Today, I am talking to Andy Propst, who runs a national single and multi-family property management company called HomeRiver Group. The company is on a mission to become the first nationally branded property management firm in the country.

For Andy, he can’t grow his company fast enough and big enough. Learn more about what Andy did to grow so many doors, so quickly.

You’ll Learn…

[10:00] HomeRiver Group shifted to multi-family properties for rent investor products.
[11:20] Biggest opportunity for property managers is to build their own products.
[11:55] Rental demand is high, but supply is shrinking, which is bad for property managers, investors, and renters.
[12:30] HomeRiver Group is a matchmaker; it bring investors and builders together for build-to-rent projects.
[14:38] Builders want to build, so it is not difficult to get a builder to pay attention to you; find stats and information that tell a story and generate interest.
[16:50] If you want to grow your business and be successful, you can’t be passive.
[18:15] HomeRiver Group follows a specific workflow to make things happen; then people come to them.
[19:45] Property managers control the revenue, top line, expenses, and net operating income; you’re there to make a sale and be there after the sale.
[21:25] If you are never failing, that’s because you are never trying new things; don’t be afraid to fail.
[22:30] As a property manager, you know what tenants want and what should be done to produce the most revenue and income.
[24:00] Marketing is identifying a need and then supplying whatever it is to fit that need.
[24:40] Timing and difficulty of expanding to new markets; need the right people to execute tasks.
[27:40] Don’t consider expanding unless you are looking for a lot more work to do and get a lot less more money up front; eventually it will pay back, if you do it right.
[32:00] Identify companies to merge with; those with a similar culture, and forward thinkers who are adaptive and open-minded.
[37:20] Big companies vs. mom-and-pop shops: There’s room for both.
[39:25] Big differences exist between franchises and HomeRiver Group; franchises struggle with growth.
[53:20] Stop running your property management company as a paycheck model business; figure out how to build your business to sell it.



HomeRiver Group

Integra Realty Resources


Site To Do Business


The Art of Buying and Selling Property Management Companies

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Jason: All right and we are live. Welcome DoorGrow Hackers to The DoorGrowShow. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow Hacker.

DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it. You think they’re crazy for not because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income.

At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth hacker Jason Hull, the founder of OpenPotion, GatherKudos, ThunderLocal, and of course, DoorGrow. Now, let’s get into the show.

Today, my guest is Andy Propst. Andy, I don’t even know if I need to introduce you because everybody has been telling me that they know you. But there might be somebody out there that doesn’t, so could you tell us a little bit about who Andy is, where you at, and what you do?

Andy: First of all, thank you for having me on the show. This is great. I am an average father and husband, which I’m working on being a better one everyday. It’s a struggle when you’re trying to run a property management company, especially one that’s national property management company.

We have a company called HomeRiver Group. We manage about 13,500-ish doors in about 15 states, 20 markets. We do single family and multifamily property management, maintenance, brokerage, construction, and we are on a mission to try to be the first nationally branded property management firm in the country.

It’s a big challenge and it’s a tough balance between work and home, but like I said, I’m trying to do my best and just trying to give back to what this industry has given me over the years, whether it be evolved in NARPM, IREM, CCIM – the real estate management space in general is just a fantastic space to be in, as you know, and I’m excited to do this and wake up everyday.

I was actually talking to my partner yesterday. I said, “How many people would you know if you ask them the question, “If you had all the money in the world, what would you do?” I don’t how many of my compadres are out there listening to this podcast right now that would say, “I would do property management,” but I would do property management. It is what I love it. Some days I hate it; most days I just love it. I haven’t worked a day in my life, but I do a lot of work.

Jason: I don’t think anybody as a kid is like, “Man, someday I want to be a property management business owner.” Everybody has an interesting story of how they got into it. I didn’t foresee this someday I would be leading a culture and creating some momentum in an industry that I’ve never even had a business in. That was just not in the cards, I hadn’t even consider it. I didn’t even know what property management was until we started just naturally attracted some clients in this space. What was it that pulled you into property management? How did you fall into this?

Andy: That’s a great question and I’d love to find out. I’ll answer, but I love to hear how you found this business, too.

I was a missionary, a full-time two-year Mormon missionary in Russia and I got a letter from my sister. She was going to Portland State University, Portland, Oregon, and she said, “I got a job as a residential on-site property manager and I’m living at this place. I really don’t have to do a lot, but I get my rent free.” I was like, “That’s brilliant.”

When I got home from my mission, I tried to get a job in property management. Nobody would hire me because I was 21 with no experience. They said, “We’re looking for couples. We want a team, like you would do the maintenance and then your wife would do all the books.” I was like, “Awesome. I’ll just get married.” Three months later, I got married and I got a job in property management.

That’s what got me into the business, started in residential multifamily in Portland, Oregon. We started managing a 12-unit deal. We went to different property management companies and kept growing companies, and kept growing companies. Finally, we adopted a baby back in 2008 or 2007 and we moved to Boise, Idaho because we wanted to be able to have a backyard—we’re living in downtown Portland—for our little one-year old to play in.

We started this property management gig on the single family side, which is my first attempt managing a single family home back in 2008. We grew that company from 200 doors in 2008 to currently in Boise, I manage almost 5000 residential homes.

Jason: I believe we started my core company, OpenPotion, back in 2008. I actually met my wife, Ashley, in Boise. That’s where we met. I was at working for HP at the time and that was right after the whole financial mess happened with the stock markets business. I left HP and was working with her family’s company for a little bit, and they had all that turmoil because they were connected to the stock market and they did reverse mergers and stuff like that. So that went south.

