Annual Company and Market Update from the CEO, 2021 Another Insane Year in the Books

Dear Prized MoveZen Rental Investors of 2022,

2022: The Hardest Year in Our 15+ Year History. Victory Property Management Evolves To Become MoveZen, a Dynamic Response To An Inflection Point

Thank you for choosing us to manage one of your most important assets for another year. The reason for the delay in our annual update this year is that it’s been a tough one and our staff has grown by a large amount, so now our communication and understanding of their needs have taken a more important role. This business of course would be nothing without them, and we couldn’t deliver phenomenal service and results.

Late 2021 and early 2022 for us were largely focused on making sure we were in tune with our staff in every way. The staffing challenges many companies are facing are well documented and small businesses were hit the hardest since they usually have much fewer resources. Another astounding fact we read this year is that even pre-COVID, property management companies had a 33% per year turnover rate. That’s incredible and we can only imagine what it is in today’s climate.

Fulfilled Staff Are Crucial to Delivering Amazing Results

For those who’ve been with us a while, you know that our company invests a lot of time, money, and concern into our staff specifically to avoid turnover. Still, this is an extremely demanding company to work for and property management is a very tough business, especially post COVID. Therefore we have constantly found ourselves in a situation where hiring is fraught with risks and we fail often, but once we do find a good fit they rarely leave. Only the best advance, which means we have to turn over a lot of our new hires to get enough people in the door to truly assess if they are willing to commit to the work ethic we demand. It’s rare for small businesses to be as demanding as we are, and no matter how well you vet people it’s nearly impossible to know in advance if they’re truly up for that relentless challenge

Formal Notice Topics

Below we discuss the market, and our general company outlook in detail, but we need all owners to review this itemized list. We’re making some drastic changes so much of what’s below will be of importance, but this link highlights major issues and changes all owners must read

Laser-Focused on Quality

Managing homes got a lot tougher in 2020 and has continued to get substantially tougher each year. Property management was already a difficult business. We’ve seen more major plumbing and flood problems in 2022 than in the preceding 10 years combined, just as a huge portion of our vendors retired.

You might expect that, but you wouldn’t expect our major pest problems to triple since 2019. Everything is more of an issue than in the past. To be as demanding as we are and growing in today’s hiring environment is getting to be impossible. At least with our resources. So much so that we’ve dramatically cut back on hiring, growth, and how we approach our business in general. We are restructuring everything we do to avoid hiring as much as possible. We’ve dramatically slowed our growth, and we are deeply committed to quality across the board. Quality properties, owners, strategies, and above all residents.

We expect rental rates for our homes (our rates are dramatically above average) to fall approximately 10% by the end of August 2022 and continue lower into March. It has already begun in some markets, particularly Charlotte.

This Rent Growth Can’t Continue

We always see a dropoff during that period, however, this is likely to be at least twice what we normally see on average. We also probably won’t have an off-the-charts spring as we have the past few years, so 12 months from now rents could be 5-10% lower. That isn’t enormous, but in the one or two years we’ve seen a slight decline it seems to cause owners an awful lot of pain and stress. Even a flat market when you’ve been banking on 10% increases for years starts to feel pretty bad. When rents fall, even slightly, renters move at a feverish pace

We Can Run Like Motel 6 or Like Hilton/Marriott

Circling back to our note about quality, a constant theme from here. In a tough market, there are winners and losers that make up the average. We’ve had an obsession with quality for all of 2022 and most of our homes have always been far above average. However, homeowners that have purchased something cheap to buy either due to condition or location will likely find out why that was the case in 2023.

Some have paired this with something unique such as a home in much better relative shape and should fair okay. If though you purchase in a value area plus cut corners on the updates / repairs that won’t work well anymore. Those who fail to keep their homes in solid shape and cater to great tenants will pay the price going forward. Marginal locations, homes, and rental strategies are going to suffer for a year or two and it will probably be painful.

The World is Playing by New Rules, Especially in Housing

Polarization seems to be present everywhere, and a recession rental market will be no exception. There will be no shortage of renters but most will present serious risks of some sort. They also tend to pay more and accept less, a tempting combination and a slippery slope. In a strong economy, those risks are manageable, but they’re amplified in tough times.

