Scaling to Success: Rebecca Halton's Expert Insights on Property Management Growth and Rent Roll Acquisitions

In this episode we talk about the secrets of successful rent roll acquisitions and property management growth strategies with Rebecca Halton, CEO of LJ Hooker City Res. 

Rebecca returns to delve into her personal journey of navigating four substantial acquisitions within a mere two years. From the trenches of integration to the challenges of scaling, she offers invaluable insights on maintaining a well-equipped team poised to handle a surge of properties. 

Experience firsthand how Rebecca's strategic foresight in balancing workload and staff capacity has forged a path for sustainable expansion, all while keeping team well-being at the forefront.

This episode isn't just about growth; it's about mastering the art of communication and process optimization in the face of significant portfolio expansions. Witness the intricate dance of welcoming new clients, melding systems, and ensuring a seamless transition that safeguards organic growth. Rebecca shares her tactics for enlisting experienced staff from acquired properties to nurture investor relationships and discusses how to judiciously involve your current team. We tackle topics from inspection team workload to trust account management, and get armed with strategies to sidestep the dreaded acquisition fatigue.

With a focus on the evolving landscape of the industry, from the trend towards larger agencies to the strategic reinvestment of sales revenue, this episode is a treasure trove for anyone looking to thrive in property management growth. 

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Transcript

Speaker 1: 0:26

All right, super excited to have a repeat guest back on the show, rebecca Hulton, welcome. Hi, ashley, how are you Good now? Beck is the CEO of LJ Hooker City Rez and normally I would say to you go through and give us a history and you and all of that. But I reckon most people will know who you are and they can probably easily Google you as well. But I put on my post yesterday that you would be one of the best sort of business owners, best run agencies in Perth with LJ Hooker City Rez, and I am always enjoying our catch ups and your experience when it comes to operating a team and staff and especially buying red rolls, which is what we're going to be talking about today.

Speaker 2: 1:20

Excellent. Yes, thank you. That's very kind words. I don't know if we run that well, but I'm sure we try our best. You are you are Now.

Speaker 1: 1:29

We've got a couple of guest questions which I thought were fantastic, so we'll get into those a bit later. But can you go through and talk to me about how many rent rolls or acquisitions you have done during your time?

Speaker 2: 1:45

Yeah, sure, during my time. I'm not sure I can probably talk about the last two years, which is probably relevant. So in the last two years we've done four acquisitions, two of them so 2023, we did two that were at 500 properties each, and then the year before we did two smaller ones, so we did one at 120 properties and one at 200 properties. So, yeah, over the over the two years would be four acquisitions, two of them quite sizable.

Speaker 1: 2:17

So, out of curiosity, is there a huge difference with a 120 versus a 500, or is it a similar workload?

Speaker 2: 2:29

No, definitely not a similar workload. So I feel with the 120 and the 200, our business, the size of it is, they can just plug in and go. I can usually disperse them over my current team and because we never we try not to ever run at capacity, so I always try and have some room for growth and I think I've said it to you before I get really concerned if our team is in a headspace of we can't take on any more properties. It's just such a business killer. So I'm always trying to, whether it's just employing a person just to have there or keeping the portfolio sizes a little under where the capacity is, so if something comes up we can act on it pretty quickly.

Speaker 1: 3:15

Do you know what that's so good that you mentioned that capacity, because I always try to run about either used to be half a person or a person sort of extra in the team, and just recently we've had two people on leave and then one of those people that then the leave was being covered by someone in the office who had to urgently leave overseas like within 24 hours, and then it was, and in my mind I'm thinking, thank goodness I have capacity and I was able to sort of get some people to help out without any stress on the rest of the team members. But so many people don't run with that capacity, do they?

Speaker 2: 3:55

Yeah, look, I think one of our biggest recruitment tools for property management is when you go away. You go away, we've got a person to cover you, and to think that is such a novelty for property managers because most of the teams are big enough to carry that extra person. But we've got. You know, we've got 45 staff members in our business, so we need to have extra people because there's always someone on leave always, if not two.

