260 - Best of 2025! How Private Equity Valuations Are Changing the Property Management Game with Peter Lohmann

0:00We manage rental homes and apartments on behalf of the property owner or landlord. We have about 700 total units under management. So 700 doors, that sounds like a lot to me, but I have no idea what that means. It's just a hair under$3 million in annual revenue. It's a sticky, contractually recurring revenue. There's also really great cash flow dynamics. What do you think are the biggest opportunities within property management right now?

0:27So I own a residential property management company in Columbus, Ohio. So we manage rental homes and apartments on behalf of the property owner or landlord. We've been doing that about 11 years and we have about really close to 700 total units under management. It's a mixture of single family homes and small apartment buildings. Wow. So 700 doors, that sounds like a lot to me, but I have no idea what that means in property management. Tell me a little bit about like what's revenue on 700 doors. It's just a hair under 3 million in annual revenue. And that's probably on the better end. It depends on sort of how leaned in the owner operator is to the industry and to sort of optimizing the business.

1:10Some of the older mom and pop property management companies who have been around forever would have like less revenue per door. and some of the newer folks who are really tuned into optimizing that will even have higher. Also depends a little bit where in the country you're located. If you're in California, you probably make more per unit than here in central Ohio. Is that your main metric? Is it like, okay, revenue per door? It's a very important metric. I wouldn't say it's like the main metric, but it's one of the top five for sure. Interesting. And what is a good revenue per door? A good revenue per door, I would say, starts to get good around$150 per unit per month.

1:48I would probably shoot for a$200 minimum to be a nice profitable business. Once you start getting up into the upper$200s and into the$300s, now you're talking about top 10 % in terms of performance and profitability. Again, slightly weighted depending on where you are in the country, but yeah. All right. So you're doing 3 million top line, 700 doors. What does that translate to, to a bottom line? It depends on the year, but we varied anywhere from 10 % to 18 % profit margin. Wow. All right. So between three and$550 ,000. That's incredible. Tell me a little bit about, like, what are your customers like?

2:32Do you call them customers? Do you call them clients? What Well, the interesting thing about property management is that we really have two customers. We have the property owners. These are the people who've hired us to manage their properties. We call them clients or owner clients or owners. And then we also have the tenants. We have a lot of responsibilities to the tenants as well. And the sort of new lingo is you call residents, not tenants. But in any case, that sort of two customer dichotomy is one of the things that does make this business somewhat challenging. And what do you do with property management?

3:06I know this is like, it should be pretty self-evident, but you're talking to property owners and then they're having you do what? Collect rent? Yeah. So there's three main things you do as a property manager. Collect the rent, deal with maintenance and lease up vacant units and deal with lease renewals. So rent collection, maintenance, and leasing is sort of the three big categories that I think of. And what are your typical, I'm going to say, I'm going to say clients for property owners, and I'm going to say tenants for tenants. So your clients, what's their typical profile? Are they, they have one or two units or are they a hundred units?

3:41Like what, what does that look like? The one or two units for sure. We have a lot of folks, we call them accidental landlords. These are people who moved out of the property and decided to rent it out for one reason or another instead of sell it, or maybe they inherited it or something like that. And then we have intentional investors. These are folks who purposely bought a rental property. And these are the kind of folks you'll find hanging out in like bigger pockets and going to the real estate investing meetup groups in your city. And those folks are more likely to have a handful of units rather than just one.

4:13I believe about 60 % of our clients have just one unit. And then like, you know, it kind of scales up from there where our biggest client has like 60 units? This is my own ignorance, but I would think if I owned one or two units, I would manage the property. Why would I have a property management company come in and do that? Great question. First, a lot of people do. About half of those folks do self-manage. But reasons you would hire a property manager, there's a few. One, bear in mind, a lot of these folks are moving away or they don't live in Ohio. It becomes much more challenging to manage the property when you're not local.

