How I Did It: Kristin and Shawn Johnson Discuss the Successes and Failures of Independence Capital Property Management

On The Property Management Show, we love helping people in the industry learn from the successes and failures of property management business owners. The feedback we’ve received on our How I Did It series has been phenomenal, so we’re bringing you another episode today. Our guests are Kristin and Shawn Johnson, and they run a successful property management business out of Farmington, New Mexico, called Independence Capital Property Management. We’re talking to this husband and wife team specifically about what may help and hurt you while you’re building your property business from 100 doors upwards. Introducing Independence Capital – Where They Are Today Currently, Independence Capital manages about 500 rental properties, down from their high of 615 doors. Most of that portfolio is made up of single-family homes as well as some four-unit and six-unit buildings. They have been in business for six years. As a husband and wife team, they have learned the importance of respecting each person’s role and talents. Their business starts with a solid relationship and a good marriage. While their skill sets are similar, their passions are a lot different. Kristin has a marketing background but prefers the sales and accounting side of things. Shawn is a helicopter pilot and needs to be constantly engaged, so does a lot of marketing and creative work. Shawn sees the growth, and Kristin operates against it. The system works, and it works well. The Big Lesson Learned: Being Quick to Buy Kristin and Shawn said their biggest failure was twofold. They bought a portfolio of 295 doors, and missed a bit of due diligence. Several of the properties within that portfolio turned out not to be legitimate contracts, and they faced about $70,000 in lost value. The properties in the portfolio were legitimate at some point, but while the portfolio was being sold, those properties were listed for sale, and the clients terminated after Kristin and Shawn took over. They had a clawback clause* specific to a client with a large percentage of the portfolio, but it didn’t extend to all the properties. There are many things they would do differently today. *(A clawback clause allows you to regain revenue for lost accounts that may leave within 12 months of acquiring a portfolio.) The second error was to push changes too quickly. Independence Capital enjoyed a high level of client satisfaction among their existing clients. There was a lot of trust. While bringing new clients on board, Kristin and Shawn expected those new clients would be just as happy. So, they immediately introduced their own fee structure, and that didn’t go so well. They upset a lot of clients, and they had to back off and take a deep breath. This caused a 17 percent loss, which was higher than expected. Here’s the important takeaway: Even with all the losses and the stress and the mistakes, Kristin and Shawn said they would still do it all over again. That’s how property management companies grow. They experiment. Focus on Integration: How to Make it Work The previous management company had neglected a lot of maintenance and even charged owners for repairs that weren’t completed. Once they took over the portfolio, Shawn and Kristin had a line out their door and had to field about 450 phone calls a day. They had hired extra staff, but this was hard to predict.  There are a few things to remember when you’re integrating a new portfolio to grow your business: New clients deserve a personal phone call. This goes a long way, especially if they’re caught off guard by the purchase and they don’t realize they have a clause in their contract that says their account is assignable to someone else. Don’t change management agreements for at least 12 months. Keep the terms the owners know,