132. Why Property Management Is a Smart Adjacent Business With Justin Rourke & John Martin

Summary

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The Millionaire Real Estate Agent (MREA) Podcast

Episode 132: Why Property Management Is a Smart Adjacent Business

Host: Jason Abrams
Guests: Justin Roark & John Martin
Date: April 27, 2026

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Main Theme:

This episode dives deep into why property management is a powerful adjacent business for real estate agents, exploring its economic models, organizational structures, lead generation, and value proposition—dispelling myths that it’s a “seventh circle of hell” profession and laying out a highly practical roadmap for agents seeking more stable, residual income streams.

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Key Discussion Points & Insights

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1. Pathways into Real Estate & Property Management

• John Martin’s Journey:

  • Inspired by his grandmother, an OG Dallas agent.
  • Started with apartment locating—quick income, massive database building.
    • “The money was a lot quicker... that's a six-digit income on year two and three. In hindsight, it was beautiful because I worked hundreds of people a year in that space that are now clients of mine still that I sell houses to.” (04:00)
  • Transitioned to sales, eventually partnered with Justin.

• Justin Roark’s Story:

  • Traditional sales start post-college (U.T., communications/business).
  • Saw businesses mismanaged and fail, leading to desire for self-sufficiency.
  • Family in real estate nudged him into the industry.
  • Stresses importance of bootstrapping and constantly growing your database.
    • “Growing your database is the single best productive behavior that you can do.” (09:10)

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2. Why Property Management? Core Arguments

• Stability & Insulation from Downturns

  • PM income is more stable than straight commissions.
    • “Through any course correction, we have a stable income and business venture that will support us... that's the biggest thing.” – John (11:24)
  • Acts as a “well to dip from” when sales slow.

• Ongoing Relationships & Increased Value

  • Regular interactions with landlords/investors keep you top-of-mind.
  • Deepens skill sets: exposes agents to legal, investment, conflict management, maintenance.

• Opportunistic Expansion

  • Property management often leads to the creation of associated businesses:
    • Construction, roofing, etc.

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3. Economic Model of Property Management

(Timestamp: 15:05–22:30)

Revenue Streams:

• Management Fees:

  • 6-10% of monthly rent (about 8% is standard for their market).
  • Tenants pay the management company directly; company remits remainder to landlord.

• Leasing Fees:

  • Charged when a new tenant is placed (usually one month’s rent, keep 60-70%).
  • About 30–40% of units lease each year.

• Renewal Fees:

  • Flat rate (currently $299) for each renewed lease.

• Miscellaneous Fees:

  • Application, late, and move-in/out fees.

• Maintenance & Adjacent Business Profit

  • In-house construction/roofing arms handle repairs/renovations at competitive rates, capturing profit that would otherwise go to outside vendors.

Example Napkin Math:

800 doors × $160/month avg. fee ≈ $128,000/month. Add leasing/renewal fees and PM company approaches $2M/year gross. (21:35–22:46)

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4. Org Chart Breakdown and Expenses

(Timestamp: 24:09–34:32)

• Accounting:

  • 3 employees + 1 VA; receivables/payables, bookkeeping.

• Leasing Department:

  • 3 employees + 1 VA; rental price analysis, new listings, application processing.

• Maintenance & Make Ready:

  • 3 employees + 1 VA; triage work orders, coordinate in-house field teams (Red Oak construction) for repairs/turns.
  • Move-in/move-out specialists: 2 employees + VA—bulletproof deposit claim process and property prep.

• Operations/Client Care:

  • 4 employees; onboarding new business, client (landlord/tenant) support, drama resolution.

• Scalability Considerations:

  • Largest cost = payroll.
  • Company stays human-forward (vs. going all-in on AI/automation)—deliberate choice for client experience.
    • “Feed your hawks, starve your buzzards.” – John (30:53)
    • “Landlords want communication and reassurance... when you dumb that process down and you turn into a chatbot, everyone gets frustrated.” – Justin (30:57)

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5. Margins & Growth Curve

• Margin Realities:
  • First 5 years: Expect razor-thin margins as you ramp up door count.
  • Margins swing with local markets—can expand in boom, tighten in correction.
  • Payroll is the dominant expense, but scale improves profitability.

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6. Lead Generation Model

(Timestamp: 34:39–38:06)

• Main Source:

  • Referrals from agent and broker network, especially within a big franchise like Keller Williams.
    • “We’re going to get more business from agents and brokers than we will from the public... It's a trusted relationship piece that keeps them coming back.” – John (35:03–36:03)

• Agent Value Proposition:

  • Agents get a reliable management partner, often filling a gap that agents aren’t equipped/licensed for.

• Direct to Consumer:

  • Organic search, reviews, SEO, but much smaller segment than agent pipeline.

• Promise to Agents:

  • “We will never poach. We’re going to kick ass as hard as we can so we look like a hero, but that agent who refers us has to keep in front of their client... We're not here to poach.” – Justin (36:12)

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7. Risk, Challenges & Key Lessons

• Tales from the Trenches:
  • Must be comfortable with chaos—mold, disasters, even deaths in properties.
    • “Just imagine mold or cars coming through walls. As far as like, who wants to get into property management, you have to be okay with that sort of thing.” – Justin (00:00, 38:02)
  • High risk and legal exposure—why many agents avoid the niche.
    • “If you don’t have the experience or the setup for it, it is very challenging to do correctly.” – John (38:12)
• Advice for New Entrants:
  • John: “Nothing’s impossible—some things are just extremely hard... put your head down, wake up every morning and be better than you were yesterday.” (38:46)
  • Justin: “Prepare to succeed. Educate yourself; talk to other property managers, attorneys, and the local KW leadership... take the time to educate yourself and find where your niche can be.” (39:19)

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Notable Quotes & Memorable Moments

• On Stability vs. Sales:
  "Property management, while it's difficult, you learn more than just strictly the sales side. It's like horse blinders when you're only doing sales." – Justin (12:43)

• On the Economics of Scale:
  "It doesn’t become successful until you have enough money and enough doors to manage that and make that impactful." – John (31:26)

• On Transparency & Value:
  "Our fees are very upfront... You lose trust with the landlord, it’s done, it’s over." – Justin (17:24)