4:51Also, there are a lot of legal and regulatory gotchas when it comes to landlord-tenant law, fair housing, and things like that. And so using a professional property manager will help you insulate yourself from those risks and make sure that you're kind of doing things the right way so that your tenant doesn't sue you. Or if they do, you have all the right insurance and protection. Okay. So that makes sense. If they're these accidental landlords or they inherited it, whatever, you know. Yeah. They're probably overwhelmed by, at the prospect of managing the property. So for them, it's like out of sight, out of mind, cool.

5:23I'll pay the property management company just to take it out of my plate. Cause I don't want to worry about it. Yeah. So it could be for like a risk reduction, but it also may just be sort of like for convenience. It's like, you know, why do people hire house cleaners? They don't know how to clean. It's like, well, no, they do know how to clean. It's just, they'd rather have someone else do it. They got other things they'd rather be doing. So for the accidental landlords, how do they pay you? Is it a percentage of collections or is it a fee-based? Oh, thanks for managing my property. Here's a hundred bucks this month.

5:51So you can do both or either. So we happen to do a flat monthly rate, a flat monthly fee per month, but a lot of property managers, I would say actually most property managers charge a percentage of collected rents. Okay. And for your clients that are large, don't just have the ones you choose, they're not accidental landlords. Is it the same? You're charging a flat fee? Similar. Yep. We do offer discounts. If you have 20 units with us, we're going to give you a better price than somebody who has one or two. But yeah, same thing, flat monthly fee. For your business, you're just doing residential.

6:23Correct. Are there commercial property management companies? There are. Yep. Far fewer of them because there's far fewer commercial properties and they're also a lot easier to manage actually. But yeah, that's the thing. When did you launch your business? 2013. Oh, you've been in this a while. Okay. I was thinking like maybe 2020 because you saw a bunch of people buying homes and then a bunch of people thinking, oh, I'll house hack or, oh, I can buy a rental property or probably a lot of people who bought Airbnbs that are now either can't get rid of it or are just turning it into an investment property.

6:56Tell me a little bit about the history. So 2013 until this year,$3 million. How long did that ramp take? The history is that prior to 2013, I was working as an engineer. I have a degree in electrical engineering and I was working as a control systems engineer. My partner and I, my business partner, who's also an engineer, he and I had started buying up single family rentals here in Columbus, Ohio in 2008. We bought our first one. So we were buying and owning and self-managing single family rentals for a few years there while we were working as engineers and we were self-managing. And then in 2013, about a year leading up to that, we decided, hey, we want to own our own business.

7:35We want to do our own thing. We don't want to work for other people. What can we do? well, we already know how to manage properties. Why don't we just start a property management company? So in 2013, I quit my engineering job and started RL Property Management. At the time, we had zero units, no clients, nothing. It was me and my apartment. That was it. And over the next year, we just started adding clients and my business partner quit his engineering job, came on board full time. So from 2013 till today has been just a slow but steady ramp up of units under management, revenue, employees. We figured everything out the hard way because we had no experience in professional property management or real estate other than the small handful of units we owned.

8:19We didn't have any family in the business or anything. So we honestly made every mistake in the book. And a lot of what I do these days, other than keeping an eye on my own management company, is trying to put out content that's helpful for other people who are starting or growing a management company, sharing a lot of the stuff that I wish I would have been able to read or consume when I was getting started. All right. Now's the part of the show where I feel the most uncomfortable, but my therapist says I need to face my fears. So here we are. I've started a newsletter and I want you to subscribe.

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9:16There's so much to it with all the accounting and all the ins and outs of leasing and how do you deal with these clients and what happens if you have to file an eviction and there's just a lot to it. My business partner, Chris and I, we have a, every Friday we do this thing called Hold Co-Bros. It's on his podcast. But last week, we talked about a business in a box idea that I had, which was there's a lot of people who just trying to do side hustles, or they're trying to launch a business. And they don't want to spend on QuickBooks, or they don't want to buy HubSpot, or they don't, you know, they're not ready for Salesforce, but they still need to be organized.

