There are almost 200,000 property managers across the country,” says Kevin Ortner, CEO and president of Bloomington-based Renters Warehouse. But the job “was never really handled like a business or even marketed.” This was the opportunity Brenton Hayden saw when he launched Renters Warehouse in 2007.
It was also the challenge. Most residential property management companies were small operations that “treated this like a hobby or side business,” Ortner says. Institutionalizing the business was like sailing into uncharted waters. But in time, property owners have seen the advantages of a specialist to handle the chores of managing properties and vetting tenants.
“Rather than have a portfolio manager hire a really smart guy to come in and manage every aspect of 100 homes, from rent collection to leasing to maintenance to legal—which is the typical model—we started building departments,” says Ortner, who became the company’s president and CEO in 2013. “This allowed us to scale quickly.”
The company’s departmentalization strategy has allowed it to put together a portfolio of roughly 17,000 properties across the country, totaling over $3 billion in real estate. Now running 33 offices across 18 states, Ortner expects the company will add another 12 offices this year as it looks to further tap into Florida and add locations in new states along the East Coast and in California.
“Originally, we were growing our business across the country through a franchise model,” says Ortner, who was Renters Warehouse’s first franchisee. In September 2015, Renters Warehouse sold a majority stake of its company to Northern Pacific Group, a Wayzata-based venture capital firm. “After the deal with them, we got an infusion of growth capital,” Ortner says. “We started to buy back some of our franchises [and] roll them into our corporate model, and open new locations.”
Shifting away from franchises allows Renters Warehouse to better centralize its operation. The company spent much of last year buying out franchise owners. Of its 33 offices, 16 are now corporate-owned, a number that will likely increase this year.
In its first nine years, Renters Warehouse grew by focusing on “the small mom-and-pop investor who maybe owns one or two homes for rent,” Ortner says. “Recently, we added our portfolio services arm, which is a division dedicated to large real estate investors and institutional owners, like banks and hedge funds.”
This new venture will allow Renters Warehouse to break into a market untouched by most property management companies. “The benefit for us is scaling faster,” says Pam Kosanke, chief marketing officer. “We can cherry-pick ones and twos all day long, but it’s a much slower path to the ultimate goal of 200,000 properties under management within the next few years.”
Ortner is confident that Renters Warehouse will hit that target. “Right now, we are the only property manager in the country that can offer institutional-level investors the option of one point of contact, no matter how many markets they are in,” he says. “We’re really the largest in what we do now, and I don’t see that changing.”
The Value of a Single Source
For most property owners with more than a couple of units to their name, the goal is to never stop amassing more homes. However, as an owner’s list of properties begins to expand to multiple cities or states, it can be difficult, if not impossible, to keep the management process simple.
Last spring, Renters Warehouse landed a major new client. Los Angeles-based Raineth Housing owns about 1,700 homes in St. Louis, Kansas City and Cincinnati. In those three cities, Raineth owner Ed Renwick had seven property managers—“each with different reporting styles, different processes, different standards,” Renters Warehouse CEO and president Kevin Ortner says. Dealing with all of the property managers was becoming a headache for Renwick, which led him to seek out a more uniform way to have his many properties managed.
Renwick interviewed a number of management firms, but says he found that “most of the other national property managers aren’t really property managers. They outsource property management to independent firms and then monitor them, adding an additional layer of fees without necessarily adding value.”
By working with Renters Warehouse, Renwick says his company has been able to lower its cost structure while improving services to tenants. Moreover, Raineth Housing can begin to grow its own property portfolio knowing Renters Warehouse can take on the additional workload.