• On Handling Chaos:
  “Messages, deaths in the house... crazy things.” – John (38:02)

• On Referral Integrity:
  "We will never steal your client." – John (36:10)

• On Partnerships:
  "On my own, I was awesome. But together, I’m building something bigger than I ever would have been able to apart." – Jason (41:51)

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Timestamps for Key Segments

• Entry to Real Estate & Property Mgmt – 02:06–09:43
• Why Property Management Is Smart – 10:16–14:40
• Economic Model Deep Dive – 15:05–22:46
• Margins & Org Chart – 24:09–34:32
• Lead Gen & Agent Relationships – 34:39–38:06
• Risks, Hard Lessons, Final Advice – 38:33–40:00

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Conclusion

This episode offers a practical and transparent masterclass in building a property management company as a stable, lucrative adjunct to real estate sales. Key lessons: success requires grit, systems, human touch, and, above all, strong agent relationships—with honesty and service at the core. The business offers stability in downturns, recurring income, and opens doors to further entrepreneurial ventures.

For those considering property management: it’s tough, but not impossible. Equip yourself, build trust, and prepare to level up your business and your own resilience.

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Contact:
For Austin-area property management: www.towerprops.com

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Transcript

[Justin Roark]

Just imagine mold or cars coming through walls. As far as like, who wants to get in property management? You have to be okay with that sort of thing.

[John Martin]

We don't get paid unless the property is producing income.

[Jason]

Most agents, I believe, look up and say, that sounds like the seventh circle of hell.

[John Martin]

The income is a lot more stable. Once you get to a certain point, if you start making money, that's where the hooks get set in. It's like, all right, there's no ceiling to this.

[Jason]

Have you ever woken up in the morning and said, I want to have a residual income business as opposed to a variable? Heard that a million times. The good news is there's a couple ways to do it. Number one, wake up and run the right lead generation models that give you a duplicatable result more often than not. But there's another way. You see, John Martin and Justin Roark thought about it differently. They said, what business can we open adjacent to our real estate team that provides us residual income? They landed on property management, which then spawned a construction company, which then spawned a roofing company, and on and on and on. Today, we're going to unpack property management in a way that I've never heard it done on any other podcast. We're going to understand and tear apart the economic model, the org chart model, the lead generation model, and the value model of property management. We are going to go deep into the weeds so that you understand not only the revenue side and I mean to the penny, but also the expense side and the org chart and lead gen. It's gonna be detail oriented. But here's my goal. Number one, to make the argument for property management. And number two, give you enough information so that you might decide that this is the right move for you. Sit back and buckle up. This is John Martin and Justin Rourke and I am joined by John and Justin. Guys, how are you?

[John Martin]

Howdy. Good, how are you?

[Jason]

We. I'm honored that you're here. We're in person.

[John Martin]

Yes.

[Jason]

We don't do a lot of that. You guys are like the first people to be live in person in here.

[John Martin]

Get to see your face.

[Justin Roark]

Prefer to see those O hos.

[Jason]

It's very good. All right. I ask everyone the same question. How did you end up in the greatest industry in the world, John, I'm starting with you.

[John Martin]

You know, it was just something that I kind of migrated into. My grandma was an OG real estate agent in Dallas and always told me the war stories as a kid and I was kind of just floundering around in my mid-20s, trying to figure out what I wanted to do in life and always had a knack for sales and got my license and Justin was in it before I did. So I kind of used him as a guide to get into the industry and started slanging apartments and doing apartment locating and figured out how to talk to people and make money in this industry and then realized how vast it is.

[Jason]

That's an interesting way to come in, doing the apartment finding thing. Why did you end up gravitating towards that?

[John Martin]

I loved it, man. It was random circumstance. I got my real estate license and my girlfriend at the time got an apartment through a locator and talked about me getting my license and he was like, hey, why don't you have him reach out to me? And honestly, I mean the money was a lot quicker. You know, you can make really good money a lot quicker. I mean there's, that's a six, six digit income, you know, on year two and three, where on the sales sides the trajectory might be a little bit slower for that. In hindsight it was beautiful because I worked, you know, hundreds of people a year in that space that are now clients of mine still that I sell houses to. So it was, it was a massive database based builder at the beginning of my career.

[Jason]

I think that's why you see some of the larger aggregators dying to get rental info onto their sites with this idea that if we can get them before their buyers, we can, number one, monetize them quickly, then number two, through some touch campaign, educate them around home ownership and then be there when they want to buy.

[John Martin]

The coolest story was I had a girl that never met before. She came into our office, sat down with me, we started looking at apartment prices. I just paid for abor like year one of me doing it. And she was like, hey, looking at these prices, let me make a phone call. She goes and calls her dad for down payment assistance, comes back, sits at my desk, it's like, can you sell me a house? And I was like, absolutely. So we transition. Never met her before. Since then I've sold her two or three houses, sold her mom's condos. I mean that's a 15 year trajectory, but just like anything else, man, the building blocks work that way.

[Jason]

Do you believe today if. Because we got agents at every company throughout the entire real estate multiverse, at every production level listening to this show. It is the podcast for the top performer, but everyone listens. Do you think an agent today can find success starting as a leasing agent in order to get Money in the bank.

[John Martin]

I think it still works. I think it's the secret sauce that nobody really talks about. Not only does it help you kind of refine your skills and give you those reps to talk to people and get in the cadence of how you sell things and be confident. Anybody in this industry that's done for long enough, confidence is huge, right? People trust you. The more vibrato you have, the more confidence you bring to dialogues from start to finish, and that helps you refine that. I can sit here for hours and tell you people that I met year one that I've done 10 transactions with since then. So it's. I would. I would recommend it highly.

[Jason]

So if you're a real estate agent today and you want to get to the bank as fast as possible, possible, and the argument is that leasing in some markets or a lot of markets would be the way to do it, how would you go find people to help find leases today?

