The first half of the interview with Michael Monteiro of Buildium. Learn about Michael commuting by boat, AllPropertyManagement, and more.
- 12,500 Customers! [01:52]
- Michael Commutes by Boat [02:05]
- Buildium’s Backstory [02:47]
- How Buildium Stands Out Among Property Management Software [05:25]
- The Importance of Ease of Use in the User Experience [07:37]
- About The State of the Property Management Industry Report [09:23]
- Understand the Competition to Remain Competitive [11:29]
- Various Services Property Managers Can Add [13:31]
- You May Need to Fire Some Clients [15:42]
- Flat Fee Vs Percentage-Based Firms [16:28]
- Avoiding Being Just a Commodity [18:25]
- “Other” Pricing Variations [19:33]
- The Advantage & Challenge of Low-Flat-Fee Property Management Firms [20:44]
- Avoiding The Cycle of Suck [21:03]
- Your Ideal Customer Profile (It’s not anyone or everyone) [22:40]
- Importance of Focus – “Managing an association is very different than managing a rental. It’s hard to get really good at what you do if you don’t have focus. It’s also hard to differentiate.” [23:39]
- Start Firing Worst Clients [24:22]
- Knowing Property Owners’ Pain Provides Opportunity – Focus on Rental Marketing & Tenant Placement [25:07]
- Importance of Prompt Communication with Owners (Not Just Tenants) [27:16]
Buildium (Affiliate Link)
Jason: Welcome! If this is your first time listening, then thanks for coming. The DoorGrow Show is a podcast for residential property management entrepreneurs that are interested in growing their business and life. If that is you, be sure to subscribe and rate us in iTunes and join your fellow DoorGrow Hackers online at doorgrowclub.com, our free community for property management entrepreneurs. I’m your host Jason Hull, the founder of OpenPotion, GatherKudos and of course, DoorGrow.
Now, let’s get into the show. This interview was one of my first and it’s a little bit messy. It was really long so I split it up into two parts. This is the first part of my interview with Michael Monteiro of Buildium.
We’re getting started here. I’m Jason Hull. This is the DoorGrow Show where we talk about property management, things that are of interest to property managers. I have a special guest here, Michael Monteiro, CEO of Buildium. I’ll let Michael kind of introduce himself, but I’ll preface, Michael is the CEO of Buildium. Buildium’s a pretty big company if you haven’t heard of it. They recently took over All Property Management which every property manager is pretty familiar with that, at least in the US. They’ve got how many people now? How many different businesses? 12,000 I think is the biggest number I’ve seen.
Michael: We have 12,500 customers. Mostly in the US, but in over 40 other countries outside of the US as well.
Jason: I thought it was pretty interesting the last time we spoke. You told me that you commute by boat. Did you commute by boat this morning to work?
Michael: I did indeed. It is getting cold now. I’m not sure what the temperature is where you are but winter’s finally hit here in Boston, Massachusetts. It’s about 15, 20 degrees with the wind chill. I took a boat. It is covered. It is heated if that’s your next question. But it is a nice way to get into work. Takes me about 35 minutes to get to work from where I live on the south shore.
Jason: Great. I don’t commute via boat. I don’t even commute which is nice. Michael, tell me a little bit about you and how you got your start, how you came up with Buildium, then we can get into this cool thing that we’re gonna talk about, your survey that you did for this state of the property management industry.
Michael: Sure. I’m a native. I grew up here in Massachusetts. It’s about an hour south of Boston. Went to school in the Boston area. Came out of school with a computer science degree. Did software development for about 10 years. Built software, designed software for some big companies and a couple of large technology consulting companies.
At the second stop, toward the end of my career at this other consulting company, I met my co-founder Dimitris Georgakopoulos. I won’t make you spell it, took me a while to figure out how to spell it. But as a consultant, I met Dimitris and learned after meeting him that he and I had a shared interest in real estate. This was about 2002.
We, together, bought a rental property together down in Providence, Rhode Island about an hour south of Boston. Over the span of about 1 ½ year to 2 years, we bought 2 more buildings and had about 25 tenants or so. I can remember pretty vividly, Dimitris was the guy that was responsible for keeping the books. He was the one responsible for making sure all our tenants have paid rent. I remember asking him one day if all of our tenants have paid their rent, and he looked at our bank balance online. He was looking at all the different deposits that had come in and he said something like, “I don’t know. It looks pretty close.” I wasn’t expecting that, I was expecting a yes or a no. It was really at that moment that I said, “This is crazy. We make software for a living and we’re not even using it to manage our properties and our tenants.”