Great renters have great finances for a reason and it’s because they find value, order, and fair treatment. They fundamentally don’t care for disrepair so homes that cut too many corners simply can’t secure them. We want to part ways with owners who want to pursue these types of strategies. We have long said don’t blame us if we don’t drive the strategy and now we’re doubling down. Not only are we advising against this approach, but we’re also actively removing them from our program.  

We Are Taking a No Exceptions Approach to Running a Quality Operation

Again, we can’t afford to pay people to inefficiently manage rentals while also damaging our reputation. When we play these games (not by choice) we never fail to have an irate resident and owner in the end. In this new environment, that makes no more sense, if it ever did. We encourage you to follow us in our committed search for quality.

The modern rental market is much more like the hotel industry than the pre-2008 long-term rental market. The stakes are high in every way, competition is fierce, and the people with money and credit are demanding. As we see it we can take one of two courses going forward, we can run a Motel 6-like model and attract Motel 6-type customers, or we can run a Hilton/Marriot-type model, and attract those types of customers. We are all in on running like a 4-star hotel. Not overboard, but definitely toward the high end in all that we do. That means we get homes in solid shape before showing, and especially before move-in, because the first impression is crucial as any good hotel manager will tell you.

Cutting Corners These Days Usually Backfires

That means we probably need to touch up clean every home after showings and before move-in. We already have to sweep up bugs in most instances. That’s something many owners don’t want to pay for. Hilton-type renters demand it, Motel 6 types don’t. For us, it’s a no-brainer. We’ve taken this substantially further now with our move-ins by providing HVAC filter install/delivery in a nice package along with a letter and keychain. We’ll likely further improve the move-in experience to cement the relationship at that crucial moment. In general, we plan to align ourselves with owners who agree with us on the following.

Can’t Milk a Stone

You can only consistently find great renters if the home is either in great shape, noticeably cheaper, or in a great location. If one is lacking the other two seriously need to come into play, especially if the location is marginal. A great location can overcome a lot but why not take care of a home in a great location these days? If you don’t deliver value in some way you will not find great tenants no matter how good you are.

The Golden Rule Has Proven to Work Very Well

If they take good care of the home (by renter, not owner standards), pay well, and don’t bury us in maintenance, then we think it’s only fair by our golden rule philosophy not to nickel and dime former renters on every small thing, because our business will be here 10 years from now. We know our reputation is crucial to continue to attract the best quality residents, just as it is with a Hilton Hotel.

That means a fair amount of heavy tenant wear adds up over time. We simply think the trade-off for being hyper-aggressive on deposit charges would far offset the mostly massive rents and speed we enjoy these days. If handled well and in bulk, we can get the repairs done more efficiently to the benefit of all.

Hyper-Aggressive Deposit Charges Will Dramatically Affect Our Ability to Rent Homes

Even with our own rentals, and those of our closest friends, we firmly push them to accept some tenant damage costs as part of doing business, and a minor offset for nonstop rent hikes. It would hold even more true in a bad market with fewer quality renters available. If you want rare Hilton-like renters you provide consistent service over the long term, and if you want Motel 6-type renters then you can cut a ton of costs and customer services.

We’re getting out of the Motel 6 business. Part of the reason, though we’ve never agreed with that approach is that we have to pay the Motel 6 manager a very similar salary to the Hilton manager in 2022. We also expect a serious recession soon, and just as with the COVID rental saga quality renters will show beyond a shadow of a doubt why they’re the better investment. About 1% of our owners (tenants we chose) were saddled with serious non-paying renters in 2020-2023. That’s quality at work.

See this article written in 2015 in preparation for what we are seeing today and more on why we expect rising rates to usher in a recession here

Don’t be a TikTok Landlord

We’ve all seen the news and demonization of landlords. Much of that pertains to Wall Street and is more than fair. Unfortunately, mom and pop type investors (by far our top customer) also often get swept up in the fray.

Just as we run a type of model, landlords do as well. Most of you defer to our model and we usually get great results, and even in the worst cases almost always above-average results. We always take good care of good tenants. Even now, most of our owners can honestly look people in the eye and say my property manager and I do not do those things. Yet we still get great results largely due to our speed, marketing, and lead follow up.