[John Martin]

When I was starting, there was a big brokerage that was one of the biggest and baddest in the city. They've since sold because one of the owners died. But they produce leads for us. I mean, they would take 50% of our income, but you do that enough, that's where it helped. And then just like anything else in this industry, if you start making money, that's where the hooks get set in. It's like, all right, there's no ceiling to this. It is directly relative to how much work I put in. And so I would get creative. I would go sit at Texas State at some of the, you know, housing campaigns and just say, hey, I can find you apartments and just anything and everything. It's like fishing, broad strokes. And I figured out what worked, what didn't work, and that was great. And on the monetary side, like, I went from waiting tables, making 25k a year to the first year in locating. I made almost 60 grand in my first year, which was, dude, you must

[Jason]

have felt like the richest guy in the world.

[John Martin]

I remember the first $10,000 a month I had. I took all my buddies out. It was.

[Justin Roark]

It was.

[John Martin]

It was awesome. And I was, you know, mid-20s and then, you know, progressed from there. I mean, I would increase that by 20 to 30k every single year. And then, you know, it got to a point where I wanted to sell houses and do more. And then that's where it kind of transitioned. And then Justin and I linked up,

[Justin Roark]

and that's when me doing the leases

[John Martin]

and him being a broker, he was like, you want to start A property management company. And I was like, you dog, let's go.

[Jason]

We're going to get there. Justin, tell me your story. How did you get in?

[Justin Roark]

I came in in a more traditional way, but I think I had just gotten out of school and I had some.

[Jason]

Where'd you go?

[Justin Roark]

I went to ut. I was also part bobcat as well, but I got out of school, had a very amorphous degr. Corporate communication studies major with a business minor. So I had skills, but not with a clear direct path.

[Jason]

You had an expensive education and no idea what to do with it.

[Justin Roark]

Expensive education, no idea what to do with it. But it wasn't a degree in underwater basket weaving, Right. So I knew I wanted to do something in business. And I had been working at a restaurant, same thing as John, waiting tables, parking cars, doing stuff like that. I also thought, hey, in my early 20s, what's really hot right now? Oh, it's beer, wine and liquor. That scene. And I thought, maybe I'll go into sales and distribution. At that time, it was 2008, great recession happened, and so they shrunk their territories. And the interviews that I went on, they're like, you're great. Looks like you could sell something, but you also know very little about beer, wine, liquor.

[Jason]

Did you tell them that I'm an expert in getting drunk?

[Justin Roark]

I mean, I was like, this seems like something so cool. At least you put it on a pedestal as a young kid, but as you get older, changes. But they were like, go work at a retail establishment and learn a little bit for a little while. So I went to a fine wine store here in town that was doing really well, But I watched that company slowly burn down to the ground because some people came in that didn't know what they were doing with business, really just destroyed their customer base. The restaurant that I was working at started to fail, too. And it was at the end of that life cycle of ownership, I watched both these companies go to the ground, and no one wanted to listen to the kids straight out of school, Giving some generally common sense direction. But what do I know, right? And so I watched both these businesses falter. And then my brother one day said, hey, why don't you just get into business for yourself? He's like, I'm in real estate. He's a commercial broker and he works with us now. He's one of our partners. He said, once you get into real estate, go into residential. Seems like something you could jump in pretty immediately. And I got connected in with one of the rookie of the Years over here at the Southwest Market Center. She took me under her wing. I started doing marketing for her until I got my license and I jumped in. And then I focused mainly on sales. And I ground through those initial models, those initial phases for the first five years until I met John. But I think there's a lot to be said with doing some unorthodox paths, especially when everyone's doing the same way over and over. I read the Millionaire real estate book a handful of times. I actually only got to a certain number of chapters because once it grew into Mega Team, you're like, I'm not even there yet. I just need to focus on steps one through four or something like that. But like John was mentioning, he had a really great backdoor to that. I was sitting there doing open houses, building my database. His database grew tremendously. And I think that if anyone's listening to this, growing your database is the single best productive behavior that you can do. And so when John's out there showing them that he's in real estate, doing this over and over and over again and churning out his database is three times the size of mine. And it shows in the production that he does. I was still working, lease, lease. Because who's going to sell their house with a 24 year old in the Great Recession at that point in time? And 24 year olds during that time too were also not buying houses unless they had some money to begin with. I think it was a little bit harder, got through the recession stabilized. John and I got together and started seeing some opportunities and that's where we came together. It was great.

[Jason]

I love that. And here's the reality of it, however, you build your databases the right way, correct?

[John Martin]

Absolutely.

[Jason]

But if it isn't growing, your business isn't growing and you're actually failing five years from now because people usually take some time to get to know you and they're waiting for life events to happen. There's a fantastic study that just came out from Zillow which said, and this is not going to be a surprise to anybody, the number one reason people move is that they have life events. And three of the top five are around your household either growing or shrinking. This hasn't changed since the beginning of time. I don't see it changing anytime soon.

[John Martin]

Patterns, that's it.

[Jason]

So let's get into this thing. And by the way, gang, you don't have to take the notes. I'm taking the notes. So you can head over to mrenotes.com if you don't get them. They come out every Thursday. Because what's really unique about your business is you have a multi pronged approach to how you all make money. And you're running huge businesses that fund these really big lives. I mean, you have the real estate sales team, you have a giant property management company, over 850 houses under management. You have the construction business, you have an offshoot of that in the roofing business, probably four more. I'm not mentioning. So you're serial entrepreneurs. But the thing that's so smart is they all generate from the core business and they all revolve around real estate. And so I want to talk about these and I want to start with property management. Most agents, I believe, look up and say that sounds like the seventh circle of hell. It's literally dealing with problems all day long at a relatively low margin and high risk. And yet you guys jump into it, make the argument for property management. If I'm a mega agent out there

[John Martin]

and it's sustainable, I mean, one of the beauties of what we do is through any course correction, we have a stable income and business venture that will support us. I mean that's the biggest thing. It survives a lot more heartily than the real estate would in any sort of downturn. I mean, we felt that over the last several years. I mean, the management side's taking some hits, but it's still, still trucking. So I think, I think that's the biggest approach is that one, it helps you build things. But two, the income is a lot more stable once you get to a certain point.