I wasn’t getting paid so I was like, “Man, okay you guys are now a client and I’m starting my own business.” That’s when I created OpenPotion. One of first client was my brother who had just purchased a franchise, had no clue what to do in property management—he just graduated from college at USC Lusk School of Real Estate—with his business partner, they were like, “Let’s start a property management business. We’ll buy a franchise,” and they had no doors. He’s at about 1200 now.

Long story short, how I got into it was he didn’t like the website he got from corporate because it wasn’t very good. My degree and background is in marketing, so I was like, “Well, let’s make this effective.” I just took a look at his site and I helped him redo his. Then all of a sudden, all his other franchisees wanted what he had, guys with 3000, 6000 doors.

Suddenly, I had these amazing backlinks to OpenPotion and we were like this tiny David versus Goliath. There are all these bigger companies much larger than us doing websites and it was me. There was this whole business that was just me. I was essentially a freelancer—I guess you could say—and then this business started building around me and– focus more on being effective.

Back in that day, the largest call-to-action on the page was ‘Pay Rent.’ I’m like, “Do you have problems getting people getting rent or is that your main goal with your website?” They were like “No, I want business.” I’m like, “That doesn’t make sense then.”

A lot of it seemed really obvious to me, but it was new to the marketplace, so we just started building these really effective websites. Over time, we just carved out that niche and so we launched DoorGrow a few years ago. The first year, we were just figuring out what we are doing, but then we really got into what actually works in growing companies.

That’s the quick-and-dirty story, but we have some connection to Boise, man, I love Boise.

Andy: I do too, man, and so do a lot of people. It’s growing so fast. I was just talking to an investor today that back in 2010, 1 out of every 10 applicants were from out of state, and now it’s 9 out of 10 are from out of state. People are just moving here. I live in Meridian, which is just outside of Boise. It was the number one fastest growing city per capita last year, over 9% growth, which is just crazy.

Jason: Yeah. I had a house in Star.

Andy: Star is awesome. That’s growing too.

Jason: It grew so quickly. There were so many builders building out stuff that we couldn’t even get the house sold when we’re first trying to move out. We moved from Boise to California. That’s not as comfortable as moving from California to Boise, believe me.

I’m in California now, but man, I love Boise. Boise’s great. Great area. Anyone that goes there, it’s such a unique blend. It’s in one of the most conservative states in the US, but it’s the most liberal city in that state. There’s all this culture that’s coming in from California, from Colorado, into this, and there’s this health-conscious feel to the area. I could sell people on Boise. I like Boise.

So you started doing property management, you had phenomenal growth during that time period. Starting a business in 2008 and being at 5000 doors now, there’s plenty of businesses that’s been around that long. I’ve talked to some that are 50 doors and they’ve been in business that long. What is different about what you were doing?

Andy: Those people that have stayed at 50 and are continuing to do it at 50 probably are going to live a lot longer than I am. Everybody has their goal and my thing is we can’t grow quick enough, we can’t grow big enough, that’s not everybody, and I get that. It’s a challenge, it’s fun for me.

When we first started bringing on properties, it was really easy to grow, so in 2008, 2009, 2010, the phone would ring, we pick up single family homes. By 2010 we realized that there were homes that 2-3 years ago would cost $200,000 to build, they were selling for $50,000. We knew that those dollars or those numbers on those properties wasn’t going to stay there long, and that eventually all these reluctant landlords are going to move these products. They don’t want to be landlords, they don’t want these properties.

We continued to pick that stuff up, but we shifted our attention to some small multifamily projects, because that stuff is a little stickier, it’s long term, we got it with builders and we just started building rent, like actual rent investor products where we could put tenants in and there’d be a great return for investors.

We became hyper focused on investors. Hyperfocused on investor returns and then we went out with a message saying, “Hey, we can bring you these dollars and cents. If you bring us dollars and cents, we’ll bring these dollars and cents back to you faster than anybody else in a market that historically we collect 99% of the rent.” It’s a very safe market landlord. We pushed that message. It worked really well. I’d say 70%-80% of our total inventory that we manage in just the Boise market is stuff that was built from the ground up, new product that we built from 2010 to currently. That is the way we have grown quickly. That’s a model that I’ve talked about in the past to people.

A lot of property managers are having a hard time wrapping their heads around it, but the fact of the matter is, Jason, you know that the inventory is shrinking because of the hot real estate market and a lot of these investor and a lot of these investor markets. These investors are getting rid of these products and trying to move their money to other parts of the country where they can get higher returns.

One of the biggest opportunities for property managers today and the future is to build their product. Their rental product needs to come from somewhere and it’s not out there as readily as it was many years ago. It has got to come from somewhere. The National Multifamily Housing Council is saying that we need 3 million to 3.5 million homes in the next five or six years to keep up with pace. Single family build-to-rent properties are popping up all over the country. We’re doing a few of those.

The demand is there. I’ve seen rental demand as high as it is now, but the problem is our supply is shrinking. That’s not good for proper managers, that’s not good for renters, and it’s not good for investors because if you look on bigger pockets, when you talk to people that are out there trying to buy product right now, they can’t get their money in the market because there’s nothing for sale. Our strategy is to put the sticks in the air and make some up.

Jason: So is what you saying is there’s an opportunity right now in property management for those that can also become builders and actually start building out properties?

Andy: No, man. I haven’t built a single property in my life, but what I’ve done is I found the right opportunity, maybe there’s a piece of ground, there’s an investor with the need to go get return on his money, and there’s a builder out there that wants to build the product.