In Today’s Fast-Paced World Focusing On Win-Wins is More Important Than Ever

You know what slows down our ability to put a happy tenant in your place paying $60+ a day? Bickering over minor deposit charges. Win wins are rare but they are possible. Of course, most of our homes are above average and our method does not work well on the low end so we aren’t solving many of those problems, just rising above them. For the most part, our model is to keep homes in good but not overdone condition, focus improvements on durable values great renters like (not owners and managers), and take care of deserving residents in the hopes of keeping them in place as long as possible, then turning into local cheer leaders for our offerings. A large part of why we’re able to do this while earning very high average rents is because our reputation and marketing are second to none.

Reducing Turnover is One of Our Top Priorities

Great renters tend to move at least every 3 years so more often than not we can raise prices between them, not through them. We prefer very long-term residents, but the economics do get complicated after 3 years.

Just this week we had a lease fall apart due to an overzealous landlord and a $900 pet fee and they didn’t even bother to look for another house from any other company. They respected our handling of that situation so much we were able to immediately put them in another home that wasn’t ready yet. We do that a fair amount and it’s flattering.

Stock Up for the Market Ahead

We want to wrap up this broad topic with a common refrain, quality long-term rentals are one of the safest investments on earth, no question. They are not bullet proof though so you must have a hefty cash cushion (3 months rent) to absorb costs that might occur at the worst possible time. With this strategy, your rental will almost surely ride out a recession with ease, if you are also quality-focused. We already noted that those who aren’t, are going to have some regrets. Generally though, rents will likely fall, costs may go up even more despite being unbelievable already, and things are going to be bumpy for a year or two.

We do not expect a deep housing crisis. Unlike in 2008, we see buyers desperate to buy their first home, not gambling on their 3rd in 3 years. That demand isn’t just about prices, we all need a place to live. There is a deep housing shortage and housing starts surprisingly just declined significantly.

Affordable Housing Inventory is Still in Very Short Supply

Supply and demand make it impossible, assuming the economy is functioning, to see a massive decline in prices. Or a decline that lasts a long time. Housing is also historically one of the best hedges against inflation. However, the lower quality homes in the lower quality areas will find it very difficult to secure good tenants and will shoulder significant maintenance, vacancy, turnover, and eviction costs.

A K Shaped Rental Housing Market

The esoteric value won’t help much since preparedness and cash flow are what matter in tough times. We consistently see these investors get in, regret it, and get out only for the next person to misjudge that strategy as a value all over again. Going forward anything but a quality approach is likely to dramatically underperform.

Rising interest rates are an exceptionally complex topic as it permeates every facet of the economy. Should that continue dramatically from here it will surely cause major problems, but we think quality housing will be the brightest star in a very dark sky. The more rates rise, the more cash on hand you will need to ride it out to avoid locking in losses that are likely to reverse before too long.

Our Company is Evolving Quickly

Despite the absolutely brutal hiring market, we’ve experienced the past two years, a fast growth rate, and an industry with one of the highest natural turnover rates as it is, we have only lost a couple of employees over the past 6 years we genuinely wanted to keep. That’s the single biggest factor for our ability to navigate the past few years while delivering very good, consistent bottom-line results. Were we perfect? Obviously not though many expected that. However, for our basic goal of long-term, bottom-line consistency, we doubt anyone did much better. COVID has affected nearly every facet of the rental management process. Also, almost every major issue in the news during this time has played a role in transforming small business, and housing services.

2022 Trends

Staffing challenges – By far our #1 problem over the past 24 months. It’s hard for a growing small business to hire well in this environment, bottom line. Brutal and nearly impossible in fact. Contractors are an extension of this problem.

Angry and Unreasonable People Everywhere

We’ve been threatened with lawsuits more in 2022 than in our entire history combined from before. The stakes are higher now.

An odd issue where it seems a lot of people are constantly trying to eke out tiny additional profit at any cost, including taking ridiculous risks and doing unethical things.

Bullies Seem Emboldened

Lack of inventory makes some things easier, but it makes some much harder. Renters are aggressive, angry, and will not hesitate to steamroll you if given any chance.

People Tend to Change When Selling

As many of these relationships wind down, some are increasingly willing to ignore the years of important time we’ve spent together. As well as the profitability that entailed.

Again, we mention in nearly every update we’ve sent over the years, that a home that has been on the rental market a while will require a large amount of work to get it into sales quality condition, and your last tenant isn’t the one to pay for it just because you’re about to pull out of this area.

