot think of a single property management strategy that would not need a metric measuring churn.

So, who should measure it?

That depends on how your property management company is structured. Ray says that whoever is responsible for owner engagement after the sale should ultimately track owner churn.

You need an ideal customer profile. This is something that gets talked about a lot. Who is your perfect client?

Churn from anyone who does not fit that profile is likely okay. Churn from perfect clients is not okay.

It’s important to keep track of who you’re losing and who you’re keeping. You need a scorecard to show you whether you’re losing those perfect clients or others that you took on knowing they weren’t a perfect client. Then, you’ll need to decide how much you’re willing to invest to recover the clients you lose. It may be worth it to recover the perfect clients.

In Part 1 of the podcast, we talked about two things that impacted owner churn:

The third thing is resident satisfaction. There’s a direct correlation between lease renewals and owner renewals.

This makes sense and it matches the maintenance indicator. Residents who are not satisfied with maintenance will not stay in a property. When lease churn is higher, owners will reconsider their property management relationship.

Sometimes, property managers worry about providing great service to residents because they don’t want owners to believe that it’s at their expense. That’s crazy. Owners should want you to treat their residents well.

When you retain tenants, owners save money. When a resident leaves a property, here are some of the things that happen:

And all those costs are passed to the owner.

Retaining a resident for five years requires resident satisfaction. It’s worth it to you as a property manager because it helps you keep your owners.

If you want to keep your property management company’s churn low, you know you have to measure it first. Then, you have to think about these three specifics. There is probably a way in your accounting software to capture this data.

These are the metrics you need when you’re fighting against churn.

Get the numbers and then make a plan. Tell your property managers that you want the number of owners enrolled in preventative maintenance services to be 30 percent higher by the end of the year (this is an example). You’ll find it addresses all three of the points that we made about why property owners leave their management company.

You get only one shot at an investor. We can’t invent new investors for you to chase down. Make it count and keep them as long as you can. If you can implement programs that reflect what we know, you can see some changes in your owner churn numbers.

If you lose an owner and you know that you did everything you could to keep them, let that owner go in peace. When you can look at their account and see:

You know there’s nothing you could have done to keep them. Their departure was totally outside of your control. It has nothing to do with what you’re doing for them.

Zero churn is not realistic.

Not everything is in your control. You cannot save every single owner, so focus on the factors that you can control with the owners who can be kept.

Consider this scenario: an owner dies and the trust decides to auction off the property. That’s going to be some churn and there’s no sense in trying to fight against it. You won’t convince the family’s trust to stay with you. You’ll waste your time and resources. Set goals and targets that are reasonable.

According to Ray, PropertyMeld keeps about 90 percent of their clients, while the industry standard in software is to try and hit 80 percent. Saving everyone is not a good use of resources. Be strategic.

Property managers need to establish a healthy amount of churn.

Other interesting data points have Ray and PropertyMeld digging a little deeper into some areas of property management and owner churn:

This could be a battleground in the future. Owners seem to be stomaching the costs right now, but there’s no telling where the next year or two will take us, and this is a crazy real estate market.

You have some new knowledge and insight into your churn numbers and what may be driving them. So, what are your next steps for your company?

We have them for you:

Don’t do one. Do all of them.

PropertyMeld is presently beta testing a PropertyCare Plus plan which builds a catalogue of services for owners. They can choose what they want, whether it’s annual HVAC clean up, gutter cleaning, semi-annual inspections, etc.

Preventative maintenance, we know now, is critical. It’s also a logistical nightmare for property managers. Ray and his team are taking a stab at making it easier.

These insights can help you hold onto more owners. If you’d like to talk about them or anything related to your property management marketing plan, please contact us at Fourandhalf.

Contact us at Fourandhalf with any questions you have about our conversation with Daniel Craig of ProfitCoach.

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