I’m the matchmaker. I bring those people together, I put together a nice performance and say, “Hey guys, if we come together and do these things, we’ll put in X dollars and then we’ll be able to take Y dollars out. If you do that so many times, we’ve probably marked up 20 build-to-rent projects since 2010.

We’re doing 3-4 lease-ups a year, small multifamily, single family products, larger multifamily, and that stuff is great because when you bring on that product, you typically bring out an owner that doesn’t have this kind of preconceived notion of how these properties should be managed.

Jason: They’re trusting you.

Andy: Yeah, from the beginning. That’s how it’s always done because that’s how we’ve always done it. We’ve taken over multifamily projects in the past. They’re very difficult to take over because certain things the owners liked about the way the old management company did, but they like the bunch of stuff that we’re doing, so they want to change our model. When you try to change our model, guess what happens? We start making mistakes.

There’s no better product in my mind to manage than stuff that you take on from day one. Build-to-rent project right out-of-the-box. You get the certificate of occupancy, here you go and you put in the renter, and then the tenants and owners love you.

Jason: Love it. This is probably a really great opportunity, especially in areas where places are growing, where there’s places that are building out, and property management entrepreneurs should be connecting with builders, creating relationships, and figuring out how they can entice them or seduce them into doing business together and playing that matchmaker role, so that you can help them become investors, not just builders.

What do builders want? I want to go down this channel just a little bit here if you’re open, so what do builders really looking for? How do you get a builder to pay attention to you, and get them interested?

Andy: Builders want to build. I don’t think it’s a difficult conversation to have with anybody that’s a production builder; maybe a guy that builds 25 single family homes a year and he wants to do something different. Maybe you have a guy that used to build multifamily in the multifamily going back in the early 90s, late 90s, and wants to get back into it. For you to say, “Look at your local supply and demand statistics. What is the survey saying? What’s your vacancy list?”

There’s a great resource,, it stands for Integra Realty Resources. Go to that website, pull down your market, it’s going to give you tons of information about your local market, what the vacancy rate is, what part of the cycle of your market? Are you in the expansion phase? Are you in the recovery phase? All of this information that you need to build a story to say, “We need this product and this is where we need it.”

You’ve got to go talk to a few, what we call, land hounds. If you have access to your local MOS, pull up a search that shows you who’s selling the most commercial or residential properties or land. Call that guy and say, “I’m a property manager. We have this huge lead, a huge delta between supply and demand, and I need a piece of property that’s going to fit XYZ model.

Then you have your owners, a lot of property managers, if they manage 50 or 5000, they have an investor base that rarely ever gets sapped. They can start calling these investors and saying, “Hey, we have this huge need in this market and we need money to build this project,” and typically, the money to goes down to these build-to-rent projects is, you need cash down to buy the land.

Once the land is bought, and you want to obviously buy the land contingent to city approvals or buy a land that’s already approved to be built on multifamily or a small single family. Once that’s done, you put the money guy together with the builder, you’re the manager, you help them get all these parts put together. Six months later, you have a product that you rent out.

That’s the very high-level, short, easy way to go about it, but as you’ve probably seen in this business, Jason, the guys who are not passively trying to build their business the way business used to come like that which is, I’m going to wait for somebody to click on my website, the phone will ring, and I’m going to get this sale, that’s not happening. That’s not going to work.

It’s a good strategy, you have to have a multi-pronged approach. But the guys that are growing their property management business the fastest are acquiring new units or they are figuring out a way to engage investors to buy their product.

Jason: They’re certainly not sitting on their asses waiting for business to come to them. They’re getting out into the marketplace and they’re creating it somehow. It’s this myth that people think they can go hire a marketing agency, hand them dollars, and in return they’re just going to have doors.

The best thing they’ll give you in returns is cold leads that are the most price-sensitive, probably leads–the worst leads as possible, and everybody thinks, “Well, those will be just like the ones I’m used to which is word of mouth.” They’re completely different.

This idea that you have where you mentioned there’s this opportunity right now, it takes builders, it takes what you call land hounds, these people with land, and then it takes owners or investors to finance, is there anybody else involved? Obviously, the property management entrepreneur.

Andy: Property management is really important. We have a workflow of all the different things that you have to knock out to make this thing happen. Like the first couple that you’ll do, you’ll make a bunch of mistakes. You’ll learn and you’ll get it better.

The funny thing is, once you do it once or twice, everybody says, “That’s the guy that does it,” so if you want to do it, you don’t have to start working on land hounds, you don’t have to start looking for builders, you don’t have to start looking for investors because they will start looking for you because there’s never been more money on the sidelines just waiting to be invested somewhere

It’s like the stock markets are inflated, they’ve been saving all this money because they’re initially worried about how are they are going to recover from the downturn, and now they’re feeling good about things and people are paying ridiculous prices.

I know there’s a lot of property managers that are real estate agents also. This is a great way to increase your brokerage revenue because if you go single family investments, fourplex investments, large apartments, somebody has got to sell those. Who’s better equipped to do that than you?

You’ve got the investors, you’re managing the property, and I found personally that these investors that are buying, they like being able to have the relationship after the fact. If you have a commercial broker that sells the property that says, “We’re going to perform at this property and we’re going to perform at 7% cap rate.” But then they sell it and it performs at a 5%, what recourse does that poor owner have to say, “Man, you made these promises.”

But if you are the property manager and say, “Here’s your revenue, here’s your top line, here’s your expenses, and this should be your net operating income or NOI,” and you’re the one that’s controlling all that activity, the revenue up the top, the expenses, and what their NOI is, they’ll feel really comfortable doing business with you because they know you’re not just there to make a sale. You’re there after the sell. Whatever you’re saying the property is going to do, who has more control over it than the property manager?