That is the nature of a simple concept in rental management accounting called straight-line depreciation, ie normal wear, and tear. It builds up over time and if it doesn’t change the rental performance we mostly ignore it. We can invest too much money while it’s a rental, or you can book profits and use them for a major efficient refresh before the sale. That’s how pros do it.

More on the fundamental reason why not even the best renter will treat your home like you

“Appliances and plumbing / plumbers, in particular, continue to be an absolute nightmare”

Shortages

Maintenance costs have doubled over the past few years and the amount of maintenance we’re dealing with has also gone up by a shocking amount. It is a massive challenge.

A huge number of vendors retired recently or took corporate jobs with apartments etc. The ones left are solid and slammed with owner-occupied larger jobs. The ones who aren’t are usually a disgrace. There is simply far too much work, with far too few vendors. Especially quality ones.

We feel we’ve navigated this minefield pretty well, but it has taken a toll. Literally, every spare minute is filled with hunting down potential new vendors and failing nearly 98% of the time. That won’t change anytime soon, but it may get worse. Repair people have a lot of options these days, and usually prefer large renovation jobs or cushy salaries with large corporations, and it shows in every facet of the rental repair process.

As Property Managers, We Truly Earned Our Money in 2021

Owners would face these same issues and may not be able to navigate them at all. Some have found success with sketchy vendors, there are plenty out there, but we cannot do that. There’s effectively a huge black market of repairpeople who work part-time, aren’t insured, and are in no way qualified to work for a legitimate company, yet owners often seem blown away that they found someone cheaper than us.

Our people must be insured, must show up on time all of the time, and must be decently acceptable to high-end renters which most of ours are. The vendors who do, charge a lot these days bottom line. The vendors who don’t, don’t. They also eventually torch you, often at the worst possible time. Remember, we’re long-term consistency oriented. Not saving $100 today because a fly-by-nighter knocked on our door. The Hilton isn’t hiring the cheapest contractors for multiple reasons.

Not Too Hot, Not Too Cold

We try hard to find value people in the middle, they aren’t the big corporations with massive admin staff that charge truly ridiculous prices, but they also aren’t unreliable either. They often have quirks we have to manage around, but ultimately do a great job at a great value. That’s an important part of our expectation to be better than our competitors. Anyone can call the biggest company in town, we manage for value, but these days that’s tougher than ever. Polarization is real in 2022, what’s largely left are the big ones and bad ones. Big though does not mean good especially these days.

Post-COVID Focus on Maintenance

We consider a major part of our role to be finding you value repairs. It is very tough, but we are doing well. However this role has grown, so we’re going to invest heavily in it.

In 2023 we hope to make a general maintenance manager hire whose job will be to support all our account managers in finding and identifying a value vendor or estimate, recognizing trends that seem to change overnight these days, and outlining helpful strategies, particularly on the most complex jobs. They’ll generally oversee that communication around expenses is handled properly, and should prove to be a massive asset. They’ll improve the entire process, and free your account managers up to focus more on marketing and logistics, and the details of great resident management.

Above all general customer service, which we have dramatically stepped up since COVID as well. We’re also making extensive changes to our after hours emergency handling, inspections and documentation, and anything else that might help us to deal with the “flood” of post-COVID housing maintenance.

Field Repair Tech Testing

Last year we hired a repair tech as a test. Hiring repair techs was as tough as it’s ever been. The decision was a response to our fear of not having any contractors to do critical work because things were so dicy. So we weren’t naive that hiring would be an easy process. It was handled as a test and failed as many tests do, but we learned a ton. We spent a lot of money on those lessons and we did that for our customers.

Now, we’ll make a management hire first, and they will oversee the next phase of repair tech hiring, hopefully in a better environment to find quality applicants. Our hope is to roll out an in-house repair program in all medium to large offices and we’ll hopefully begin that process in earnest in early 2024.

Other Companies Begin to Realize What We’ve Always Known- Great Staff are Hard to Come By

The other major factor we’ve dealt with over the past 12 months is the hiring and employment environment. Everyone knows the basics here, we just want to cover the steps we have taken to show our existing staff that we recognize they are what makes this company go round and that we appreciate the passion and commitment they bring to our organization.