Speaker 1: 4:24

Yeah, absolutely, yeah, exactly. So can you talk about what initially sparked your interest in buying rent rolls as a growth strategy versus having a strong sort of BDM plan?

Speaker 2: 4:37

Yeah. So we've got both, and up until probably the last year or two, organic growth was hard. There wasn't a lot of investors coming into the market, as you know, and that's definitely changed. So we've still got a multiple BDM team. But when I looked at what our goal was, we were never going to do it organically in my lifetime, Like it just was never going to happen.

Speaker 2: 5:02

So as you get bigger, obviously you lose a lot more properties as well as the percentage. So we had to look at one BDM. A good BDM will keep us at a neutral point. That will keep our rent roll neutral. Second BDM is all growth. Third BDM, before BDM growth. But for us to be able to afford to employ good BDMs and pay them well, we had to get the income in a lot quicker. So we just we looked at it as the strategy and interest rates have gone up a bit now, but it's still money, still not that expensive to borrow. So we looked at it and thought, okay, well, how many can we purchase and acquire and what does that do to our bottom line and how does that? What can we do with that money to help that organic growth? So that's just the ecosystem we're working in. All the money that comes out of these, all the profit that comes out of these acquisitions, is going back into organic growth. You know what I love?

Speaker 1: 5:58

You didn't change your goal. Your goal was the same.

Speaker 2: 6:03

I've always been the same. I remember telling people and they're like that's crazy. And I'm like, yeah it is, but we'll get there. Whether we do or not, we'll be close.

Speaker 1: 6:13

I'm sure we'll get there, can I tell you, and I know what your goal is. But it's well, I think it's still the same goal. But I love that. It's like I strive to get to your goal, like it's your goal, but it doesn't allow people the energy and the motivation to go. You know what that can do it. Maybe I can give it a good old try as well. So it's.

Speaker 2: 6:33

If I can do it, you can definitely do it. I'm a rookie in the PM space but I love the growth side. I do love it.

Speaker 1: 6:39

Yeah, and what is really interesting and I'm just recognizing, maybe what I'm doing wrong is that I love how you've set your goal and then you've worked out okay, well, to do that, I'm going to have to, you know, have this many BDMs and and do this many acquisitions. Where, where I think I've gone wrong is I've created my goal based on my goal, based on my BDM and how much lead, how many leads we're bringing in, and I've just gone, oh, okay, well, if I can bring in, let's just call it 200 or 300. My and I based my goal on what we're currently doing, where I actually don't look at it the way you have. We've gone. You know what. This is actually the goal and this is how I can get to it. I've actually done it very weak, like.

Speaker 2: 7:23

Yeah, you've done the safe way. It's very safe. You've set your goal around already. What you're doing, and that's. I don't think there's anything wrong with that because you're doing phenomenal business, but it it for us, it's like okay.

Speaker 2: 7:33

Well, you know, we're in a very similar situation where both our business partners you know Frank's definitely retired and and then I'm like, well, what, what, how do I grow it to where I need it to be? And then I can get out like, and it's unfortunately in 43 now, not much 20s or 30s anymore. So so I want to be aggressive with the growth, so I get the years of enjoyment out of it as well. You know, I want to be sitting there in in 10 years and and be Frank, to be honest, like I want to go. Well, I don't have to work for a great team around me, but I still love the business. So, yeah, it's.

Speaker 2: 8:13

I think you've got to be really aggressive in your goals. And you know when, when I look at business growth and acquisition, there's a lot of people who are scared of acquisition. They're scared of the merge, the process, the debt, the what if it doesn't work, what if this, what if everyone leaves, and, and that I think I always find the best opportunities come where there's least competition, you know, and that's for me it's like well, who's actually and excuse me who's got the grit to get stuck in and make it happen and do it fast?

Speaker 1: 8:45

Yeah, yeah. So when you are looking at buying a rent roll, what are the key criteria for choosing which ones to pursue? Like, are you looking at lots of different locations, management styles? Like, how important are all these factors for you? Look, to be honest, it's not.