I started to look for software, this was around 2002-2003. Found a lot of software at that time, it was all, of course, desktop-based back then. Universally, it was all either hard to use or really expensive, just way more than what we needed. Dimitris being the ‘build it’ kind of guy said, “Why don’t we just build something online for us?” And so we did. We thought if it was useful and valuable for us as property managers maybe it would be useful for others. That’s really how it started. That was back in 2004. That was 11 years ago. We’re coming into our 12th year as a company this year.
Jason: Over a decade.
Michael: A long time and now life’s changed since then.
Jason: Yeah. For those that aren’t familiar with the Buildium software, why don’t you tell us just a little bit about that? What makes it unique in the space because there’s a few different – you’re always in the top three especially for residential property management list that I see from the back office.
Michael: Yeah, you’re right. We focus on residential. Some of our customers do manage a mixed portfolio of residential and commercial. But if they’re doing commercial, it tends to be a small part of their portfolio. It might be storefronts or retails but it’s primarily residential. We focus on management companies that manage both rentals and community associations. A number of our customers do both, in fact. Although we have several that just do one or the other.
What makes us different there are, as you said, we have a number of competitors, we operate in a crowded space for sure, everyone on this market that sells property management software like us will talk about helping to make managers more efficient and profitable. They do that. We do that by streamlining and automating the little value stuff, the time-consuming stuff so management companies, the managers can focus on the higher value stuff like growing their business and providing customer service.
But the truth is everybody talks about that. What really makes Buildium unique is really two things. One is that we’re the only property management solution in the industry, the only one that in addition to making you more efficient and more profitable by streamlining and automating, we actually help our customers grow. We help them make more money by helping them win new contracts, win new clients, and that’s with the acquisition of a marketing service called All Property Management that you mentioned earlier. That allows us to help customers make more money.
We do that with intuitive software that really balances a few things. Power, it’s gotta be able to do a number of things well but we balance that power with simplicity and ease-of-use. Those are the things that make us different in the industry.
Jason: Great. I remember doing research on biggerpockets.net and looking at the different property management tools a few years back. The overall feedback that I saw, a lot of people are recommending Buildium. The feedback was generally that it was intuitive and easy to use. I think when it comes to software, that’s always going to be the number one factor in adoption, whether people use it or not.
Michael: Everybody is a consumer. Everybody is used to software on the consumer side that’s really easy to use, that has a really nice user experience. It’s only in the last few years that companies like Buildium that sell software to businesses versus consumers have started to really focus on the user experience. We do it for two reasons. One is we think it’s just part in par so we’re setting the highest standard for how business should be done. But the truth is, companies are demanding it. They know what sort of experience they’re getting on the consumer side so they’re demanding the same experience on the business side. For those reasons, we’ve been investing heavily in it for a number of years.
Jason: If you’re a property management that doesn’t have back office software, you’re operating in the stone age, I definitely recommend you check out Buildium. I already got a link here on the sidebar because I’m an affiliate now. I gotta sign-up for this affiliates for everybody.
Jason: I’ve got the affiliate link there in DoorGrow, and people could click right on that and they’ve got a two-week trial it looks like. They can test it out and play around with it but that’s a great place to start, especially for people that have really small portfolios and they’re managing it by themselves and they haven’t yet gotten a property management tool. Try out Buildium. I think it’s probably the easiest of the bunch to start out with. A little plug there affiliates.
Let’s get into this cool report. I’m gonna hold this up here. I’ve got this printed out here. The state of the property management industry report. Tell us a little bit about this and how you got this data.
Michael: Yeah, sure. This is a report that we did for the first time. We put it together in August of last year. It is an annual report that we plan on updating each year based on new research. We conducted some research with the help of All Property Management and ended up surveying over a thousand property managers, property owners. We did it with really one objective in mind, that is to try to uncover some insights and findings, things that we think are gonna help property managers be more competitive.
We wanted to understand, as it says, the state of the industry, to try to uncover some of those trends, and hopefully service a few nuggets that property managers can use to be more competitive. That was really the objective and we’re committed to the industry so it’s something that we plan to do every year. As I say, it’s based on responses from over a thousand property managers and property owners.