[Justin Roark]

Justin, I think I've got something for the mega agents. It is so hard now, even at, even at our level on the sales side and we both love sales. Like we always have to keep our talent sharp. Like I don't think we're going to be giving it up. I think there's a knack and kind of an edge when you're in that mode versus letting it shrink. But it is so hard, the bigger that you get to be in contact with all of your database and all the people that you work with. What if you have an ongoing running relationship with these people to where they're dependent upon you for this financial investment that they've made and that they want to keep, you're there as their main go to, hey, this guy can be the Swiss army knife of whatever it is that I need. In real estate property management, while it's difficult, you learn more than just strictly the sales side. It's like horse blinders when you're only doing sales. When you have property management, you are solving those problems and you have a greater understanding of real estate as a whole in general. The investment side, the legal side. I mean, what else? Conflict management?

[John Martin]

Yeah, I mean, just the reps. It's the chaos that helps you fine tune everything.

[Jason]

Well, it makes sense to me, the premise that, number one, I'm in a variable commission business on my sales team. I hope they come, but they don't always. And I'm in a fixed business on the management side, which is I'm collecting fees on a monthly basis. So I've entered a new revenue stream into the company that's far more stable. I also have a business that is not recession proof but will weather differently than the sales team will.

[John Martin]

Correct.

[Jason]

That's the primary argument. Yes.

[Justin Roark]

Yep, exactly. Totally.

[Jason]

Okay.

[John Martin]

Wrapped up.

[Justin Roark]

That was actually the idea that I feel like I get inspiration from because John and I, we were hanging out at Austin Java coffee shop here in town and I turned to him and I was like, do you want to start a property management company? But I was thinking we had just gotten out of the Great Recession, which I had mentioned a while ago. How do we not go through that again? Or how do we weather that? Because if I'm starting a family, obviously we just talked about life events. If I'm starting a family and I want to create this business, I need to have it be a little bit more insulated than what was going on. I was sitting in a bold program. I was like, gary Keller is so smart. I was like, he has this program to where he's not doing real estate, but he's getting paid to produce this material. He's still in real estate. It's real estate adjacent. Right? The Wagon Wheel. He's got this well to dip from. I was like, how do I create this well to dip from? And I just purchased my first property, which was a duplex. I was like, I could do this over and over again. And so, yes, it can definitely weather the storm. Certainly there's going to be ebbs and flows in the leasing market, rental rates, all those things. Even it swings the other way too. Lease rates can go really high. You can have multiple applications on one property where people start bidding over each other.

[Jason]

Let's jump into it.

[Justin Roark]

Okay.

[Jason]

And let's stay linear. On the management side, I want to make the argument for management because I happen to think it's a great business to be in. And I understand in some markets it has more risk and some brokers love it and some brokers hate it. And I understand that in every state it's different. So all that said, let's talk about your business.

[John Martin]

Yeah.

[Jason]

Let's start with the economic model so that if I'm driving in my Range Rover right now at 100 miles an hour, I can do some rough math in my head. So how do you guys get paid?

[John Martin]

There's a lot of layers and a lot of different avenues and kind of vehicles that help us get paid, but the main ones are the monthly collected rent and the management fee.

[Jason]

Okay, let's stay there. So money comes in every month.

[John Martin]

Yep.

[Jason]

Are they paying that money directly to you or do they pay it directly to the landlord?

[John Martin]

Tenants pay directly to us. We hold the money, take out our fees and then funnel that money towards to the landlord every single month.

[Jason]

Excellent. And I know rates vary, but can you give me a range of what a management fee in this market and what you all charge is?

[Justin Roark]

It depends. And if we're talking about a single family home, you're probably somewhere between 6 and I've seen as high as like 10%. We like to hang out in the middle, it makes the choice a lot easier. But some people are doing flat fees as well and that can have positives and negatives depending upon if you're the manager or if you're the landlord, depending upon what's going on there. Maybe you get some cost savings as a landlord, but then you're running discount management on your multi hundred thousand dollar asset and that seems a little bit insane.

[Jason]

That's a brilliant nuance you just made. Is your business mostly based on single family homes?

[John Martin]

I would say 70 to 80% of our portfolio is single family, but we have, we just kind of tapped into multifamily. We have a brand new apartment complex on the east side that we're managing that's like 36 units.

[Justin Roark]

Yeah, it's our new frontier. We're, we're looking to, to snatch up a different segment of the market. And so that's the direction, the economics

[John Martin]

are different on that.

[Jason]

Let's stay single family.

[Justin Roark]

Yeah.

[Jason]

Just so we can stay linear. Okay, so the rent's going to come in. I'm going to take anywhere from 6 to 10%. I'm going to call it 8%.

[John Martin]

Yep, that's what we do.

[Jason]

So that's bucket number one. What's bucket number two of how you make money?

[John Martin]

Leasing fees. So whenever we lease the property, I mean you're, you know, your average agent is going to charge you one month's rent to lease the property. With that one month's rent, you take a portion of that to give to another agent as a tenant rep to bring you clients and bring you tenants.

[Jason]

And needless say, all commissions are negotiable.

[John Martin]

All commissions are negotiable.

[Jason]

Does it usually end up being half and half?

[John Martin]

No, typically it's. In our market we see 30% going out to the, to the tenant rep agent. That's typical. You know, anywhere from 30 to 40. I'd say every now and again you'll see a 50 percenter, but that we charge a leasing fee. That's a bigger piece too. And a lot of other companies, their economic kind of strategies and angles are if they do lower leasing or lower management monthly fees, they will increase those leasing fees. So it all kind of comes out in the wash with that.

[Justin Roark]

Property management is very. Choose your own adventure. You have to find an equation and a model that will work for landlords who you have to be careful of. And one thing that we're, that's really important to us is making sure that our fees are very upfront. We don't like the hidden gotcha fees, the extra margins, or oh, hey, this like little tripwire that causes the landlord to receive a fee that they're not expecting because you lose trust with the landlord. It's done, it's over.

[Jason]

I understand bucket number one completely. And let me just make sure I get my math right. If I'm collecting $2,000 in rent, 8% of that's going to be 160 bucks. So you're going to take a fee of $160 on a monthly basis.

[Justin Roark]

Correct.

[Jason]

Bucket number two, I understand how commission works. If you're keeping 70% and it's a $2,000 a month rental, you're going to take in $1,400, correct?