Speaker 2: 9:03

I feel like rent rolls don't come up all that often. It goes through waves Like I've got really good relationships with all the brokers I've. Also, I spent last year, in the year before, I was very insular and didn't really do a lot of industry stuff, whereas the last few years I've spent going into lots of industry events and building relationships within the industry and really listening for is that person ready to, you know, get out? Or they got some pain points that maybe if we merged I could help. So it's not really what I look for in terms of that portfolio. I look for the opportunity and then I'll go through the portfolio after that.

Speaker 2: 9:42

So when the portfolio, when an opportunity does come to me, I look at, you know, one of the rents, first the average rent, like is there some room? Generally, I find when a portfolio goes on the market, it's not running out at top to minimum, which I don't think is a bad thing. If you've got a good team, you only pay for what it's bringing in at that point. So so what, is there room to get some growth straight away with some good, you know rent reviews? I guess would be the first thing. And then the second one is definitely. You know you do once. You only get a snippet when you make the offer on a rent roll. So, and then you get time to do due diligence.

Speaker 2: 10:25

So that's when I look at okay, what's the arrears like? Or the management? The management authorities don't worry me because the seller has to get them signed over anyway. What are the? What's the fee structure? You know, is it in line with ours roughly? And then generally I look at if it's run because we don't do end-to-end property management, we've got a bit of a different setup I always look at well, it's pretty much, how many people would I need to run that number? And then, if so, if it's say, if it's bringing in a million dollars revenue and I need two people to run it, you know that's say $200,000 in your salaries, maybe a couple of expenses, say $250,000. That $750,000 pretty much goes to our bottom line. Yeah, so that's that's as basic the numbers are, because we don't need bigger office space, we don't need anymore. We might need another VA, but that's like 25 grand a year. We might need another leasing person. So I just look at that and go, well, does that bottom line? Does that make sense? And it's generally a yes.

Speaker 1: 11:38

Yeah, so one of the questions we had on Facebook was out of the acquisition process, would you say it's better to retain existing staff from the office you purchased the rent roll from, or hire new staff and train them with your systems and procedures?

Speaker 2: 11:58

Yeah, so, yeah, look, I think if it's your first acquisition, if you can absorb it into your current team, there's obviously more bottom line in it. If you need to bring someone over and they're a good property manager with good relationships, that also helps retention. That's normally not a problem. We've done one where we've bought a property manager over just for six months. They wanted to get out, but we bought them over for the retention period to settle the portfolio in, and then we've just dispersed it across the others when she left. Look, it's like any recruitment depends on the person, depends on if they're willing to change, because we do do business so differently. But that's why I'm always trying to stay one or two people ahead so, for instance, they could come in and once the portfolio comes in and settles and if that's taken up, one of my spare people I just make sure I recruit straightaway for an extra staff member and then get them all trained up ready to go so I can do another acquisition.

Speaker 1: 13:34

Have you purchased a rent roll where you haven't kept any of the staff and it's yeah, yeah, and that's worked fine.

Speaker 2: 13:42

Yeah.

Speaker 1: 13:43

Do you tell those clients straightaway, like with your new systems and procedures, or do you be a bit more delicate or is due to just going? Yeah, wait to get you to know.

Speaker 2: 13:53

Yeah, look, it's hard. We try and be really upfront and honest, but we're not talking to the clients until they're signed. So when the selling agent is ringing those clients telling them that they've sold the business and introducing us, it's a sales call, right. So that business owner is saying they're award-winning, they've got great this and that, and so they're basically selling our services to them and we just ask them to leave it by saying, once the management's signed, someone will be in touch and they'll run you through everything that you need to know. So it is, look, it's just a hard sell when you're doing it on scale, when you've got 500 owners, on that first end of month, I tell you, you get 500 emails because they can't read their statements, or there's money that's not come over, or there's always, but it's only. I find after two months all rent rolls are settled in.

Speaker 1: 14:55

Yeah, yeah.

Speaker 2: 14:56

Yeah.

Speaker 1: 14:57

So have you noticed any direct link with the organic growth when you acquire property, so as your portfolio gets larger, does that improve the organic growth or is it a? Big market share with market conditions.