Jason: I thought that was really interesting. I liked the results, I read through this last night. It’s really helpful to get this high-level perspective of the industry as a whole. I think I’d be even more curious to see on the future report a segregation between the multifamily and the single family. Because in some of these things, I had a question because the numbers might be different depending on the different type of business. Let’s get into it. Tell us about your first point here.
Michael: Yeah. There were really three key findings. There’s a lot of data, the report’s 16-pages long. I think we’re gonna make it available for people to download after this blab. But there were really three key findings that came out of the report. The first is that it’s super important to understand really what your competition is doing and also understand benchmarks that are out there within your industry in order to remain competitive. You can’t improve, you can’t optimize how you’re doing business unless you know how you’re doing.
One measure of how you’re doing is what your competitors are doing and how they’re doing. For example, we found that over 90% of respondents, property managers, are offering five basic services. These are gonna come as no surprise. They’re helping with the rent collection, they’re screening, and they’re also advertising vacancies and marketing, and then they’re doing financial reporting. Those are services that the overwhelming majority of your competitors are offering today.
But what was interesting is as those companies get bigger, as they begin to manage more units, they start to offer more services. For example, over 81% of property management companies that manage over 500 units are offering around 10 services. That’s up from the 90% or so that are offering those five basic ones that I talked about. If you wanna be competitive and compete with these other companies, it’s really important to know what services they’re offering.
Further, once you understand that, it’s important to know how they’re charging for those services. An example there is that we found a majority of property management companies are, in fact, charging an application fee or rental application fee. But surprisingly, that means that 24% are not. They’re either not charging a fee at all or if they are, they’re refunding that fee if they don’t end up renting the apartment to that applicant.
A quarter of the companies are clearly leaving money on the table. Again, if you don’t know what the competition is doing, if you don’t know what they’re charging for these services, it’s hard to stay competitive.
Jason: Right, you gotta add some services. A lot of these services seem like they would be really simple or givens for the industry as well. You’ve got the 12 services listed here in the graphic on here in the report. If you guys wanna get access to this report, you guys already set-up a link for this, you can go to buildium.com/blab. You can get that report. You just pop in your email and they’ll send you this PDF.
I thought it was really interesting that there was kind of this cutoff, it seemed like, with property managers right around this sales brokering. Some property management don’t do sales, some do. It seemed like that’s kind of a cut off point.
Then I also noticed that landlord-tenant law advising. Some areas have rent control and have challenges, that maybe kind of area-specific maybe somewhat. That’s a big deal in rent control areas. I know it is for clients. Then, the insurance services, that sounds like something they can easily set up. Not very many people are doing it, only 19%. Insurance services, they could just go sign-up, add this additional upsell that they can offer to their clientele to create a more safety, certainty with their clients. We all have a premium package that includes that and I think that’ll be really easy for them to offer. The other stuff, if they don’t have a software like Buildium or some of the other software that are out there, the e-payments, and the management of maintenance, and all these different things becomes a bit more difficult.
Michael: For sure.
Jason: Sometimes, just by implementing a decent back office, they’re gonna add services which is kind of a no-brainer, they can increase their capacity.
Michael: The ability to offer these services, it hinges on your ability to deliver them efficiently and cost-effectively. Technology can definitely help you in that area.
Jason: Yeah. Fulfilment is a big challenge for property management companies, especially when they’re small. I was on colleges before this. The property manager was a solopreneur, he’s doing this by himself. He’s at that stage where he’s got a portfolio but he’s struggling to do everything himself. Yet, he doesn’t have the capacity to bring on more business, to have more money, to be able to hire somebody. He feels kind of stuck. I told him to fire some clients.
Jason: They’re limiting his capacity. He had some clients that are just taking a lot of time and I said, “You need space. If you don’t have space then you‘re either charging too little.” We went over that and he was charging just fine. The other thing we talked about is fees. Some people, there’s two kinds of points of view. Some people try to be the low, flat fee guys. Some go on percentage. Some people when they’re struggling they start thinking about doing the flat fee. But it looks like most people are doing percentage-based fees.