I found that that’s really easy to convince folks, and I’m not going to convince them to buy a product that’s not going to perform because again, I’m stuck with it. I’m going to be yelled at everyday if it doesn’t do a good job.

It’s equally skin in the game for the owner, for us. We have upside, owner has upside, but we have to perform because the owner has performed.

Jason: I love this idea and I love how you mentioned that we just start doing it and you’re going to fail, you’re going to mess up on a few instances in the beginning. One of my mantras is, we all start at level suck. That’s where you start.

My son just started learning to ride a bike, my daughter’s learning how to read. You see kids get frustrated, but they just keep going. That’s just part of the process. We all start at sucking at whatever we’re doing. You should see my first podcast episode. It was brutal.

Andy: It couldn’t be any worse than—

Jason: I’m glad you’re not the guest. His internet went down during it and he ran a tech company. I don’t know if I’ll ever get him back on the show.

Andy: No, you’re making a great point, man. If you’re not trying new things, if you’re never failing, because you’re not trying new things. Don’t be afraid to fail because there’s not a lot of upfront risk to doing this for the property manager because you’re not putting in thousands of dollars to buy their land or to buy the sticks and the bricks. You’re just matchmaking.

Like you said, you’ve got a guy that’s got money, he wants to invest it. You’ve got a builder that has all this energy and the ability to build a product that’s going to make this guy happy, and you have the most important part–any property is how it’s managed. You’re very important. You’re managing the building, you’re managing the owner, and you’re managing the people that are going in there.

Out of all those people, I don’t know how these projects don’t get built without guys like us. The builders are going to it and don’t have a property manager in their quiver, they’re guessing on what kind of finishes matter to the tenants. Well, how do you know, builder? You probably live in a 7000 square foot house in the nicest part of town. You don’t know what the tenants want. You don’t know what the unit make should be. You don’t know what the rent should be. You don’t know what the amenities are. What’s going to make this project the highest and best use for that particular area and produce the most revenue and income? Who’s better to answer those questions than guys like us, property managers who knows what tenants want.

There’s tons of resources out there. Like I said, IRR is one of them. The Tapestry, sites who do business. When you’re looking for these pieces and these opportunities to invest money, when you say, “This part of town really needs multifamily,” well go to, just the search area demographic tapestry reports and then make sure that the right people are in that area. It will tell you average family size, what people’s income is.

There’s another one that’s really great called NeighborhoodScout, because it talks about crime, it talks about schools, it talks about demographics, it talks about median income, average income, so then you can utilize these facts to build your story to sell.

Jason: GreatSchools, you can look it up on GreatSchools, they’ll show income in areas in school zones.

Andy: GreatSchool is great. That’s a free resource. You don’t want to go to a builder and say, “You need to build 500 apartments here and all will be five bedrooms.” You’ve got to make sure you know who’s in that market. That’s what marketing is. In my opinion, when there’s a need, you identify that need and then you supply whatever it is to fit that need. You’ve got to know what it is.

Jason: You can probably mitigate some of the risk when starting this out by simply making sure you get a really savvy builder on board and you get maybe even a savvy owner-investor to be involved because they’re going to bring some resources to the table, too, I would imagine.

Andy: Yeah, I would assume that they would have those resources.

Jason: Awesome. Yeah, that’s super helpful. That was a cool tangent to go down. Andy, tell us a little bit about what was involved in deciding to expand into other markets. This is something I see in property management a lot. You built up a massive company compared to most in Boise, and then you decided, “We’re going to make this bigger. I want to be a national company.” That’s what us entrepreneurs do. We have this crazy idea and we decide to actually make it reality and you’ve been doing that.

One thing that I’ve noticed in the industry is what I call premature expansion. You’ll see a property manager and instead of growing, expanding into a new market, simply because they are ready to do it, they’re like, “I’ve kind of maxed out this market. I’m at 300-500 doors and I can’t figure out how to grow anymore. It’s getting hard. So, we’ll just do what we’ve done here in another city. That will be easy.” Then they go and try open up a new market and they find it’s not growing there either, and they’re having trouble there, too.

Now they doubled all of their processes, they’ve doubled all their overhead, they’ve doubled their team, and the did not double their revenue. This premature expansion I see, this happens all the time, people get so tempted, because as entrepreneurs I think we see where everybody else sees problems, we see an opportunity.

We’re like, “I could fix that. I can make money solving that problem. I could do that.” Then we get distracted, we get deluded in our energy, in our focus. When did you recognize this was the right time to do this and what thoughts do you have around when is the right time to focus on expansion or hitting a new market?

Andy: I think expansion, as far as going into a new market expanding that way, is probably one of the most difficult things there is to do in a business just because just location, we greenfielded into four other markets. Property management as you know is so fragmented from city to city, state to state, it’s so much different, and what works here doesn’t necessarily work there.

The most important thing is getting the right people that can execute, because you can have the best systems in the world, but if you don’t have the right people to execute those things, it doesn’t matter.

We felt like we were getting close to a critical mass and I saw an opportunity. This is property management, it is one of the last businesses in the world that hasn’t had any type of a roll-up strategy. It hasn’t been really institutionalized especially on the single family side. I saw what was happening with these institutional investors and the need for people to exchange properties in one part of the country and move to another part of the country based on where those markets were at, and there just wasn’t a good apparatus for that.

This opportunity came, so I have merged my company with two other companies and now, obviously, we are building this national property management platform, but to get back to the original question, the expansion thing is I wouldn’t even consider expanding unless you’re just looking for a lot more to do and get a lot less money upfront.