Speaker 2: 15:12

No, 100%. So one of the portfolios not the recent one, the one before that we did we've had big organic growth because and to be honest, we bought the senior property managers over and they've always had good relationships, so they've got good investors who are reinvesting. So that's been excellent, tremendous actually. On top of that, and then we've also recruited some great property managers from other businesses and people are following them. So it's so true that people want to do business with people they trust.

Speaker 1: 15:47

Yeah, absolutely.

Speaker 2: 15:49

Yeah.

Speaker 1: 15:50

So when do you involve your current team in the process, like, do you let them know, hey, we're starting to look for our next rent roll, or do you tell them like at the last minute, how do you?

Speaker 2: 16:04

No, definitely not at the last minute. It's a lot to throw on them, especially the inspection team, the leasing agents of the trust account, because that's who it really affects. So, look, I think my team just expects that I'm going to do it consistently and I've said to them we are in growth mode. So if something comes up and the opportunity is there, we'll get stuck in and everyone's really excited about the growth. But if it's a hard acquisition, a bit of acquisition fatigue sets in. I'm not going to lie Like.

Speaker 2: 16:37

People are like here we go again, or had a meeting with my EA and Office Manager this morning and they're like, can you just hold off a little bit? This one's been tough. And I'm like, yeah, no worries, I just roll with how my team feel. But they all definitely know and I think it gives them job security too. They're always going to have a job if we keep growing and they're good people. So, yeah, obviously I can't tell anyone who it is or what we're looking at, or even they're pretty cloying, I think one. I told them the size and then they were like they knew, they were like on to it and I was like, okay, I didn't say who it was and then, once it's unconditional, I'd sit it from down and let them know who we've, who we've acquired and what that's gonna look like, and then I make sure I've got the plan pretty. You know a really good strategy around the acquisition before I announce it.

Speaker 1: 17:29

For everyone. It's a reminder. That time I came back from overseas and I'd been to a conference and the girls were all freaking out like what great idea is actually gonna come with and dump us with, and so I had to really gently these ideas that I had just gently, you know bring it to their attention, remind them.

Speaker 2: 17:50

You know what I've found. If I go to now moving like definitely last year, this year, going to the bigger conference is taking some of the team with me who are really implementing like they're change managers. So I always hate them with me now, and then I'd have a try and have a half day after the conference before we come back. Right, what are we gonna implement? Who's in charge of that? And then it's not just me coming back going, right, we're gonna change the whole business. That's what I do yeah, I used to as well. And then they just wait for my enthusiasm to die down.

Speaker 1: 18:21

Exactly. I did read somewhere that I and I did do it every now and then, where I put my great idea and you know, because people aren't watching this, I've got that in inverted commas my great idea in my calendar for like three months time. So then when it gets to it, if I'm still super excited about it, then I can do it. Yeah, enthusiasm's died off, then I don't.

Speaker 2: 18:42

Yeah, so true, yeah, so true.

Speaker 1: 18:50

Now, when you bring in a portfolio, now there's going to be a lot of work for somebody. Can you like, are there people that you can outsource that support too, which you divided up between a few people? Is there someone like an office manager, where it is their job, like physically with, like the merge and everything like that? How do you physically do that?

Speaker 2: 19:13

Yeah. So up until the last one, so the three before that I did that all. And then I learned very quickly I can't, you know, it's better if I do it. So I bought my office manager, caroline celebrating 10 years with me today actually In on the last one.

Speaker 2: 19:30

She's up for a new challenge as well. So she came to the meetings prior to it, even going unconditional, and so she got to see the whole process and then, look, yeah, I mean we settled on the first of December, which is never ideal because everyone's going on holidays and stuff. But again, that will come back in one of the lessons I've learned. Yeah, so she'll kind of manage that. But then she's got people to delegate things to. So we always let we've got a BDM VA who does like, sets up all the new management, so we let them know that it's coming and we try and do a data merge with the big ones and then their job is to go through, make sure all the data is merged properly, make sure that everything's in property me and then and then they, yeah, and then it gets the properties get distributed to the property managers, and then there's there's just it's very process driven, I mean, keys are not there. We bought over a thousand sets of keys last year. Can imagine.