[Justin Roark]

Correct. The leasing fee is close to about half or 40% to half of what you're going to make on your overall income for a year. If it, if you're doing both management and leasing, sometimes you'll just do management. Right. Because if they renew, then you're just managing.

[Jason]

Well, yeah, that's kind of the question. If I, if I manage, I know it's going to change everywhere. But for your portfolio, for every hundred homes, how many of them do you get the opportunity to lease each year?

[John Martin]

Probably 30 to 40% on average.

[Jason]

Perfect. So you have 800 homes in the portfolio, give or take, and at 35% is going to be somewhere between 250 and 300 of those are going to lease Yep. Fantastic. What's the next way you make money?

[John Martin]

So the next one are kind of just the little fees. I mean the next one that we kind of lean on the landlords is going to be our renewal fee. You know, every time that a lease comes up for renewal, we do site visits. There's a lot of legwork that goes into it paper pushing. So we have a flat fee for that.

[Jason]

What does that cost?

[John Martin]

299. Our flat fee. We started 199. We're at 299.

[Justin Roark]

Yeah, I think that's correct.

[Jason]

It's a hell of a lot cheaper than if I hired a lawyer, I'll tell you that.

[John Martin]

Correct.

[Justin Roark]

Well, things also need to happen at those junctions.

[John Martin]

Yes.

[Justin Roark]

They get to stay on for another year and that seems like such easy paperwork. But what if one tenant's going out and another one's coming in or. Oh, hey, something wasn't working on this last lease that like the landlord was getting hosed on or didn't foresee. And now we've got to make an adjustment in the lease. Like there's some mental work that has to happen there too.

[Jason]

Justin, would you say are the majority of the leases one year leases?

[Justin Roark]

I prefer that. And I'm a little bit of a dictator on that because. And I have a reason if you want me to go down that road.

[Jason]

Well, is the reason that you get to collect $300? No, no, no.

[Justin Roark]

I really, I really care less about that because as long as they're staying there and the management fees don't.

[John Martin]

We also don't want them to renew.

[Justin Roark]

Yeah, we want them to renew. The management fees for us are what we want. We don't want vacancy. Vacancy is going to cripples us. Yeah. It's going to mean less money month per month that the thing stays vacant. The landlord go down this rabbit hole

[John Martin]

is we don't get paid unless the property is producing income. So we don't collect anything until we have money coming in producing revenue.

[Jason]

Not necessarily revenue.

[John Martin]

Correct.

[Justin Roark]

Y.

[Jason]

Vacancy.

[Justin Roark]

Vacancy means we don't get management fees.

[John Martin]

If they're not making money, we're not making money.

[Justin Roark]

So that's our, that's our rule. Yeah.

[Jason]

When you think about a portfolio, what's a reasonable vacancy rate that you just know you're going to have every month? Ballpark. So if I got 800 houses, do I figure 100 of them are always vacant?

[John Martin]

Yeah, yeah, I would say, I would say 70 to 100 is kind of our threshold on what we have. We can run that number on how much, how much activity we have on the leasing market, and I'd say 70 to 100.

[Justin Roark]

Let me throw it back to that idea. Between my length of time, certainly you can have longer running leases. I would tell everyone in general that I'm okay with 12 months to about 16 to 18 months. And the reason being is that there's times in which it's better to lease than not. So if we can engineer the lease end date to be a better opportunity for the landlord to put their property in a great time to lease, then yeah, I'm all for it. But Jason, like you said, life events happen and people's plans change. Especially when you're a renter, life can change. You may need to move for a job or something like that. You're getting established or whatever that might be. If someone sits down a three year lease, how long is it until their life changes that they need to get out of it? And then they come to us and they want to change and we're like, you're stuck in this contract that you've been in for so long. And if they feel stuck or if there's not reasonable ways for them to get out, then they start manifesting ways and that becomes another problem.

[Jason]

I love that, by the way. And I'm doing rough math, I'm doing napkin math, and I'm not trying to remove the fig leaf here, but I want to be able to explain the opportunity to the audience. I think that's a key here. So when I do this and I think about making 160 bucks on a monthly basis, having 100 vacancies all the time, I'm sort of looking up at 110 to 115,000amonth in management receivables. Does that sound ballpark?

[John Martin]

That's just on the baseline.

[Jason]

Just on the baseline.

[John Martin]

Correct.

[Jason]

100%. So that's going to give me about a million. That's spot on a year. Perfect. Then I'm gonna do my fees and I think I'm gonna pick up another 350 to $400,000 in leasing commissions.

[John Martin]

Correct.

[Jason]

And just audience, if you're following along at home, I took a $2,000 a month rent and I took 70% of that. Then I'm gonna have the fees at $299. I did it across the board. Call that another quarter million. So I look up and with 800 properties being somewhat conservative, I'm looking at somewhere between 1 million 902 million dol.

[John Martin]

And just to be fully transparent, I mean, there's other fees that we do, application fees, late fees, you know, those are all of our rubs that we, you know, always get.

[Jason]

I'm throwing another 100 grand. I'm now at 2.1 million.

[John Martin]

So. And the baseline and what I track on a monthly basis is if we're in that 200 to 220k gross coming in, that's where we need to be with the number of doors we have.

[Justin Roark]

If I can melt your brain a little bit further as well. I went to a seminar years ago where it was this guy and it was for the national association of Realtor Property Managers. As long as they were, they could have come up with something shorter. But this guy had this profit center seminar for property managers and he listed all these ways in which to make money and the sky's the limit. Like I said, as a property manager, you get to choose your equation. How are we adding value and how are we servicing our language? How are we doing that better than everyone else? Some things you can certainly say, hey, our approach and our customer service can be one thing, but how are we serving these people? And one thing that I've been hell bent on is finding ways that not only benefit the landlord, possibly the tenants, but also us at the same time. So it's an open world out there. There's different things that we can do to generate income. And it can also be variable to where the landlord gets to decide and then when they get choice, that makes it so much easier when it's their own volition.

[Jason]

I agree 100%. So if we're talking economics, we have the revenue side and then we're going to have the expense side and the expense side is going to bleed into our org chart and the value that we provide. So I think I have a really clear fear of the economics on the revenue side. Talk to me now about margin and talk to me about org chart.

