A Philadelphia-based property management firm has entered into a strategic partnership with a property manager in Winston-Salem, North Carolina, as the persistence of high interest rates pushes up costs for rental operators and turns more single-family homeowners into landlords.
Under the terms of the deal, TCS Property Management, a regional operational services provider with offices in Philadelphia, New Jersey, and Delaware, plans to acquire a 50% stake in Winston-Salem-based Piedmont Premier Property Management, known as P3. Both companies are focused on single-family rentals.
TCS manages a portfolio of roughly 5,000 doors across its regions and will add 200 through its partnership with P3, allowing both companies to scale faster and increase manpower with a reduced cost burden.
“We were able to build a management process that was pretty much seamless and profitable day one,” Ben Oller, TCS’ owner, told CoStar News. “We just needed a local partner with the experience of their market and their industry and boots on the ground.”
Oller said TCS’ expansion model has focused on Southern and Southwest markets where there has been organic growth in both the renter population and rent prices. The company’s partnership with P3 is the latest in a series of deals. The first took place in December 2022 with a local franchise of the brokerage Keller Williams in Nashville, Tennessee.
Since then, the company has added partnerships offering professional property management to individual single-family owners in other Sun Belt markets, including Phoenix; Charleston, South Carolina; and Atlanta.
“Our expansion is more than geographical growth; it's about equipping local real estate entities with the tools and processes to excel in property management,” Oller said.
Beyond the cost savings and ability to scale services quickly, the impetus for reaching beyond the company’s Northeastern roots has been the emergence of what Oller called the “accidental landlord.”
Locked In
As interest rates have pushed up mortgage costs — which are still hovering near 7% according to Freddie Mac — fewer single-family owners who are locked into lower rates have put their houses on the market, even if they need to relocate.
That squeeze in supply has also created more renters, helping to push up rental rates and creating a scenario in which owners stand to profit more from renting their former homes than selling.
“We're seeing that if people have a 3% interest rate or below, it doesn't really make sense to liquidate that asset, so they become the accidental landlord,” Oller said, “requiring much more of the need for a property manager to run the day-to-day of the house.”
The typical landlord that TCS and its partners serve own one to two properties. Some may buy an additional property over their personal investment cycle, but they are far from institutional investors and often become hands-on in every aspect of running the business from showing properties, to dealing with tenants, to handling potential litigation, and negotiating insurance premiums.
The services offered by TCS promise to provide the labor, expertise and scale to mitigate those issues for small landlords while reducing costs, a situation Oller doesn’t expect to change any time soon.
“With the way the world is going with interest rates, the lack of first-time homebuyers and the prices of real estate; it’s a perfect storm to be in our business,” he said.