Eventually it will pay back if you do it right. But it is very difficult unless you have somebody in your organization that says, “You know, I’m in Boise and I’m going to move to Kansas City,” and they’re the best employee of all time and they happen to be a licensed broker in Kansas City, you say, “Man, this is a great opportunity for us to expand.” But to go out to a new field, hire somebody…

The reason that we’ve expanded in these other markets is because we’ve had investors in our portfolio here that says, “We don’t want anybody else to manage our property. We have 100, 200, 300 properties in this area, and we want you to manage them. Could you go do that for us?” We figure out how to make that happen. But for us to go out and say, “We like this market a lot, we want to expand at that market.”

In Boise, there’s 45,000-55,000 residential rentals and we manage 4000-5000 of them. We’re almost at 10% market share. There’s still 90%. We could still grow more, but if those opportunities weren’t there, there’s probably a good chance we wouldn’t have greenfielded those areas. We would have found a good operator in those locations, teamed-up with them, bought their company, and then help them grow with some of the systems and the people that we have. Unless there’s a critical mass of properties that is going to entice you to go to that market, that type of expansion is a really hard sell for me.

Jason: I have to agree. I’ve seen people close those second businesses or second markets several times. Even guys with thousands of doors.

Andy: We have market number two. Would you buy that? Market number one, we don’t want to sell, but we have this this other market and there’s 500 or 600 doors there and you saw me last year and I had a beautiful set of hair, and now I look like with pockmarks and no hair, and that’s all because we went in and we saw the market.

Jason: The scenario you explained, unless you maybe have a new team member that could go off that is a broker in another city, and is ready to do all these, the odds of somebody that is in an employee-type of position, then running a whole entity in another area is also pretty rare, that that’s going to work out. It’s just a different mindset.

Andy: That employee has got to be like number one or number two to even consider it. Some person is that is a property dealer that earns $35,000-$40,000 a year and says, “I’m going somewhere…” I’ve seen companies do that—I’ve been around a while—and again, they’re either shutting those doors especially now that 8 out of 10 property management companies, they’re the ones that I’m talking to nationally are either not growing or they’re shrinking because a lot of those inventory doors are being sold.

It doesn’t seem like without some crazy opportunity that makes total sense, I would run the numbers over and over again, 10 ways to Sunday, looking for a reason not to do it versus trying to force a reason to do it. That’s the importance of having a CFO-type in your business that can really help you analyze that data.

I am not the CFO type. I’m just like you, Jason, “Oh my God, awesome opportunity. Go do it.” But before I say that, I’m like, “Awesome opportunity,” but before we go do that, we should have Ross, the CFO underwrite these numbers to make sure this works. Or maybe we understand that this is going to be a negative cash flow situation for 12, 18 months before it turns into a positive cash flow situation.

As you know, man, it doesn’t matter if you’re in your primary market or you’re looking at a secondary market. If you don’t have that growth driver in that location, you’ll never grow. You’ve got to have somebody that is trying to grow that business, not just sitting back and waiting for the phone to ring.

Jason: A couple of things I want to ask you about related to this. You mentioned initially, you merged with two other companies and I’m guessing then that was your strategy, merging with other companies that were already doing really well. How do you identify which companies are welcome to the HomeRiver fold? What’s your criteria that you’re really looking for? Maybe there’s some listening, and they’re like, “Hey, let’s get on board with HomeRiver group,” but what’s your strategy for deciding who’s worthy of being part of the HomeRiver group? It sounds like you have had some really awesome people come on board with you.

Andy: Probably one of the most respected and loved property managers that I know of. We’re hoping to close that business. I can’t tell you who it is, but we’re going to close the property management company in one of the southern states by the 15th of this month.

I’m really excited for that. That will be huge, but we’re looking for great, culture-fit, good people, people who are running their business, forward-thinkers, open, adaptive, because everybody that has a successful business in property management, they think that’s the way to do it.

To buy a company and say, “Hey, you do all these things really well, but there’s a few things that we can help you do better,” but they’re just completely closed-minded to do those things, open-minded they’ve got egos. Those kinds of folks, probably not the best fit. We want people to say, “Look, all these things I do great. I’m going to help the mothership with these things. But the things I’m not so great at, I’m going to have the mothership help me with those things.” We’ve consolidated stuff like human resources.

Property managers are generally bad at human resources. You have people that do that and it allows us to focus on growth and adding more services. We’re typically looking for companies, 800 doors or larger and the reason we’re looking for larger companies is because to underwrite and buy these companies, it’s very expensive to do it really. To really to understand where their business is at and to put a proper valuation on the business and I feel like we are buying these companies at a very competitive market price or better.

Jason: Qualify larger. Is this like a 2000-door companies or $4 million revenue? What do you define as larger?

Andy: I think the minimum is about 800 doors.

Jason: Okay, 800 doors is a milestone in its own right. There’s a certain level of change that occurs even between 600–800.

Andy: Yeah, 800 doors we have a second tier of management in that level and maybe you have a part-time CFO, you’re doing things, you’ve got some systems in place. It’s really hard to fake it until you make it 800 doors.

Again, the reason that we are looking at that number is just because of our acquisition cost. It doesn’t make sense for us to buy a 200-door company as a platform because we have two different models. We have the platform model and we have a portfolio model.

Portfolio is just, “Hey, I’ve got 300 doors and I don’t want to to do this anymore. Can you buy the doors?” We do that all the time, but if we’re going to have a platform, the person who’s going to run that market or run that state, we’re looking at that person to have about 800 doors, and then we value the company and then we pay them based on the EBITDA multiple to keep them “skin in the game” is that we require all of our sellers to reinvest in HomeRiver Group up to 25% of their equity in their business.

