It’s been six years now since Cliff Tarr made the bold decision to leave his high-powered job in Sydney as the CEO of a successful national financial services business working alongside real estate businesses. In a move that surprised many, he headed back to his hometown of Brisbane to take a job as a real estate salesperson.
Unsurprisingly, Cliff wasn’t planning to always be a salesperson - he always had the view that he would one day own the office. But that was part of a five year succession plan; first he would take his time learning the business, literally from the ground up. Little did he know at that point that less than a year later he would be catapulted into the principal role and a few years after that, his property management business would be winning awards for exceptional growth.
The early days were hard - Cliff went from a healthy predictable salary travelling the country with numerous social functions to a nonexistent income and days filled with cold calling, door knocking and a healthy dose of rejection by the majority of people he came into contact with. Slowly he began to find his feet.
Three months into his new life the first shockwave hit - the principal of the business he was working in suddenly decided to sell. The opportunity for Cliff was to buy the sales business now or it would be sold to someone else. The rent roll would continue to operate in the same premises and the sales business would have a restraint of trade on property management in the meantime.
Cliff decided to take the opportunity despite his lack of hands-on experience. He brought in the existing sales manager as his partner to counter what he felt was his key weakness and in January 2005 officially became the principal of Ray White Coorparoo Sales. Cliff worked hard at establishing himself and learning every aspect of operating a real estate business - making mistakes, learning from them and slowly building a solid foundation.
Less than two years later came the next fork in the road - the original rent roll of 500 properties was now up for sale. With a price tag of around $1.5 million, Cliff was torn. Ultimately, he decided he wasn’t in a position to buy the property management business, instead focussing his resources elsewhere in the business. With the restraint of trade on property management due to continue for another year after the sale was finalised, Cliff continued to focus on building more depth in his sales business, which was beginning to show solid growth.
By late 2006, Cliff was free to start a property management business under the banner of Ray White Coorparoo and he decided to begin slowly. Recruiting an experienced property manager two days a week, in the first eight months they gained 20 managements. Cliff could see the potential for property management was enough to justify dedicating more resources.
Mid 2007, Cliff offered one of his salespeople the opportunity to move into property management full-time. She thrived along with the business although unfortunately didn’t last and Cliff continued to have trouble finding the right person to take charge of the rent roll.
In early 2008 Cliff re-evaluated his property management business again. Having had a significant turnover of staff in the department already, Cliff and his wife Juanita decided to team up professionally. Along the way, Cliff had parted ways with the partner he had brought into the business in the early days.
Juanita took over the property management business in the first quarter of 2008 and by the end of 2008, another full-time property manager had been recruited and the rent roll had grown to an astounding 137 properties.
Also during that year, Cliff had implemented Ray White’s Professional Property Management Business System - the set of systems and processes that he says gave the business structure and a solid foundation to grow from.
“When we started doing property management it was all ad-hoc. I guess we were just testing the waters. We didn’t have proper systems in place and that was only ever going to work for a short time.”
“I would say now looking back that implementing the Professional Property Management Business System was one of the three key drivers of our success, the other two being the opportunities of our area and the strength of the Ray White brand” Cliff said.
Evaluating what had happened during that extraordinary year, Cliff says 50% of the growth came via referrals from the sales team. The demographic of his area helped too - roughly 50% of properties in the area are owned by investors and roughly 50% are units. He says up until this point, they had only been “farming” - taking leads that came into the office and picking up managements from the sales team.
“The Ray White brand is strong and drew a lot of landlord enquiry without any effort. That, on top of the opportunities presented by the area’s demographics gave us a great environment to build our property management business from scratch.”
“A real backbone of the business’ success and our ability for growth now is the fact we are process driven and follow the tools inside the Ray White Professional Property Management Business System religiously - the online training, reporting and measurements” Cliff said.
At the beginning of 2009, Cliff realised to maintain the rate of growth they would need to start “hunting” instead of farming - going out and proactively chasing new managements and by the end of 2009 the rent roll had grown to 219. The team had grown to three property managers, with Cliff and Juanita taking the decision to allow extra capacity in staffing for continuing growth.
Impressively, their overall growth strategy was not simply about more managements, they were aiming for better managements and succeeding. During this time, the average management fee grew from $1100 per annum to $1595. This was achieved through targeting higher rent properties and focussing on the net figure achieved on each management.
Looking back, Cliff believes that with the benefit of hindsight he perhaps should have purchased the existing Ray White rent roll when it was offered to him in 2006. His reasons are not straightforward though - he says a large rent roll would have given him a fast-track to building depth in his sales business at the time.
“You have to have both businesses humming - when they’re working well in tandem there’s a great potential for cross referral. But I’m not sure I would buy a rent roll if it was offered to me now. We have done it the hard way; we now have a solid business on both sides of the fence.”
“Our plan is to grow the rent roll to 500 organically and then reassess where we’re at. It may be an appropriate time to buy, or we may decide to go on growing the business ourselves. You have to consider all the variables at the time.”
Cliff’s advice to other principals or would-be principals on the great “build or buy” rent roll debate is to look at each opportunity on a case-by-case basis.
“There are so many things to consider - cash-flow, whether you have the expertise to handle the sudden acquisition of multiple properties, the list goes on” Cliff says
“I can honestly say that being the principal of a real estate business is harder than it looks. There are so many different balls to juggle. Having said that, I ultimately have no regrets about my decision - it’s been incredibly rewarding.”