Speaker 1: 20:34

And I imagine they're just being a bucket or a box, would they?

Speaker 2: 20:39

Some people do that, yes, Whereas again I've learned to be very clear at the start. I need every single set of keys in an envelope with the address on them.

Speaker 1: 20:49

Ah, I do know a lot of people listening. That is a fantastic tip if you are acquiring, because I think that I probably would have just popped them in the bucket, but I like that making sure that they're enveloped, and that's part of this.

Speaker 2: 21:00

Yeah, and then obviously you need to make sure that the keys are never left in anyone's cars in those envelopes like it's gone. Pick them up, bring them into the office. And even if we lock them in the key room, they're there, yeah, until. But what a six weeks post last acquisition and we're still sorting out keys Like it's just. It's a drama, as it's always going to be.

Speaker 1: 21:19

And it's such a physical job so it's not like you can get the BA to really do it. You need to physically someone to sort it out.

Speaker 2: 21:26

It is a physical job and then keys always go missing and there's always look that you've got to allow for incidentals but stuff. Yeah, in this game of things it's generally we. I think you've found doing my first one and I knew what I know now and be really good, but you've got to do them and just learn as you go.

Speaker 1: 21:44

Yeah, absolutely so. Future of rent roll acquisitions the I and I'm actually I don't know where it's gonna go, because part of me thinks that we're going to see like a lot more Rent rolls around the hundred mark where people are going you know what, like it's too hard, I don't want to employ anyone, I'm just gonna sell. But then the other part of me Feels that people that have got higher portfolios are going to take advantage, or larger portfolios take advantage and sell. What are your thoughts with the future of it? Do you think we're going to see more small people selling or bigger people?

Speaker 2: 22:20

I Definitely am. Look, I definitely think the smaller and roles you need scale to make good money and property management and, as we've said before, most business owners or salespeople and they don't it does seem like a bit of a nightmare to them but though, funny enough, those smaller ones are getting a higher multiple on Acquisition because they're ones that you can just bring in and plug into a business and they usually can find geographically. So they're really good little little ones to pick up. I, I don't, I think the bigger agencies are just going to keep getting bigger and bigger as long as they've got all their you know financials right and you don't want to be over stretched, because I do think in a couple of years the rents will start to whether even out or come back a little bit and you don't want, you know, you don't want to be leveraged too much. Yeah, I don't know I.

Speaker 2: 23:17

Any advice and this is advice that obviously comes through a long time working with Frank and talking to the right people is, once you get to a point like for us now to do acquisitions around that 500, even a thousand Managements we could look at, we could just bring that into our business and then we feel comfortable with it. But we started off doing 80, a hundred property acquisitions and then we've worked our way up Now where I think I and the goes back to your question before there is just as much you have to do for an 80 or a 500, but this is just more of it. You know it's it. For me it's like well, I'd rather do you 500. Yeah, because the headaches for the same time. There's just a few more headaches in that time, if that makes sense.

Speaker 1: 24:04

Yeah, so the top, the tasks are exactly the same headache, except you know one one, the smallest size. It might take you an hour when the big ones going to take you three hours, but it's still the same yeah exactly, exactly.

Speaker 2: 24:17

And then you know, and then just having systems and processes around those acquisitions and and the system won't change, whether it's a hundred or six hundred, it won't change. So you know, I probably should document that, come think of it or get Kate here or Joe to do it for me after your podcast this morning. Yeah, just to really make sure. Because again I'm getting to the point where I Look at an acquisition now and go, well, that's gonna fit in with my timing of my life. Now I'm not. You know, gotta be a bit more strategic around that as well with the kids and stuff.

Speaker 1: 24:54

Yeah, well, I mean, and that's the thing, like now that you've probably done it, you know a couple of 500 ones. It's probably now you know what, if I'm gonna do it, I'm just gonna do it properly and do a five, yeah, as opposed to multiple little ones.

