The Practice of Property Management Profitability

Summary:

You may recognize today’s guest on The Property Management Show podcast. Steve Crossland is joining us, and he gave a speech at PM Grow Summit 2021 about the ABCs of property selection and portfolio selection. (by the way – if you’d like to watch that talk, and the rest of the recorded content from PM Grow 2021, head over to 2021.pmgrowsummit.com)

Today, he’s talking about the practices, mindsets, and habits that property managers should have to ensure their business is profitable.

Key Takeaways:

* Property management profitability is a mindset and  a practice, you can cultivate as a property manager

* Profitability practice starts with knowing your Financial Freedom Finish Line

* Stick to your practice, trust in the strategy you’ve laid out to get to your goal, and live within your means as your wealth grows over time

* Steve’s profitability practice is to limit owner decision-making in order to provide better service to his tenants

Property Management Profitability as a Practice

Property management profitability is more of a practice than an end result. It’s similar to nutrition in that it has to be part of your day-to-day lifestyle and mindset. We asked Steve to speak about what profitability as a practice means for the property management industry.

It starts with a personal financial goal.

Ask yourself where you want to be in five years, 10 years, or 20 years. At what point do you want to cross what Steve calls the Financial Freedom Finish Line?

The Financial Freedom Finish Line is the point at which you have enough assets and money and rental income to quit working forever and not run out of money. It’s the point where your wealth produces the income you need to live.

Everyone should start with that.

You’re starting with the end in mind, and that’s often a big jump for people.

But, if you’re 25 years old and you know you want to retire at the age of 55, with a net worth of $3 million in today’s dollars, you’ll have to do some math. Compute out into time with inflation what that number needs to be when you’re 55 (or whatever age you pick). Work backwards to figure out how much you have today and how much you have to add each year so that when you do reach the finish line, you’ve done what you set out to do on your financial journey.

That’s where you start.

For Steve, the practice of building wealth is just doing some numbers. It doesn’t have to be complicated. In fact, he first wrote those numbers out for himself on the back of a napkin.

This strategy has informed his property management business. It’s why he never wanted to be a 2,000-door company or a 1,000-door company or even a 500-door company. At 100 doors, he got what he needed to be on that path he had set for himself.

If you’re feeling a financial bottleneck that’s preventing your company from becoming profitable, check out our episode with Daniel Craig about Bottlenecks to Property Management Profitability.

Establishing an Ideology of Profitability

Steve remembers listening to a finance guy on AM radio every Saturday when he was younger and driving around, and he absorbed a lot of what the expert said. Steve doesn’t remember who it was, but there was one thing in particular that stuck out. The finance expert said never borrow money to purchase a depreciating asset.

That idea essentially means: it’s a bad idea to borrow money for things like furniture and cars. If you can help it, those things should be paid for in cash. It’s okay to borrow money for things that increase in value, however, namely real estate.

Steve moved forward with this philosophy and never bought a car that wasn’t at least 10 years old and ...