[John Martin]

So the biggest thing and it's different from management company to management company and what we've noticed, our competitors stay a lot leaner than we do on employment costs and they've automated a lot of things. AI has been huge. We do not want to go down that road until we have to. Retention's different. First line is always customer service and people to people interactions. So we have employees in every single department that we have. We employ with our VAs over 20 something people.

[Jason]

Cool. Let's talk about the departments I'm going to need. And again, we all agree there's a million ways to do it.

[John Martin]

Yep.

[Jason]

I want to know your way.

[Justin Roark]

Yeah.

[John Martin]

And so what are the departments? So the biggest bleed on our money is salary and what we pay our employees. So we have an accounting department that has three bodies in our office and one va.

[Jason]

Okay, and what is the number one goal? What's the key to the accounting department? They wake up in the morning. To do what?

[John Martin]

Accounts receivable. Manage our books, push out money to the owners, collect our funds. True, the books up every single month. I mean, they are the gatekeepers to the pennies.

[Jason]

Okay, I understand accounting. What's next?

[John Martin]

Then we have leasing. So we have three bodies in seat there and one VA as well.

[Jason]

And are those commission or are those.

[John Martin]

No, they're salary. Everybody's salary. There's bonus structures that we have, which is just a side point just to help them kind of motivate themselves to get stuff done.

[Jason]

Okay, the leasing department. I understand. The overall goal is to make sure our units are filled. What do these three humans wake up and do?

[John Martin]

They run rental analysis. They tee up our lease listings. So everything's chronological. We use systems to let us know when we have leases, renewing, when they're not renewing, when to toss them to other portions of our company so that they can get ready for the market. Running applications, marketing our listings.

[Jason]

Are these people licensed real estate agents?

[John Martin]

One of the manager is, the other ones are not.

[Justin Roark]

We think it's better, but I don't think it's required. We have a lot of people that have come from the apartment world in which they're not. They are employees of the apartment owners and so they don't need to be licensed in that situation, at least in Texas. But when they come over to us, they're doing the same function. So is it helpful for them to be licensed? Sure. And it can lead to better career paths. But if they're not licensed, it doesn't hurt because we've created the systems to make it easy.

[Jason]

Okay, I understand accounting, I understand leasing. What's next?

[Justin Roark]

Maintenance. Oh, jinx.

[Jason]

This sounds like the seventh circle.

[John Martin]

This is what everyone's afraid of. So. And I mean, it is what it is.

[Jason]

How many you got? How many people?

[John Martin]

So there's three bodies there and one va but it couples with our make ready department too. So let me kind of unpack that. So we have maintenance that does the day to day tenant chaos. So tenants submit work orders through our portal kicks to our maintenance team. They triage that first thing in the morning and figure out which ones they need to address and move through the line. They have a VA as well. So there's three bodies with a va. Our make ready team kind of has two departments. One of them kind of focuses on turns and when security deposits need to go out they reference damages and they work with the maintenance department to help tee those up. So that's probably the most chaotic department on maintenance.

[Jason]

Yeah. I guess they're out in company provided trucks. They're doing this?

[Justin Roark]

No.

[John Martin]

So they're kind of butts in seat. For the most part we are farming out what we need to to our field agents. So introduce the construction company. So that's where we created that side of our other business. And so we have an in house construction company that is our boots on the ground. So they farm out our work orders

[Justin Roark]

and work to them.

[Jason]

And is the, is it a cost plus, is it a manager?

[Justin Roark]

Absolutely.

[Jason]

How does the landlord get charged?

[John Martin]

So we just undercut the competitors. So you know, we're fully transparent. If we need multiple quotes we can, we lean on our folks first and foremost to do the jobs just because it makes it easier. It's all in house but we make a margin on, you know, some of the turns and the maintenance things that do come up as opposed to giving it to a big company that's going to charge a plumber 300 bucks just to get to your front door.

[Jason]

So that's another way we make money in an adjacent business.

[John Martin]

So we started that probably five years ago. We were just. Every time, every year we look at these books and see how much money are we giving out to these vendors from our portfolio alone until every new business starts. Yeah. And it's like who are we paying? Why are we recovering? And that's where the roofing came from too. I mean one year it was almost a million dollars from after a hail storm for our portfolio alone to one roofing company. And we were like how the hell do we get that? So we did that with our, with our construction side too. So the maintenance team works directly with them. We have full transparency again and that's the name of the game. And these landlords have to trust us. So do tenants. And we never want to get to a point where they're questioning how we spend their money every single month. We have to make those decisions correctly for them or else that relationship is going to sour. And that doesn't do anything for us.

[Justin Roark]

I think that's why it's better that we did what we did. Again, it always comes back to trust and choice and being transparent. Owners should have, the landlords should have the ability to get multiple bids and not just from the in house company, but a lot of other property management companies. Either they will have their team that is a part of their company that will go out and do the work and they'll charge. It doesn't leave room for other bids. And then some other management companies will choose third party vendors and then they'll tack on a margin. And our way that we found works really well is that we have a company that they can choose or not choose and their experience can determine whether or not they use them over and over. But our additional income will come through that instead of being an extra layer on top of the charge of doing the work.

[Jason]

So I get accounting, I get leasing, I get maintenance. How many employees in the make ready side?

[John Martin]

So the make ready has. It's two. Two kind of wings, let's say. So one of them has two people in seat and they mainly just process move ins and move outs. So one of the main reasons why we get sued is because tenants dispute what we charge them for move out costs. So we have dedicated a whole department to do nothing but bulletproof that process. So those two. And they have a VA as well. So. So anytime a move out happens, they go to the property, get tons of photo sets and then dissect what we're going to charge the tenant and then they outline that and there's a lot of back and forth. And on the flip side of that, anytime that they have to get the property ready, they do the same thing, but then give a kind of a needs list to the landlord and tee up all of those cost and action items and then they roll through that to get it ready for the next tenant.

[Jason]

Okay. And you said there were two sides

[John Martin]

and then so the other make ready, it's kind of the boots on the ground. So we have, it's kind of a mix between our manager or our construction company, Red Oak and Tower. So there is three Red Oak employees and two Tower employees.

[Justin Roark]

Red Oak's the construction group. I'll tell you what, Tower's the management group.