Interestingly we were such a tight-knit company for so long that we never had formal staff reviews. We began that this year and things went well. It’s no secret that we subscribe to a major team mentality here, but we don’t have many meetings or formal staff engagement. That issue was highlighted more than any other during those reviews (we’ve long had phenomenal benefits). So we have stepped up meetings, but more exciting is that we’re building committees to address various company needs that were largely neglected before. Some pertain to how we can perform better for customers, and many pertain to how we can perform better for our staff. Things like improving our benefits communication (HR overall really), and light-hearted competitions that help to drive us forward, without becoming cutthroat. We expect this addition to add a ton of value to what we can offer our staff, and in turn what they can offer you.

Management by Committee Isn’t All Bad

Our first committee focused on improving the move-in experience and has so far been extremely well received by residents, which makes them happy with their home and decision, and that shows up over time.

Ethics in a Complicated Field

We’ve reached a point now where ethics aren’t as easy to properly assess as they once were, and we want to address that issue head-on now.

For example, in the past, there have been minor issues where our staff may have work done on their own home by our vendors, and would likely receive a discount, and it was not of any significance to any party. Given our growth over the past few years though we have to plan and manage on a larger scale, and that means more general rules rather than case-by-case monitoring.

We completely understand the importance of reputation. At this point, ours is hard to deny from owners to residents, to the ever-important vendors in our areas. That is why we are going to begin frank discussions on the topic as we build out a formal policy that scales with our company.

Transparency is Important to Us, As Is Efficiency

As we’ve mentioned, especially in today’s environment we do all we can to offer our staff any reasonable benefit possible, and that is simply too helpful for us to forbid. Obviously, these are complex topics. We’re starting the conversation now but will parse out policies and rules over time. At this point, serious problems aren’t possible, but we’re getting in front of the problem.

The need for a more comprehensive ethics policy was dramatically highlighted when we ran our repair division. For our entire history billing was extremely cut and dry, third-party costs with no markup. We occasionally did small minor things (staff cleaning) but the jobs were so simple and cheap it was an obvious benefit to the customer. This policy was relatively simple and as follows.

All Quotes are Staff or Company May Benefit From Must be Labeled

Should our company or our staff (our staff is our company as we insure and oversee them) do one of those small jobs, our policy is that the quote is approved in writing in advance by the owner, stays within what management would consider a reasonable price, and finally must be a solid value decision. Most importantly the bill must be on MoveZen letterhead. That leaves no doubt who’s being paid.

Cleaning has always been the most likely staff task, especially a touch-up clean after showings but before move-in. As we note in this letter several times we are working hard to improve the first impression of a new move in. That usually requires a touch-up clean after showings, however, companies don’t really offer that as an option. It’s a major challenge and if our staff is willing to bill $50 for this service it’s much more efficient than paying any company. So it’s highly encouraged, and when our staff won’t do it we struggle. The move-in experience committee is working on an efficient alternative if our staff won’t take it on, and it’s a challenge.

Our Company Profits From Repairwork

With our maintenance division though, clearly, the company profited at times (not overall). We usually charged about $49 an hour when things went well (already cheap post-COVID), but as we mentioned the hire struggled, and we ended up doing a lot of work closer to $10 an hour which was far below cost. The next iteration though must be slightly profitable. We’ll deal more with those complexities at that time.

Old Risks, Very New and Much Higher Stakes

There are other factors at play. As a result of fronting huge sums of company funds to pay vendors extremely fast, a strategy that’s non-negotiable if you want value vendors, we rack up a significant amount of credit card rewards. Again this is complex because we firmly believe it’s a winning strategy to pay fast, but not all will agree.

These grey areas are what we’re going to clarify in our coming communications. The irony though is that most companies do not dare institute that same policy we could be lambasted for, because of the massive risks and costs involved in short-term lending. Even for relatively small amounts they make their vendors wait, or you pay in advance, and as a result, you have substantially more hassle, and things move much more slowly.

It’s important to remember that such a large portion of what we charge for or benefit from, gets reinvested back into improving our results, ie 3D scans at no charge to existing customers we already paid hundreds of dollars to photograph.

“Ethics issues are almost always complicated, especially for such a diverse business in a field as personal as housing”

Types of Issues We’re Looking to More Formally Disclose

Because of our hefty trust accounts, our bankers treat us to meals and will probably someday send gifts. Our Christmas deliveries from vendors have started to become more than a tiny issue. We are hitting a scale now where things that were once completely harmless, at least pose some risks.