Michael: Yep. To some degree, that also varies based on the type of property you manage. What we find is that those that are doing a lot of community association management, managing condominiums, HOAs, that tends to be a flat fee per door. But as you just noted in the report, if you’re managing rental property, then predominantly, the fee structure is a percent of the rent.
Jason: Yeah. On the fee and the amount of per unit and all this kind of stuff, that would be where there would be an interesting divide between multifamily and residential.
Michael: Yeah, we could probably do that. I’m sure we have that demographic. It’s just a matter of splicing the data differently to show how the results would differ.
Jason: Yeah. If you could put together a specifically hyper-targeted multifamily one and a hyper-targeted residential one, those will be some really cool reports. The focus of power and target things. That’ll really be interesting to see if there is some big difference on that. I noticed that on the fee pricing, I think that was different too because multifamily, you’re not usually seeing 10% on multifamily units. But it might seem more like maybe 4%. But then on single family homes, in a lot of lower rent areas, 10% is pretty normal.
Michael: Pretty typical, yeah. 8%-10%.
Jason: In coastal areas, not usually, but the rent is usually insanely high so they’re making plenty of money.
Michael: Don’t feel too bad for them.
Jason: Yeah. No, no. This is really good stuff. I think, again, I think you’re right. The biggest thing I like to challenge clients to do. I noticed in your report, it mentions to be competitive with fees, and so I think it’s really good to look at your competitors and know what the fees are. I like to challenge clients to not just be competitive but to price themselves at the high-end of the market, and then in their market. They need to know what the market’s doing, price themselves at the high-end and then make sure they’re delivering value and know how to sell at that level to be that higher-percentage property management company in the market. If you’re at the low-end and you’re always competing on price, that’s a really painful place to be in any business model.
Michael: It is. You become viewed as a commodity and you don’t wanna differentiate on price because, over time, that’s a losing proposition. That’s a tough place to be, like you said.
Jason: Yeah. I think that a great advice is price high and deliver really high value if it’s possible in your market. Cool. Let’s get into the other thing that I have down in my notes here. I thought it was really interesting, the other pricing structure. What did those kinda look like? You said usually it’s a combination of both.
Michael: We see people that will charge a percent but then there’s a monthly minimum. If that rental amount varies, they’re guaranteed to get a certain dollar amount per door. We’ve seen that variation, we’ve seen variations on whether people get a percent even when the unit’s vacant. In some markets, they’re getting the percent of the expected rent whether the unit is vacant or not because the presumption is there’s still some work to do even if you’re trying to market it and fill it. Those are some of the variations that we see beyond just a straight percentage or a straight fixed amount per door.
Jason: The other thing I’ve seen is some companies play this game where essentially it’s almost percentage based but they position it with a flat fee and they have tiers. Based on the range of the amount of rent they’re collecting it’s on tiers. I think it’s really easy with flat fee firms, especially if they’re low-priced to get a lot of doors. It’s like they can get a lot of doors, but then the problem becomes fulfillment because they’re dealing with so many problems and higher-end properties take a lot less effort. A lot of the flat fee guys that are the really low flat fees I see them get into the “cycle of suck,” I call it.
Michael: It sounded like cycled BN.
Jason: No, the cycle of suck is really simple. It’s four steps. Basically, you take on crappy owners, they’re really price sensitive. They don’t care about your value, you’re a number to them. They don’t wanna put money into the property because they’re penny pinchers. Their property, whether it’s amazing or not, becomes kind of a crappy property or they have a crappy property. That’s the second step.
And then, if you have crappy properties, it doesn’t matter how great your tenant screening is. If you’re doing amazing tenant screening, you’d place that A-grade perfect credit tenant into a property that the owner won’t invest in or is not willing to fix things on, you then become the crap show for a song lord essentially. You’re put on a painful position. Then the next step, so then you have crappy, at the top you have crappy honors, crappy properties, crappy tenants. Then what kind of reviews you’re gonna get and reputation, crappy reviews and crappy reputation online. What kind of owners do you attract?
That’s the cycle of suck. It continues. Then you attract crappy owners. I think that the challenges usually to make sure that you’re clear on the types of property you actually wanna manage and that aren’t going to cost you an incredible amount of time, energy, resource. Because when that property’s infinitely worst, then it’s probably equal to 10, 20, maybe even 100 good properties depending on how bad the situation is.