[Jason]

If anyone's keeping track with four, I'm keeping track. And that's 20 people.

[Justin Roark]

Yeah.

[John Martin]

And we have about. That's just management. Our sales team has their own employees too, but. Yeah, that's right.

[Jason]

Okay. And the number one expense for this company is all this manpower, payroll.

[John Martin]

Yeah, absolutely. Every month.

[Justin Roark]

But it's worth it.

[John Martin]

I mean our saying is not questioning it. Feed your hawks, starve your buzzards. And they're amazing.

[Justin Roark]

Landlords want communication and reassurance and they want to plan I think that when you dumb that process down and you turn into a chatbot, everyone gets frustrated. And that's why, like John was saying about the AI part, is that until AI can do what these humans are doing, we need humans there in order to do it.

[Jason]

Makes sense to me. Pretend you're coaching and I'm telling you that I'm thinking of opening a property management company. Based on your experience, what's the profit margin that you would consider to be healthy for a property management company?

[John Martin]

I don't know that in the answer that question, to be honest. I think we just are continually running through it. I will say for the first five years of management, you're not going to make anything. It's going to take at least five years for you to grow the income stream because those margins are so skinny. I mean, compared to every other real estate industry, 160 bucks a month isn't anything for the work that goes into that property. It doesn't become successful until you have enough money and enough doors to manage that and make that impactful.

[Justin Roark]

Also, we've seen huge swings in margins in the time that we've formed together. We formed in 2015, but in Austin, at least in our local market, it was ramping up as far as sales prices and activity up until the COVID crisis in 2020. And at that point in time, we exploded. For the next three years, we had tons of margin. Now there's been a hard correction if anyone's been paying attention to Austin, and now we've seen the margins really slim down. But you have to ride the ocean on that. And just saying, I'm only going to do this for a certain percentage. Certainly you have to set your prices and you have to make adjustments, and you want to do that as infrequently as possible. And also protect your landlords if they came in at a certain price, you want to keep them grandfathered.

[Jason]

By the way, you're on the MREA podcast because you guys are running businesses that make more than a million bucks. You're crushing it. And it's an incredible business. I just like to give the audience some frame of reference.

[Justin Roark]

Of course, of course.

[John Martin]

That's the important stuff.

[Jason]

So now I understand the revenue model, I understand the expense model, I understand the organizational model.

[Justin Roark]

You might have missed one more department as well. In addition, the ops department.

[John Martin]

Oh, I totally forgot about that.

[Justin Roark]

Totally forgot about ops.

[John Martin]

Sorry, guys.

[Jason]

Somewhere Joy Powell is rolling over.

[John Martin]

Yeah, yeah.

[Jason]

Can't believe he left out the ops.

[John Martin]

So they're kind of our front line. That's where our kind of number one lieutenant is. He's our junior property manager and he. Their job is to bring on new business. So he has an assistant, and then there's an auxiliary piece that we call client care coordinator who does tenant drama day in, day out. So as soon, as soon as the tenant's locked in outside of, like, maintenance and make ready, it's like, where's my, you know, mailbox key, whatever that is? Her job is to control that. So that's an extra. That's an extra four people.

[Jason]

The people that do those jobs.

[John Martin]

She's the sweetest little tiniest thing ever, and she deals with so much fire. And she's just the happiest, coolest little lady.

[Jason]

There are just some jobs that I would have to charge more than the going rate in order to do because I would be miserable. Like if you said to me, jason, what do you charge to paint a room? I'm somewhere close to $300,000.

[John Martin]

Yeah.

[Jason]

That's how much activity. Right. But someone else wakes up in the morning and loves doing that.

[John Martin]

Yeah.

[Justin Roark]

It's hard to find that perfect connection. The girl we have right there, right now, she's wonderful. But shout out Anna in reality. And I think if we get back to technical terms on this, you will have property managers and assistants to property managers. The way that we have it structured is that there's an assistant that focuses on landlords and there's an assistant that focuses on tenants and dealing with those interplays. And we're working on growing that group because if they're also our rainmakers in the property management business, like, that's the group that can oversee everything but also bring in more business. And so for us, expanding. Expanding that operations group is important.

[Jason]

Okay, so I understand the math, I understand the org, I understand the margins. Talk to me now about the final piece.

[John Martin]

Yeah, so lead gen. So that's kind of evolved over the course of our business just like anything else does. I think at the beginning it was just we're out there on the streets, pounding doors, talking to our agents. The biggest piece that we grew from was our broker and agent relationships. So we're going to get more business from agents and brokers than we will the public, just because of their interactions and the frequency of them.

[Jason]

That's one of the key benefits to you to being inside of a giant Keller Williams office.

[John Martin]

Absolutely.

[Justin Roark]

It's correct.

[Jason]

Because you're running a business to business in that way. Lead generation model. And the agent is running business to consumer.

[John Martin]

Correct. Yeah. And so they bring us the consumers. It's easier for us to tap into that than directly to the consumer.

[Jason]

What's the value proposition for an agent?

[John Martin]

It's a need, it's a necessity. Most of them don't want to touch management. Most of them can't touch management based on broker structure. And so we are that need. We fill that gap. So it's a trusted relationship piece that keeps them coming back. You know, you mentioned earlier, there's not a lot of monetary stuff. We give little $50 Visa gift cards where we can, we take them out to lunch, we host events. We're actually going to start a golf tournament to host our brokers and agents. So little things like that, I mean, we try to make it fun, but the biggest thing is that they can trust us to do a job well and help them shine for their clients. It's just like if you. Any agent has that crossroads where their clients ask them for a handyman and if you send them someone that's not good, it's going to be a reflection of you.

[Jason]

What are the promises and commitments you make to the agent who's handing you their client?

[Justin Roark]

I promise to always make sure that your client gets back to you.

[John Martin]

We will never steal your client.

[Justin Roark]

We will never poach. However, it comes with a caveat. We are going to, can I say it? Kick ass as hard as we can so that we do look like a hero. But that agent who refers us, they have an obligation to keep in front of their client, to make sure that they're there in front of that client. If we're told by that client, hey, we want to sell a property, we will let that agent know and it's that agent to keep up that responsibility. But if they have to be great at what they do too, like it has to be hand in hand. We're not here to poach. And we want people to survive and thrive and throw us business. But at the same time, like, they're also hiring other brokers to do work adjacent to what they're doing. So there's a mutual relationship there.