“Many vendors who come here are referrals or outright friends of friends”

One new policy we’ll be implementing shortly after summer is a formal staff disclosure process to identify potential conflicts of interest. It should be known that many of our best vendors were brought in as a result of some relationship with our staff, we are a local relationships business at the end of the day. We want to identify stronger ties such as living in the same household, directly related, or having outside business interests together. We’ll have these disclosures in place soon, and they’ll be monitored more closely than we already do.

We’ve always monitored relationships, but now it’ll be formalized. We also monitor repair costs closely of course, and we know what value repairs should cost. If things aren’t being done properly we’ll know it in a reasonable time, and begin to look into why. If you’re getting a clear value we’ll be less concerned. Closer oversight of this process will be another great benefit of our upcoming maintenance manager role. We’ll also institute similar disclosures regarding applicants.

Do More With Less

That said, we are soon going to embrace these marginal benefits full force both to alleviate our staffing pressure, and our exploding costs. So while we want to outline details, it’s best to know that our company, within reason, is trying to make the most of creative profitability, and we have historically been very creative.

We also historically have a great reputation, and we think all of our owners will agree that the fees we’ve charged to date prove we don’t abuse our position. Standing almost completely alone we’ve avoided them for over a decade, but that model isn’t working well anymore. We’re working to better formalize this process and will keep you informed as we build out the policy.

Not Raising Prices, but We Are Charging for More

The most obvious change will be charging for true value added services and expenses we used to absorb. In the future we’d have to charge a discounted but fair amount for a 3D scan if we already have photos. At almost $4 each now, we can no longer cut keys at no charge, and things of that nature other companies have always aggressively billed for.

We’ll also be exploring affiliate programs where we advertise services to renters in exchange for small referral payments, renters insurance being a likely candidate, or rental payment reporting to build their credit. We may sell ad space on our sites or major emails, just to name a few.

We Must Evolve, or You’ll Need a New Management Company

The reason for this change is clear, we too are being battered hard by inflation. We can barely hire, it’s so difficult we will intentionally shrink our company this year for the first time. You are seeing more traditional inflation costs in your repairs (also your income), but we are seeing two brutal types in the form of wage inflation, and digital cloud inflation.

Our two primary costs by a light year, and both are far higher than average inflation. The biggest problem with wage inflation is that we are forced to hire unproven and inexperienced new staff, at pay that’s painfully close to our most prized staff. That is simply unacceptable if there is any other option and there is, shrink the company and stop hiring as much until things improve.

Learning to Do More With Less

You can also become more productive using what you already have. That is the primary source of our motivation to get creative with revenue, so we can continue to keep a healthy buffer between our staff who will bleed sweat and cry for you, and those who don’t. We’ve also seen our digital costs skyrocket at least 100% over the past 2 years. We now pay huge sums for Zillow, Google Maps of all things, multiple cloud storage and computing resources, HR software, rental management software, bank fees, it has all gone up by a huge amount, and many didn’t even charge until recently.

We are in a constant battle to stay ahead of our exploding costs while pouring all we have left into retaining our best staff. This company has never been very profitable because our focus has always been growth, for the foreseeable future it will be stability and training, then retaining the best staff in the business.

Why Not Just Raise Prices

There’s an easier solution to all this and it’s to raise prices. Many of you would stay. Sadly despite the fact we think even a 100% price increase would still be a great value to most of you, many would leave in disgust over any increase. We don’t raise prices unless there’s a clear economic reason, but it still amazes us how quickly someone will fire us over $20 a month after years of committed service.

So while that is the kind of simple transparent solution we prefer, we can’t realistically raise prices, especially since our most cherished relationships would bear the brunt of it, and that’s the reason for this shift. We have raised them dramatically on new business though, and that has crimped our growth but is working as intended. Our new model is quality prices for quality service for quality investors, managed by quality staff assisting quality tenants.

Our Billing Practices Have Left No Doubt Where Our Priorities Lie

One look at our company policies or your statement, and it’s obvious we are not running a greedy, high-fee strategy. We want a ton of happy customers to tell a ton of others how happy they are, and you don’t get that by milking them for pennies. We have no true “junk” fees for owners or renters, though we are going to have to add a few for things that are not junk, such as a long-term lease renewal. We’re probably the only sizeable company you’ll find who has not been charging for that. We don’t charge tenants an admin fee, though most of our competitors do. We’re about to raise our application fees but they’ll still be below average.