9:47And so I was like, man, that'd be really cool to just have a business in a box. Cool. This is how you set up Google Sheets. This is how you set up these automations with Zapier in order to get the flow of things. So I think that that's just a huge piece that's very intimidating to people when they're getting into things is not understanding just how to organize. Yeah. And there are a few franchises in our space that are seeing success and they sort of help with some of that stuff. So that's an option you can look into. But a lot of folks who start companies, start businesses, they're doing it because they want the freedom, right?

10:21They don't want to be under a franchise or bound by someone else's idea of how things should be done. So it's interesting to watch sort of the different approaches that people take to help other people start management companies. So I think of property management, again, I'm an idiot when it comes to this stuff. It's like, oh, I got to go out to the house if there's a problem with maintenance. Collections, you can probably just set up online, but you probably have to collect paperwork at some point unless probably everything's all digital. Is your team fully remote? Are you on site? What does the management of the actual properties look like from your team?

10:56Yeah, so we are a mixture. We have a pretty sizable office here near central Ohio where most of our team works, including all of our maintenance guys and a lot of the day to day PM operations. You do need some real life component that's near to the properties you're managing because you need to go out there and deal with issues, meet inspectors, show vacant units and things like that. so you couldn't have like a fully remote company you do need people who live in the area where the properties are being managed okay but we've moved more and more of of the functions remote so and that's a mixture of u.s based employees as well as global talent more and more what functions are you doing remotely what functions do you still have to do locally yeah so again anything where you need someone physically going to the property, obviously that needs to be local.

11:51But a lot of property management is communication and that can be handled by a remote team member. And a lot of it is accounting and paperwork, answering the phone, following up on email. So a lot of the leasing activity that's not actually showing the unit that's handled remotely. A lot of the lease renewals, property management agreements, our sales function, marketing, a lot of the compliance and accounting. In our industry, we call them RTMs, remote team members, but basically global talent or even US-based remote employees. Are the majority of the properties that you manage in Ohio or are you all around the country at this point?

12:29They're all in Columbus, actually. That's by design, I'm assuming? Correct. Because I don't want to figure out how to have a person in 50 different cities who's going to run around and put a lockbox or whatever. Now, there's some groups who are going after that and they do a city by city approach where they grow Go to a few cities and then they either acquire a management company in a new city or they start a new one and then they grow that and then they go to the next one. Yeah. I'm assuming the administrative functions, those are easy to outsource, right? Sending and collecting invoices, compliance, renewals, all those things.

13:03But like you said, showing the units, maintenance, anything that breaks, it's got to be done by somebody locally. So you've got to have a local network that you outsource to. it's like this weird not weird combination but it's a combination of being able to do remote and locally have you ever seen these guys on on twitter or social media who were like i started a remote cleaning business yeah it seems like an oxymoron to me but it's similar to what you're talking about right where it's like you can have remote components to it but you have to have somebody locally in order to fulfill the services yeah i think a lot of those companies are kind of glorified lead resellers, they're fulfilling a lot of that, or actually all that work is through contractors, subcontractors.

13:45Now, I think that works with cleaning because cleaning is a very straightforward, narrowly defined type of business where it's like, okay, go to this house, clean it, tell me when you're done. And it's sort of like, it's either clean or it's not. And if it's not clean, you send someone back and then you're done. With property management, it's such a huge surface area that you have to cover, I mean, from leasing to maintenance to accounting to everything in between, that you could never just have a bunch of subcontractors and run a successful property management company. Now, I do think you could, and I know some people who have started or run property management companies and they don't live in that city anymore, but the company will have an office or some sort of a location with W2 team members, at least a handful who are, you know, where the properties are located.