Michael: Jason, that’s critically important in any business. We call that the ideal customer profile. As you say, it’s critically important to understand very clearly what does your ICP or your ideal customer look like, so that you can direct all of your sales, your marketing, your efforts to try to attract more of those. It’s funny, I talk to a lot of property managers and they all seem to fall into the same trap early on. They tell you that they’re in the beginning, as they’re starting out, their ICP is basically anybody that will pay them. They’ll take any business, anybody, doesn’t matter if it’s rental, if it’s commercial, if it’s HOA. It doesn’t matter what type of property in which geography. It’s amazing. You’ll have property managers that are managing properties in all these desperate locations.
Jason: Like an hour away.
Michael: An hour away. Then they get to a point where they realize that this is just not sustainable. Managing an association is very different than managing a rental. It’s hard to get really good at what you do if you don’t have focus. It’s also hard to differentiate. Because then you’re providing the same generic service to everybody and everyone. It’s hard to really stand out in the market if you’re not really clear on what that ideal customer looks like.
Jason: I get it. If that’s how a lot of us start in business, you take on everybody. But if you’re targeting everybody in marketing, you’re targeting nobody, essentially. That’s the challenge too. A lot of people get, that’s how they build their confidence, they start that. The challenge is they keep these clients on. If you did level up eventually, like some of the clients that I spoke to today, if you do level up eventually, then you need to start firing these people that are big time sucks.
I talked to a really awesome property manager, he’s got thousands of properties, and he says every month, they at least make sure they fire their worst three properties. They look at how many requests are coming through, maintenance requests, problems, whatever. If they’re on this list, they let them go. You feel a lot safer if you’re actually acquiring properties. If you have enough deals coming in, then hey, you can let go of the riff raff that are causing issues.
Let’s go onto your second point in your report here.
Michael: Yeah. The second thing that we found is that just as it’s really important to understand what your competition is doing so that you can be more competitive, it’s really important to understand what pain your ideal customers or your prospective clients are experiencing so that you can capitalize on opportunities.
A great example is that what we found from the survey is that 48% of property owners, landlords, this probably won’t come as a surprise, but almost half of them find marketing and filling vacancies pretty unpleasant. They don’t like it. It’s not anything that they look forward to. 67%, almost three quarters, feel like they’re not even equipped to do it. Half of them don’t wanna do it. Almost three quarters of those that were surveyed say, “Even if I wanted to, I don’t think I can do it well and effectively.”
That’s clearly an opportunity to offer that service, that’s presumably why so many of property managers and your competitors are offering that service because there’s an opportunity there. Understanding what pain your customers are experiencing, your clients are experiencing, is really important. Take the time. Take the time to ask. It might help you uncover an opportunity in your marketing service that you can offer that no one else is offering.
Jason: I think this kind of goes back to the previous point that if you take on too many bad properties or all the riff raff in the industry or in your market, your ability to provide good service, your ability to deliver it and fulfillment, your capacity is gonna be limited. There’s always going to be a difficulty in that area. Providing great service and being able to really devote time and energy towards taking on these new properties is gonna be a struggle because you’re overwhelmed and showing up tons of money on staff to manage a large number of problems.
I noticed you have these different points. Number one was prompt communication, I thought that was interesting.
Michael: Yeah. It seems so simple and so obvious, but think about it, any business that you’re in. One measure of customer satisfaction or one thing that influences customer satisfaction is how responsive you are, no matter what business. This could be tenants that are calling or emailing about a particular maintenance issue. Your ability to feel those calls quickly and be able to provide timely updates is really important. It’s gonna influence customer satisfaction there.
Similarly with your property owners. I was talking to someone, a property manager, a couple of weeks ago, he said that they have found this call center service and I automatically assumed that the service was there to answer support calls, maintenance calls that come after hours for tenants, and he said, “No, no. The number one source of inquiries is our property owners. When we send out those statements at the end of the month, when we send out those owner cheques, we get lots of questions about the amount even though we’re sending them statements. Most of our inquiries come from our clients having questions about the money, about the statement, and trying to understand the finances.”
Their solution, that property manager’s solution to making sure that he was responsive to those inquiries was to hire a call center that could provide that service when that call volume is highest. It’s critically important to be responsive and prompt. It’s a critical factor in terms of customer sat.
Jason: We’ll continue the interview in the next episode because it was really long. I chopped it in half, so continue on the next podcast. Thanks!