Let’s talk about what we don’t do. We don’t accept kickbacks of any type. We don’t upcharge on maintenance or supplies other than maybe a small rounding addition to cover the time. Most importantly we don’t underprice your home in a scorching market and harvest huge numbers of application fees.

Did Your Property Manager Net 10’s of Thousands in Application Fees at Your Expense?

For the past 3 years, we see homes several hundred dollars below market all the time. Let’s ask ourselves how that plays out? $100 fee times 30 applications = $3000. That’s more than we make off many of our accounts in an entire year. We believe some companies have made this their model. It’s a tempting piece of pie at your expense. Our application revenue for 2020-2022 is paltry despite a massive number of leases.

“How much do you think they’re making off those listings? Why not list at 4k?”

I’m also reminded of a meeting with one broker as we took several of their properties where they asked if we did our own maintenance, then inquired incredulously how we make money. Well, I thought, probably by doing what’s in our name, passionate property management, how are you still in business? 10 years later they still are, and probably more profitable than ever. We have chosen a tough path.

More Than Just a Fee, HVAC Filter Delivery

That brings us to one of the most exciting win-win ideas we’ve ever had. The kind of outcome our company values above most all else. We instituted an in-house HVAC filter delivery system, and residents to our amazement have been highly receptive.

For a couple of months now we have been measuring every HVAC return on most vacant house or renewed lease, and hand-delivering 2 sets every 4 months or so. They are MERV 8 so they provide good air quality without choking airflow for your system. Just right. We’re formalizing the policy but eventually, most of you will receive a photo of your home about every 4 months, with filters on the door as pictured below.

Improved Care for One of Your Biggest Expenses

This is particularly useful for houses, but we can glean a lot from townhomes and many condos too. This almost guarantees tenants will not just have the filters but remember to actually use them. They won’t have to worry about sizes or ordering or returns etc. This will clearly improve the life of your HVAC, one of your primary costs. It also sends a loud message to our residents when they see that bright teal bag on their porch. Leaving no doubt that we don’t snoop around, but we aro engaged, we are on top of everything. Many love the attention.

We have enjoyed handing those bags directly to renters who have huge smiles on their faces. We were surprised how well received this has been across the board though we never doubted its merit. One day we’ll make money on this, but it will mostly be used to add unique services, particularly at the move-in stage, and with more exterior attention. We’re probably going to have to raise prices soon but we started at $13 a month for one filter, or $9 each, and almost no one complains, unheard of in this business.

We’re Expanding to Virginia, DC, and South Carolina

Richmond, Northern Virginia (NoVA), Washington DC, and Greenville SC. Currently, all of our staff are employees with no commissions. That has been a challenging environment. About half of property management companies use a different model where they recruit 1099 agents that are more independent, but possibly more invested as well.

In these new markets, we’ll be utilizing the 1099 contractor approach. There are pros and cons to both, we just outlined that ours is particularly tough at the moment, but we intend to meld the two extremely well. We’ll centralize a lot more than any other company, hire specialists with a few very specific duties, and let the contractors focus on building those crucial local relationships that are so important to our business. Most companies largely leave them on their own except for help securing new leads (all about the priorities).

Our Contractors Will Have the Industry’s Best Resources

We will focus on offering the broadest resources available, greatly simplifying their duties, and focusing our attention on those that are most receptive. Again, we’re not going for numbers, but quality. However, we have found that to uncover quality it’s good to start with numbers. We’ll let the cream rise to the top but all will be qualified and heavily vetted, and provide the minimum level of service we’re so committed to guaranteeing. We had planned to be operational by summer but due to new challenges, that will now be around the end of the year.

For the Remainder of 2022 and Likely Beyond

As noted our priority this year is retaining our staff. At this point, we have no particularly weak links (they’re all gone because we don’t give them raises), and our executive team can compete with the best in the country. We’re all in on making sure our staff know how deeply we want them to hang around so once we start hiring again, they can pass on the company culture, which has enabled us to grow dramatically for quite some time, while still delivering great results.

The most important thing we need to do to achieve that goal is to focus on them not growth, then on long-term creative revenue that allows us to consistently attract staff who deliver exceptional results to ever more mom and pop rental investors. It’s the end of an era, but we’ll make the most of it.

The trends noted in our first major update after the 2020 pandemic still cover the most important trends of 2022 exceptionally well.