So 25% rolls over into HRG, it gets tax deferred, it takes 75% in cash and they put that in a bank account or do whatever you want with it, but then they’ll stay on typically on an employment agreement and continue to help us run that business. We’ve done a handful of those acquisitions and a handful of those portfolio acquisitions over the last two years.

Jason: By pulling these companies into the HomeRiver Group fold, you’re getting access to all of their IP, their processes, the things that are there because all of them are probably particularly brilliant, more so than the others at one aspect at least. You guys are like the Borg at Star rolling these guys up like you’re unstoppable, it sounds like, so that’s awesome.

Andy: That’s what we want to be and we want to build that great brain trust, “Hey, this is what I do better than anybody else. Maybe for me, it’s the build-to-rent model.” Andy knows that, nobody does more build-to-rent property management than Andy does. Well, that’s my area of focus to help grow the business. Somebody might be really good at driving ancillary revenue, somebody might be really good at technology and rolling up KPIs. So we leverage—

Jason: HR, hiring.

Andy: Yup.

Jason: Got it. You’re able to bring that, too, this business that you’re bringing into the fold as well. They’re getting access to all this. It sounds awesome. Other people have a different model than you, and so I wanted to touch on this because this is something that is interesting or people are curious about it. There’s probably a lot of property managers that are a lot smaller than you. They are going to hear the show and they’re freaking out like, “HomeRiver is coming for us. They’re going to eat us all.” First, what’s your feeling on the big companies versus the mom and pop shops, and how they fit into the marketplace? Is there room for both?

Andy: Absolutely. There’s plenty of room for the bigger companies just because there’s not a lot of bigger companies out there. As more light gets shone on single family rentals as a legitimate investment for Wall Street, there’s going to be a need for bigger companies in this business because not all of these companies want to internalize. There’s smaller, like the midcap institutions that want to get into the business, they want to buy some assets, but they don’t want anything to do with the management.

There’s not a lot of HomeRiver groups out there that will perform in multiple locations and put it all under one single consolidated statement. But there are mom and pop investors that are good people. They don’t shop at the big box stores. They go to the city center on the weekends. Those are the same people that are going to be wanting to to talk to the mom and pop 200 and 500-door guy in Grand Rapids or wherever.

Jason: They’re looking for the personal local person that’s going to be holding their hand. It’s similar in real estate. We seen these big box franchises come into different markets, in smaller towns, or even in some larger city markets. There’s still some outside the franchise model that are crushing it and the franchise penetration has been really small, I think percentage-wise in brokerage, and that’s been around forever. Property management, I think the franchise side has struggled even moreso.

I’d love to compare that. What’s the franchise model versus the HomeRiver Group? The franchises seem to be folding up, all of these smaller property managers are struggling, not being able to figure stuff out, they’re snatching these people up into the fold, and then you guys have a totally different model than that. How do you see franchises versus HomeRiver? How does that weigh in?

Andy: It’s interesting because I’m pretty good friends with the main guys that have the franchise companies. I won’t name names or whatever. I was talking to one of them one time and they get phone calls like, “I was talking to a potential franchisee, applied for a grant to get a franchise and they were talking to me or Subway.” Can you imagine what’s the difference in wanting a Subway or property management?

But then they said, “We have this grant. We want to invest in a business and Subway property.” Those are the kind of conversations they have. A lot of these franchisees get into the business because they want a recurring revenue model and they need help from the franchise. The franchise org comes, brings them in, trains them how to do it.

Where I’ve seen the franchise model struggle is not the people the people they bring in, not the service that they provide, it’s the growth. It’s hard to start a property management company without a lot of those contacts, some type of a growth model in place. They don’t know how to get units and if the franchise were on this podcast, they’d agree. I don’t think I’m saying anything that they disagree yet.

We are saying, we are looking for established property management companies. You don’t need to pay us anything. In fact, we’re going to buy the units that you have or the company in whole, and then we’re going to allow you to continue to operate basically the same way, but with more resources.

We’re going to take all the things out of your business that are a pain for the local operators—like I said, human resources, benefits, all that stuff—we’re going to provide that service for them, get them more resources, get them better pricing, and they’re buying in, like I said, 25% of their equity into our company.

They’re very different. But at the end of the day, HRG will own 75% or more of that business, so if it comes down to it, the franchisor can say, “You need to do things this way,” but the franchisee has the decision to do it or not.

We say we have to do things this way because we are the majority owner of that business—typically, that’s how we have to do it—but not that there would be a conversation back-and-forth of what not might work the same in this market, we understand the intricacies of property management. They’re very different in different markets. There’s a big difference between us and the franchise model.

Jason: My perception of the franchise model—this is how I got into this space—was helping franchisees and I thought it was so strange that I was helping them figure out how to grow their companies and the franchise wasn’t.

The franchise wasn’t too happy that I was doing this, by the way, like they stick lawyers on me and stuff like this. I thought it was really interesting to see that they’re selling this idea for tens of thousands of dollars and people are buying into this thinking it’s going to give them a business, and then they have systems and processes, maybe some documentation and some legal support, but then they have no idea how to make money, like they actually generate revenue and go out and create business.

What I think is interesting is that franchises often attract these opportunists or people that are maybe wanting more safety and certainty, whereas true entrepreneurs, they just go and create stuff. They don’t want to have control, they don’t want to be giving up a piece of the pie to anybody, they want to figure out how to make it work, they will take risk, they will stay up the late nights, they will figure out how to make it work, and what ends up happening is what I’ve seen in the franchise market is that it attract a lot of business owners that really probably shouldn’t be business owners and they fail.