[Jason]

This makes perfect sense to me. So, number one, I'm going to run a B2B campaign through the agents that I'm in business with.

[John Martin]

Yep, everywhere.

[Jason]

Do you also then go directly to landlords?

[John Martin]

Yeah, of course. I mean, you know, you know Google Analytics, you know, we do SEOs, we have websites, we try to push that out. You know, Google reviews are huge, so we get organic traffic that way. It's just marginal compared to our referral network. Through agents.

[Jason]

So your number one source of business are the agents.

[Justin Roark]

Absolutely correct. And agents would also want possibly another group to do that because, you know, on the sales side, which I think everyone tends to preach, is that it's a hot, you know, so high risk, high reward, with relatively little liability. You can definitely get yourself into trouble in sales, no doubt about it, but not in comparison to the level of trouble that you can get yourself into when it comes to property management. And I think when people start thinking about the risks involved with property management, I think John has done a great job in pushing my risk tolerance over the years. I'm very risk averse and he's not. And I think that it works out because you do have to take a little bit to get into property management. But just imagine mold or cars coming through walls or something else.

[John Martin]

That's crazy. Yeah, Messages, deaths in the house. I mean, crazy things.

[Justin Roark]

Some agents may not want to deal with that. And so as far as like, who wants to get into property management, you have to be okay with that sort of thing.

[John Martin]

If you don't have the experience or the setup for it, it is very challenging to do correctly.

[Jason]

Gentlemen, I gotta tell you, we've went through the models. I understand the property management business better today than at any other point.

[John Martin]

Good.

[Jason]

There's a million things we didn't discuss because all businesses are businesses of nuance.

[John Martin]

Yep.

[Jason]

So let's do this final question and I'm going to give you each time for a final thought.

[John Martin]

Okay.

[Jason]

I'm going to get into this business, save me, protect me, either talk me out of it or tell me the one thing that you wish you would have known when you started it. And each of us close us out. John, I'm starting with you.

[John Martin]

Nothing's impossible. Some things are just extremely hard. Right. So that's, I think, what separates people that want to do something like this or not. And I encourage all the agents out there. I mean, there's a million things that you can do in this industry to help make more income and they're all challenging. So, you know, I think if I had just one nugget, I don't know what I would do differently because I think I'd do the exact same thing, the exact same way we did it. I would say just put your head down, wake up every morning and be better than you were yesterday. And go get it and remember and remind yourself nothing's impossible. It's going to be hard to brace yourself and get after it.

[Justin Roark]

Justin, I like the idea of prepare to succeed. And so do the things that you need to do to educate yourself. Talk to other property managers. We spoke to real estate attorneys. We spoke to other property managers. We definitely got the blessings from the KW brass in which they housed us and nurtured us while we were in this fledgling phase and we took the time to educate ourselves. Like I mentioned, I went to seminars and other things as much as possible. I would say focus on doing that and find out where your niche can be from that preparation.

[Jason]

Awesome. All right boys, if I'm in Austin, Texas and I'm a real estate agent and I'm listening and I might not be with Keller Williams, but I need a great property management company. How can they reach you? How do they find you?

[John Martin]

Www.towerprops.com There it is friends.

[Jason]

Awesome. Gentlemen, thank you for sharing with us and everything you're doing for the industry.

[John Martin]

Thank you so much. Much appreciate you.

[Jason]

Man, those guys get it. Yeah, they're wacky and they're zany in the most contagious way. You just want to hang out with them. But when you get past the fact that they're just awesome guys to hang out with, they run an incredible business. It makes perfect sense to me that when you get upstream to renters and landlords, the renters of today become the buyers of tomorrow and the landlords of today become the sellers of tomorrow. That makes perfect. See, the math of this business scales beautifully. And sure, they haven't necessarily jumped into the AI bath just yet, but I do believe they're going to find efficiencies within their organization model over the next 24 months. But here's the deal gang. The margins are really nice just the way they are. It seems to be an incredibly efficient business based on number one, providing wild amount of value to landlords that need it. Number two, being completely transparent with both tenants and landlords and number three, supplying a valued service to the real estate agents in their office. Understand they have 1300 real estate agents out of the one market center that they're in. So they wake up in the morning and having a ready, willing and able group of real estate agents to refer them business to might be their largest single advantage. Here's what I know. If you wake up tomorrow morning and want to know which business to think about starting, this would be a good one to get into. Gang, this closes out our series on partnerships. Here's what I've learned. Number one, there's no one size fits all when it comes to partnerships. We've seen husband and wives, we've seen good buddies. We've seen simple business partners, and we've seen solo agents that have come together, and we've seen mothers and sons. Number two, all of these partnerships honor four things. Number one, everybody seems to have an incredible amount of respect for the person that they're in business with. Number two, everybody has a divided and defined swim lane, and they know exactly which part of the business they're responsible for. Number three, they offset each other's strengths and weaknesses. In all the cases, you seem to have someone who wakes up in the morning with an incredible ability to grow the business and someone else who has an incredible ability to run the business. And finally, I think every single one of them would say the same thing. On my own, I was awesome. But together, I'm building something bigger than I ever would have been able to apart. You know, the truth is, the road of entrepreneurship is a lonely one to walk. I think it's wonderful when you find somebody to hold hands and walk it down together. Go faith and do likewise. If you're enjoying this podcast, I want you to click the subscribe button anywhere that you get your podcasts. We want to be the voice in your head every single week. And every week we're dropping new content. We also send out a newsletter at the conclusion of every show to make sure that you get the highest points in the models and systems that were discussed. So if you want to sign up, I need your name and your email email address. Head over to themillionaire agent podcast.com millionaireagentpodcast.com Enter your name and your email address and every week that newsletter will be in your box. Friends, you just went on a journey. I hope that what happens between now and the next time we meet is absolutely wonderful for you. Thanks for listening. I'll see you next week.

[Justin Roark]

This podcast is for general informational purposes only. The views, thoughts and opinions of the guest represent those of the guest and not Kwri and.