14:36Parker Cox, who is a friend of mine, he lives here in Boise and he has a property management company they manage. I want to say they have a thousand doors. I don't know how many doors. Yeah. He's over a thousand. Yeah. But they've got the Bay Area, Southern California and Boise are like the three markets that they're kind of playing in at the moment. But how did you get your, your revenue per door so high? I was just doing some math. It says it's like$350 per door per month. I just did 3 million divided by 700 divided by 12. and you said a good revenue per door was like 150? There's one caveat there.

15:10When you calculated my revenue per door, which you did the math correctly, that's including revenue from our maintenance department. So we have an in-house maintenance function that performs work at the properties that we manage. Now that's optional. A lot of management companies don't have that. And when I was giving you the benchmarks for a good revenue per door or revenue per unit, that would be without the maintenance revenue included. So about 40, 35 to 40 % of our revenue comes from that maintenance component. So once you back that out, I can't do the math off the top of my head, but it's mid 200s, I guess, is our actual number.

15:45Let's say it's 30%. 30 % of 3 million would be 900 ,000. So 2.17. So it's about$300 per door. I mean, it's still, it's still a really good. Well, 30 % is from the maintenance. So 70 % is from the other stuff. 250 so about 250 per door per month yeah there you go sounds right okay if i'm sitting at home and i'm like and i'm entrepreneurial and i'm listening to this i'm like man okay great margins and it seems like i could go out and get some doors i want to try this business how how would you go about starting one of these businesses would you start it would you acquire it where would your mind be if you wanted to get into property management if you've not run a small business, I would not buy one.

16:29I would not buy a property management company to start. I think there's other types of small businesses that you could buy with no experience running a small business and probably figure it out. I wouldn't want to try and do that with property management due to just the complexity of the business. I would start one if you wanted to do that. The first thing I would do there is check your state regulatory requirements. Most states require you to have a broker's license, a real estate broker's license to start a property management company. Some states don't require it. It's easier or harder in some states to get that.

17:00Or sometimes if you have a buddy who's in real estate, you can ask him and he'll kind of let you operate under his brokerage for a while. So that's the first thing is just check with your state requirements. But once you get that figured out, yeah, I mean, you just basically put your shingle up and start going to real estate investor groups. And I was going to ask, how would you get your first door? Yeah, I think the way we did it is I spent a lot of time on BiggerPockets. And I would just go there and I would talk about the fact that I offered property management and I would try to offer value to other folks who were asking questions about real estate in my area.

17:34So I don't know BiggerPockets that well. I mean, I know it's a thing and I know they have forums. Why would you go to BiggerPockets? It's just probably the highest density of real estate investors anywhere on the internet. And so you can set up search terms for their forums where anytime someone mentions Boise, you'll get an email. Then you can jump in and see, oh, they're talking about, does anyone know a good plumber in Boise? And then you can jump in there and say, oh yeah, here's a great plumber I used last week. By the way, I run a management company if you ever want to just be done with these headaches.

18:04So it's kind of like that. Okay. So you would start with BiggerPockets. That's kind of the area that you would go first. I would go BiggerPockets online. And for offline stuff, I would go to real estate investor meetup groups. And there's two or three or five of these in every city. They're usually held monthly. And I would try to be at every single one. I don't know what those are. I mean, I can figure it out. But who organizes them? Are these all just self-organizing? Are they part of an organization? They're usually independent. Just somebody or some small group of people wants to meet other like-minded folks.

18:36And they tend to change hands over the years and to sort of be passed down to the new generation of real estate investors. These groups are hit or miss. I would try going to a few of them. Some of them are really heavy on the sales pushes, sort of like get rich quick real estate stuff. Others are very much organic, just a bunch of guys hanging out talking real estate. These tend to be amateur real estate investors, meaning this isn't their full-time professional job. They usually have a job. They're buying, they're flipping, they're renovating, there's hard money lenders there, there's realtors, there's title company people, stuff like that.