The ones that really do well and succeed in the franchise, they’re the ones that I can tell would have done great without it. They would have done just fine without it.

I think one of the big franchises just sold, and I am seeing a lot of the large franchisees get out, they’re leaving, and that they’re rebranding their companies, they’re changing, and it’s like, “Why am I still giving up a certain percentage to this entity, when they help me get started but what have they done for me lately?” It becomes this question.

My perception of the industry is that over the last 20 years, property management industry in the US has really not moved very far. Perception-wise, awareness-wise, it’s really a struggle and one challenge that’s held that back is everybody is trying to focus on the existing market share which is small, and everybody is competing doing all the same marketing—pay-per-click, SEO, and sliding in the red water with each other—and that’s held it back. The other thing that’s held it back a bit has been franchises that are also doing those same things and getting people to buy into it, and that has caused the whole industry to suffer.

What you’re doing is very different than what the franchise model has attempted to do, and some of the franchises have actually switched like Renters Warehouse transitioned. I had them on the show talking about their acquisition process.

Andy: That’s right. They started buying some of their franchisees and RPM—Real Property Management—they just sold to The Wire Group. Our private equity partner that help us put HRG together originally, they own The Wire Group.

The Wire Group, if you’re not familiar, they have Mr. Appliance, Glass Doctor, Mr. Handyman, and now they have a property management franchise arm. I don’t know what that’s going to look like long term. Obviously, The Wire has a lot of resources and can do a lot of great things because they have this massive franchise model that does all these different franchises. It will be interesting to see what changes they’re going to add to that business.

Jason: Yeah, that will be interesting.

Andy: As you know, property management, you compare Mr. Appliance to Glass Doctor. That’s a very different franchise model for sure.

Jason: Subway sandwiches is a very systemizable thing versus property management. You definitely can have systems, but there’s always going to have to be a certain level of expertise that’s involved in there.

Andy: I think to try to institutionalize and just make one system and try to roll that our nationally and say, “This is how we do it. This is the only way to do it,” it’s going to be a huge fail because it just won’t work. Making sandwiches is a lot different than underwriting properties.

Jason: Yes some of these tech-based companies have also started coming in. A couple of nerds get together and they’re like, “Hey, let’s program property management,” and we started to see some of those folding and going under. It’s like, “We’ll just undercut everybody, we’ll nerdify it, and it will be amazing.”

Andy: And has it worked?

Jason: Yeah, it’s just not working. Interesting stuff. Andy, man it’s really cool I could probably jam and talk with you all day, but what’s next for HomeRiver Group and what would you like to get out of this? If there’s somebody listening that might be a fit for what you guys are looking for, and maybe we’ve gotten them drooling just slightly and they’re interested in pairing up with HomeRiver Group, how can they get a hold of you or how can they help you?

Andy: I always need help, but that’s not why I’m on your show. I wanted to talk to you and we know how difficult property management is. There’s people out there struggling everyday and a lot of it right now is growth challenges.

If there’s anything I can do, like I said, property management has given so much to me. Every one I give to property management, property management gives me a hundred back. There’s no secrets here. I don’t think there’s a lot of secrets in property management, it’s all execution.

People go to these conferences, they might hear a nugget or two, but then they get back into the busyness. A lot of the conversations I have with entrepreneurs that are maybe looking at an exit, it’s typically not because they’re retiring—which is obvious, we bought people that are on the retiring end of their business—but it’s like, “Hey, I’ve got to a certain point in my business and I feel stuck. I want to be part of something bigger. I feel alone at the top of this heap, and I want knights at the round table around me to help me be better, challenge me and all that stuff.”

Those are great people that we like to talk to. They need help with the next step. I found myself in that situation on a regular basis running my own company and then the people that are, “Hey I’ve been doing property management a long time. I don’t want to do this anymore. I just want to get rid of my property management accounts, and I don’t want to to this anymore.” Those are great people to talk, too, because we have that multi-pronged strategy of buying platforms and buying portfolios. Those are the kind of people that we’re looking for. We have a lot of people that are wanting to talk to us about this already.

One of our biggest problems, Jason, honestly is to get enough analysts to analyze their businesses to give them a valuation. I talk to everybody. Only in markets that we’re really targeting have we had any type of outbound strategy, a lot of people have approached me like Bob Machado. I don’t know if you know Bob Machado. He was the past president of NARPM, he was president in 1995, he’s managed around 3500 doors in Sacramento. We purchased his property management company about six months ago, and Bob came up to me and said, “Hey, I want to retire. I don’t want to give this to my kids because I feel like that’s way too much pressure on them. I’d rather take a bunch of chips off the table and then give them money when I die versus give them a property management company that they might not necessarily want,” and so, it gives him a better exit strategy than putting all this pressure on his kids.

For some people, that’s their exit strategy. Give it to the kids, have the kids pay me, or get paid now and pay the kids later. I don’t know what the right thing to do is, but we just like talking. I love property management, I love talking to property managers about anything.

Jason: I love it. What you’re doing is you’re bringing something new to this space where the option before was either work with companies like myself, or just buy a franchise, or figure it out. You’re able to help some of the top tier in the property management space be part of something bigger which is phenomenal.

One of the challenges I see within the franchise industry is that eventually corporate interest will somewhere misalign with the franchisees. We saw Burger King Franchisees Association sue Burger King. Most franchises have a franchisee association which is almost like a NARPM or a Chamber of Commerce or something.

