Property Management Business Plan Market Analysis
Our target market is located in Alton, Illinois. According to American Community Survey census data, approximately 35% of Alton’s population rents. This works out to be approximately 4,000 of the 11,500 occupied residences. In addition to this fairly large segment of the population, approximately 25% of the houses in the community are $50,000 or less. Rents in the area range between $450 and $800. The properties we are focusing on are at least 2 bedroom single-family houses.
Our target consumer’s, or prospective tenant’s, are low to middle income families. In the screening process we require that a household make at least four times the monthly rent. Presently, our household income requirement is $2,200 per a month. Census data shows that the median family income in this area is $44,276, or approximately $3,600 per a month. This average exceeds our rental requirement. American Community Survey census data also reflects that approximately 60% of the rentals in this area rent for $500 or greater. In addition to income requirements, other screening criteria that are evaluated prior to leasing a property are; 1) credit score ratings, which must be greater than 640, 2) no liens or judgments on their credit report, 3) positive feedback from employer and prior landlord, and 4) no criminal history.
There are numerous competitors in our market, in both geographic location and industry. While research must still be conducted, it should be noted that a number of our competitors, managing 1-5 properties, are not recognized as formal businesses. Many “landlords” never formally register their activities following a formal procedural system. Gathering solid statistics for this research will be time intensive and costly.
Our marketing strategy is fairly simple. All advertising efforts to this point have been extremely effective and efficient. We place an ad, for free, on craigslist.com in the real estate rental section and we place a for rent sign in the yard. Our properties rent between two and four weeks from the time the property is put on the market. In the event our current approach doesn’t fulfill our expectations, we will advertise through local newspapers.
Ferventure Realty LLC will be differentiated from competitors based on three unique factors. We place an emphasis on compassion, enthusiasm, and quality service. Compassion is an element of caring that will differentiate us from others. In particular we are implementing a modified version of the principles reflected by the Ethic of Care. While this is an experimental approach at this point in time, we hope this approach will improve tenant retention and have a positive effect on the timeliness of rental payments. In talking with our current tenants, it seems our competitor’s lack this attribute and we believe that because we possess this trait our tenants have expressed a specific desire to “stick with us,” improving our market share.
Enthusiasm is an attribute that is an integral part of who we are and we try to carry it into everything we do. It is contagious. If we can’t be excited or enthusiastic about pursuing this business, or other endeavors, then it isn’t worth pursuing; this quality will be a part of any business interest we pursue.
We will differentiate ourselves from our competitors in terms of quality service by providing a prompt response to service calls. From personal experience and feedback from current tenants, service calls tend to be neglected. Evidence suggests that many landlords either fail to respond promptly to service calls, or they provide faulty maintenance.
Given the nature of our product and service, there are few alternative substitutes. The two alternatives to our product are home ownership or applying for section 8. While home ownership will eventually play a more significant role as a substitute threat, presently, given the current market and stringent regulating adjustments being made to the financial industry; this alternative is not currently a significant threat. Additionally, the timeliness of our entry will allow us to be in a well-leveraged position. By the time the market recovers we will be well established and will be looking to acquire multi-unit complexes; furthering our market share.
Our company has considered accepting Section 8 in an attempt to mitigate this substitute. However, after further scrutiny we decided it would not be in our best interest. To briefly describe this program, low-income families that meet state criteria can obtain a Section 8 voucher. This voucher acts as a subsidy and the government guarantees and pays the landlord a percentage of the rent based on what the tenant is able to pay. While our properties currently meet city code requirements for Section 8 occupancy, Section 8 has additional mandates that will require additional expenses. Additionally, research suggests that once we accept Section 8 vouchers, we would be required to accept them in the future. We do not want to be constrained or limited by this governmental program, as it could adversely affect future revenues and the program requirements will supersede our screening criteria.
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