Speaker 2: 25:07

Yeah, that's right, exactly, yeah, yeah. But you know, I think the future of acquisition is, I still think that the bigger Agents will get bigger and the smaller ones will get out. Yeah, I mean looking at the sales market, I think it's 3800 homes on the market, like I said to my team last year when it was just under 5000, but I think it's gonna get any tighter and I really ate my words on that.

Speaker 1: 25:30

Yeah, yeah, yeah. No, I think it's a very good time to sort of be in the property management Industry and I think that people, agencies that are having a really great sales market potentially, but but I think there's also a lot of agents where they're seeing a decline in their rent roles because maybe they're in an area where investors are selling, so so their sales department is going really great, but maybe their property management isn't. I would strongly recommend that they have a Look at that extra cash flow in that sales department and potentially use that to purchase and top up their rent role If they want to keep maintaining their rent role. That is but doing something smart with that extra money in the side and not Just going oh look, sales is going so well, let me go buy cars and houses and let the property department go down. Yeah, I would think about, from a business point of view, how to balance that out a little bit if you want to continue with a strong property management.

Speaker 2: 26:30

Oh, 100%, yeah, I mean, yeah, you've just got to make smart decisions and, as a business owner, you've got to know your numbers on your portfolio and you've got to dig deep, because even at our size we've got really good reporting. And then a week later someone goes oh, actually there's two less that I forgot. So it's just getting to know those numbers.

Speaker 1: 26:53

And that's a finish off, and I don't want you to share what your goal is, but I do want to know are you still on track to achieving your goal?

Speaker 2: 27:01

Yes, yes, yeah, yeah. Well, the goal was 2025. So end of 2025. Yeah, look, I think we will definitely get close. I'm limited to opportunities at the moment, yeah, but there's some big things in the pipeline the first half of this year. I want to do another acquisition and I want to spend some time in the department and looking at the efficiencies. Now there's nowhere else we get a really good return on our money in property management, so there's nowhere else you can put your money and get that return. So can I get more income in and can I just increase that bottom line? The two things I'm working on at the moment and having a bit more fun this year. Last year was tough here for me personally and we did a lot. We did a full office renovation, we did two massive acquisitions and it didn't feel like I was doing too much until I got to the end of the year and looked in the review mirror and went, yeah, that's big year, that's a big year.

Speaker 1: 28:10

Yeah, yeah. When you were talking about being a big year, I actually even completely forgot about the office renovation, because how many months did that take? That was nearly four and guys, that's moving a lot of people out of the business and you know, yeah, a lot of people back in, but well worth every moment of it.

Speaker 2: 28:29

It's an amazing space and even just being in the new space if anyone's thinking about doing that investing some money in their space I can honestly say we've been in here probably four months now and just the level of the energy of the business you can feel it. I think we've definitely increased our business just by everyone feeling a bit better when they come in and yeah, so it's been really good. There's lots of great stuff that happened last year. It was a good year, so hopefully we can tail in that this year and go again.

Speaker 1: 29:07

I've got the energy, with a little extra side of fun. Yeah, a little extra time for myself. Amazing. Well, it's always lovely chatting with you and thank you for providing that insight and answering those questions, because I think it's one of those topics where people probably feel a little bit uncomfortable to potentially call you up and ask these questions.

Speaker 1: 29:29

So it's really good for people just to hear the conversation of the process of buying rent rolls if it's something that they want to consider. And finishing off with you had that strong goal and you didn't change the goal. You just changed the plan, which is something I need to take away and stop playing.

Speaker 2: 29:48

And just on that, Ash, before you go, I'm happy to always answer any questions or if anyone's about to do an acquisition, I'm more than happy to help people through that. I think we don't ask each other enough and because we all know it is a list of mistakes I've made that I'm hoping other people don't. And if again, if anyone's thinking about selling their rent roll, give me a call. We're always open for acquisition. But, yeah, always happy to help. And if I don't know the answers, I know about 50 people who were also.

Speaker 1: 30:19

Yeah absolutely wonderful. Thank you so much. So that's Beck Halton from LJ, hooker City, res. And you can easily find her on social media or by Googling to get her details, if you do like to, if you do need to reach out. Thanks, beck, enjoy your day. Okay, bye.