Andy: Interesting fact: OMG, which is the Organization Management Group that runs NARPM, Gail Phillips, I don’t know if you know Gail, but her company OMG runs the NARPM association. She also, her same company, run the franchise association for Hardy’s. Just like you’re saying.

Jason: Okay.

Andy: Yeah, it’s pretty cool.

Jason: I did a website back in the day for the Jack In The Box Franchisee Association, and after working with a lot of franchisees in property management, I was like, “Why don’t the franchisees in property management—even though I’m hearing them complain about their franchise heads all the time in corporate—have a franchisee association?”

They were able to bypass that by getting all the top franchisees on their board. So the people coming in new, they don’t have the weight and the clout, and they were able to squash any dissension really quickly.

But then what ends up happening is, you end up with four franchisees from the same franchise in Vegas, four of the same franchise in Chicago, and they’re competing with each other, and they’re not allowed to expand into other markets without buying another franchise.

Every franchise eventually hits some capacity in which they’ve already had penetration or already have all their markets sold, so they have to start overselling markets. I think that’s coming with some of the newer franchises. It will be interesting to see how they transition because eventually, corporate’s number one interest is to make money and sell franchises typically, and then the franchisees’ interest might not be that. It’s to make money and food on the table.

What you’re doing to bringing something new to the space. It’s another option and I appreciate that. What you’re doing sounds really cool. I’m really good friends with Clint Collins, who I know got involved with your guys.

Andy: That’s right and you know what? Clint actually at one point, they bought into a franchise model. Those guys will try anything. That’s what you’ll love about the Collins brothers.

My one thing that you can do for me is basically allow me to say, the one thing I’d love to have a conversation with all property managers is, stop running your property management company as a paycheck model business and figure out how to eventually build your business to sell it. I think 9 out of 10 property management companies, they just look at creating a paycheck and that’s unfortunate.

These are businesses that, if you have a level of entrepreneurship blood in your body, there’s so many different things you can do. It’s such an easy business to be distracted, but get together on a quarterly basis with a CFO type and say, “What am I doing right? What am I doing wrong? What can I do to drive more revenue to this business, not just to line my pocket, but to reinvest it in the business, and eventually one day be able to give it to my family members, sell it to somebody, maybe sell it to HomeRiver Group.”

I don’t know, but don’t just build the business to pay your bills. I see so much of that happening and there’s a lot of education that we could offer to the Joe Schmo property manager that is running their business to pay their bills.

Jason: There’s definitely a difference between an entrepreneur that has consigned themselves to survival versus one that’s in momentum. That’s one of our core values at DoorGrow is to eliminate constraints to create momentum for ourselves and for our clients. If I find entrepreneurs when we can give them momentum.

These are the two states. The rest of the world is like, “Am I happy or am I sad?” Entrepreneurs, we’re like, “Am I on fire and alive in momentum, or am I frustrated and stuck somewhere?” That’s really how we look at the world and if we can keep our clients, if we can keep people in the property management industry in a state of momentum, and if the industry is in a state of momentum, the entrepreneurs will be thriving and will take new risks, try new things, and the whole industry will change for the better.

That’s […] what other entrepreneurs are doing inside our DoorGrow Club group, and we’re just allowing the entrepreneur in on Facebook, and seeing how this is changing the industry.

Andy, thanks so much for coming out on the show.

Andy: Thank you for having me.

Jason: Any other quick tips you think some of the struggling property managers should focus on in order to grow their business before we let you go?

Andy: No, man. Just if you’re not a part of that DoorGrow Hackers Facebook page, it’s time to get on there because there’s some really good people on there, a lot of great content being shared. There’s a million ways to do this business, but there’s a million resources for you to do it better and that’s a great resource to do it better. Appreciate you making that happen.

Jason: Awesome. Andy, thanks so much for being on the show. Appreciate you being here.

Andy: My pleasure. Good to see you.

Jason: All right. Awesome. Make sure you check out Andy and what they’re doing on the HomeRiver Group. If you are not a member yet of our Facebook group, it’s free. Go to We only allow the business owners in, the executives of the business, the decision makers, the entrepreneurs. We want them to feel safe communicating about everything else that’s going on in their business, so we’ve created that place for you.

You have to apply to get in and share a little bit of details about your business so that we know that you are who we’re looking at. We actually go and check your website, we check your about page to see that you are the business owner, and do that stuff. We usually turn down about half to two-thirds of the people that apply to join the group. The group has at this time, as of the recording, we have about 1200 members and the group is just phenomenal.

We’ve got just several amazing people that are involved in NARPM. We’ve got several amazing property management entrepreneurs that are just contribution-focused. We’re creating a culture in there in which the industry is focused on collaboration over competition.

When you have a business category like property management in the US that is struggling for awareness is relatively new when it comes to business categories in the US. There’s only so many business categories in the US that are new right now. There’s marijuana, vaping, cryptocurrency, but there’s also property management. It’s just been sitting there dormant, waiting to grow like a seed, and there’s so much potential. We’re not even close to hitting the potential that property management can impact and have on the the rental market in real estate.

Get inside the DoorGrow Club group and feel some of that momentum that we are bringing there and then make sure you check us out at I appreciate you guys taking time to check out the show and if you’re listening to us on iTunes, be sure to subscribe so you don’t miss episodes. Check out our past episodes and give us a review on there that really gets me excited. This is kind of a niche and I love seeing that we’re having some positive impact, so help me out there just a little bit, I’d appreciate it.

That is everything for today. Thanks again to Andy Propst. What an honor to have him on the show. Really fun guy to talk to, and as I always say, to our mutual growth, I’m Jason Hull with DoorGrow and I’m out. Bye everybody.