The team at Real Estate Dynamics (RED) released their Rent Roll Growth 2020 Report last week, which they are also touting as the blueprint for your BDM to drive rent roll growth this year.
The report explores some of the thornier, more nebulous questions around how to properly remunerate and incentivise business development managers (or BDMs). We read it cover to cover, and here’s what we learned.
Rent roll brokers and industry consultants RED shared some interesting insights into property management portfolio growth and attrition. In particular, they’ve observed that the natural attrition rate sits at about 17.3% annually. In other words, most agencies will churn around this much of their book per year for reasons beyond your control, such as changes in circumstances and property sales.
In order to stabilise and grow a Property Management portfolio then, Property Management and real estate BDMs need to be able to add another 17% to the books each year to maintain an agency’s bottom line.
But that’s before factoring growth and development, which is kind of in the job title of a BDM. So how do agencies best train and reward BDMs to deliver the kind of growth needed to do more than tread water?
It’s not rocket science. RED suggests there are three species of investments required to bring about outstanding performance in a BDM.
Firstly, invest the time in finding genuinely the right applicant for your business. A good BDM needs to be able to do more than just smile and dial. They need to be capable of genuinely connecting with people. You could even say that kind of skill is key to well, being able to connect with people. Like prospects and leads, for example. So that you can develop your business.
In an age of sales saturation, people can smell a fake and needy salesperson at twenty paces. It would be wise not to hire one.
Asking the same old ‘Why did you apply here?’ questions you asked the entry-level, admin assistant, in their interview will not help you here. To determine whether they’ve got the emotional intelligence to excel as a BDM, ask questions that give them a chance to show self-awareness. If this isn’t really your bag, here are some ideas from the NY Times’ Hiring Manager’s Guide to Hiring the Right Person.
Besides interpersonal skills, a great Property Management or real estate BDM also needs to come to the party with strategies for growth, and a track record of executing these strategies successfully. We’re talking about real strategies, not just repeating what they read in How to win friends and influence people. (That said, it's not a bad book for them to have read.)
According to their blueprint for BDM growth, the four key strategies are acquisition, fee growth, capacity and efficiency, and organic growth. We’d love to share more with you, but we think you should really download the report for yourself!
Once you’re confident that your prospective BDM can do the job, will do the job, and is a good fit for your business, you’ll need to motivate them.
RED suggests this rather simple but underappreciated scheme: pay them fairly, and incentivise them with a scheme that doesn’t require a diploma to calculate. To determine a fair incentive scheme will ultimately be a matter of your business’s finances.
The key figures to consider when offering an incentive structure will be your average annual management income per property under management (your AAMI), your BDM’s yearly salary, and the average rent per week per property. Identify how many new managements you expect your BDM to deliver per year, and go from there.
Psst! Wondering how to calculate your AAMI? We asked Rent Roll Broker Dean Yeo for some tips in this article.
Just want a ballpark figure? Compensation research website payscale gives some indication into what the Australian market is offering BDMs here.
This is a not-so-subtle spruik for RED’s Standout | BDM performance program, but it’s a worthwhile course. This training offer covers listing presentation lessons, scripts and dialogues that convert, a personalised professional development plan, and more. Graduates include the 2019 Gold AREA for Property Manager of the Year Jamie Billerwell and numerous other successful directors and BDMs Australia-wide.
According to RED, ‘Growth is the easy part.’ Besides leaning into your (hopefully well-hired, well-remunerated and highly qualified) BDM, look to sources within your office for new leads. Current landlords, tradespeople and contractors, and even current tenants can surprise you with new management opportunities. The secret, according to the report, is simply to ask more of them and ask more often.
You can find this, and other property management resources, on RED’s website here.
Enjoy this article? You might be interested in reading about 6 trends hitting real estate in 2020, property management events to add to your calendar in 2020, and 5 lessons for property management from 2019.