19:11How do you find those? Literally just search, you know, Boise property management or Boise real estate investor meetup. Oh, all right. So it's not like, oh, they're usually on BiggerPockets or they're usually on Facebook or they're usually... No, they're kind of organic. Yeah. Definitely look on Facebook too, but I would start with a Google search. Yeah. All right. So let's say I go to BiggerPockets or I go to real estate investor meetups and I've got a fish on the line. When you got your first customer, first client, excuse me, was it one door? Was it a package of doors? Like how did you land that first client?

19:43I believe our first client was a small handful of doors. I think that was just chance. And did you offer a discount? Were you like, Hey, I'm just trying to get into this. Let me, let me do it for a month or. I mean, I think that back then I didn't offer a discount exactly, but our pricing was really low because I knew that I needed to offer something to entice people since we didn't have, you know, experience really. And what I said to our early customers was like, listen, we're a young, small company. I am young and hungry. I want to make this work. You are going to get a ton of personal attention from me to make sure that everything's going well at your property, which was 100 % true.

20:20And so in those early days, it's like, hey, you're going to be my 13th client. But that means you're going to get a ton of attention from me. And I have a background in engineering and we own our own rentals. And so we know, you know, we're going to treat your rentals just like our own. So you got to work with what you got, right? So these days, I don't say that. I don't even talk to our customers. The sales pitch that our salesperson gives is completely different than that and leans on the strengths that we have today. Interesting. So my background was healthcare. And in hospice, there are sort of these benchmarks.

20:52Once we get to 10 patients, it's like, okay, we have a team. Once we get to 30 patients, that was the point where it's self-sustaining and profitable. And you have a good agency, quote unquote. And then 50 is another benchmark. It's like, all right, you're at 50. Now you're kind of a real player in the market. You have some sophistication and then over a hundred, you're one of the, you're one of the big guys. Those are broad, but that's generally, generally what it is. Are there, are there benchmarks like that in property management? Like let's say once you start, is there a certain number of doors you're aiming for?

21:23What does that look like? Yeah, there definitely are. So a hundred doors is a big deal. When you start a management company, you'll be able to do everything yourself for the first 50 to 100 doors. Once you hit that 100 door mark, first, that's a big milestone for a few reasons. One, you're generally going to be able to afford to hire your first full-time employee. If you... And you're going to start to need someone at that point because you're going to be stretched really thin. Also, by the way, you would then qualify for Crane, which is my paid private community for property management business owners.

21:55Crane? I've never heard of that. Please tell me more. Yeah. So Crane is, is it's a community of property management business owners that I started a year ago with a friend of mine, Wolfgang Kroski. He owns a management company too. And it's a place for those who are already up and running and looking to grow to communicate with each other, share best practices. We do real life meetups as part of the conferences and things like those communities are, are so valuable. Like they're great because you're learning from other people. It's not necessarily, I am Peter here to distill all of my knowledge onto this community.

22:29I'm assuming, I don't know, Crane, but most communities are like, hey, what are you doing in this market? How does this work? Would anybody talk to a lawyer who's done a transaction before? They're just invaluable as you're trying to get up and running. Yeah. And there's actually a bunch of these groups on Facebook too, and they're really valuable as well. But on Facebook, first of all, it's super noisy, right? And you have all different skill levels. You have vendors mixed in there. You never know what you're getting. And then the other thing with Facebook is that because it's not really private, there's no vetting, people are not comfortable sharing sort of what's really going on.

23:04What I like about a paid private community is everyone who joins is highly vetted by myself and my co-founder. And then once you're inside, everyone agrees to a code of conduct where what happens inside there stays in there. So you get people sharing very transparently and very, very raw experiences. is and then that's like kind of where the magic happens where the real juice is but yeah so anyway so that's 100 doors and once you reach 100 doors it's sort of like you can make a living off this you're not going to have to go back to your normal job if if this is something you start on the side or whatever because theoretically at 100 doors i'm doing anywhere between 15 000 and 30 ,000 a month.