DOL Overtime Rules In Effect December 1, 2016
On May 18, 2016, the Department of Labor (DOL) released the final rule increasing the salary threshold for overtime exemption to $913 per week (totaling $47,476 per year). This means many employees currently classified as exempt from overtime will now have to be reclassified as non-exempt and be paid overtime. The new regulation is effective on December 1, 2016.
Many small businesses, such as property management companies, are unaware of these requirements or think the requirements don’t apply to them. However, if you are an employer whose annual sales total $500,000 or more or are engaged in interstate commerce – this regulation applies to you. Please note that the courts have interpreted the term “interstate commerce” very broadly so that these regulations apply to most workplaces. Let’s review the problems that the new regulations can cause, as well as suggestions as to how your office can comply.
In a typical property management office, you have employees who would currently be classified as salaried – exempt from the overtime regulations. These employees may be an office manager, property manager, or a maintenance supervisor that work many hours (often more than 40 hours per week) to keep the business running smoothly. Many of these employees make under the new threshold of $47,476 per year and will now have to be paid for all overtime hours worked. Most of these employees enjoy the flexibility of being salaried and the distinction that typically comes with that classification.
Before determining how you will comply, look at the potential problems first:
- Many employees will feel that being changed from salaried to hourly is a demotion.
- Employees lose flexibility – i.e. an employee might work fewer hours one week, but make up hours during the next week. As an hourly employee, this is not possible since any hours spent working must be compensated within that workweek.
- Can your employees accomplish all their assigned work within a 40-hour workweek?
There are several ways to make sure your business complies with this rule and they will all affect your employees one way or another.
- Raise employee salaries to maintain their exempt status. This might make sense especially for those employees whose salaries are close to the threshold.
- Convert salaried employees to hourly and track their time. This may potentially end up costing your business more if you don’t limit overtime worked by your employees.
- Reclassify salaried employees as hourly, adjust their base pay to account for overtime. If this is done right, employees will earn the same amount they did before the change. This option might be the hardest sell to the employee as their hourly rate will go down even though they will be earning the same annual rate.
With these changes, some re-training will also have to take place.
- Employees will need to be trained on timekeeping. As a salaried employee, they are most likely not used to keeping track of their time – especially accounting for lunches or other breaks.
- Employers will need to retrain themselves on how to work with a non-exempt employee. Any time worked must be compensated, so, if you are used to emailing, calling, or texting an office manager or maintenance supervisor after hours (and expecting a response), this time will now have to be tracked and paid. These types of interactions are typical in a property management office as after-hours requests from tenants and property owners are the norm.
- Employers may have to adjust assignments to account for the employee who will only be allowed to work 40 hours/week and used to work more.
Whatever actions your property management business decides to make, keep in mind the effective date of the new regulation is December 1, 2016!
Additional Note: The Fair Labor Standards Act (FLSA) is a federal regulation and some states have more stringent laws. Make sure you know your state’s laws as well as federal.
Property Management Business Solutions, LLC (PMBS), franchisor of Real Property Management, recently hosted a roundtable meeting with U.S. Representative Chris Stewart (UT) and U.S. Chamber of Commerce representatives, the International Franchise Association (IFA), and other franchisors regarding joint employer policy affecting locally owned businesses.
The meeting was initiated by the Coalition to Save Local Businesses, spurred by the National Labor Relations Board’s (NLRB) recent actions to change the joint employer standard used to determine when separate employers share responsibility and liability for the same employees. After decades of protecting businesses from liability that shouldn’t be theirs, the NLRB now allows regulators to potentially find joint employer liability in almost any business contractual relationship.
“As a national company and leader in the property management industry, we welcomed the opportunity to bring together government leaders and business owners to discuss this important issue,” said John Gohde, PMBS Chief Operating Officer.
“Joint employer legitimately threatens the franchise business model. If franchisors are liable for franchisee actions, they will stop franchising. Then, rather than locally owned businesses on Main Street, you’ll have big corporations. Ultimately, the joint employer threat will destroy small businesses over time. We are encouraged by Congressman Stewart’s knowledge and experience working with Congress in this area, and his commitment to further the discussion in Washington.”
Through the Coalition to Save Local Businesses, the IFA seeks a permanent solution on joint employer policy to protect franchise businesses from undeserved liability for another firm’s workers.
How many times have you heard someone say, “I love my landlord!”? I’d venture to guess, not very often. The property management industry has a less than glowing reputation overall, and this keeps many from entering the industry. Yet here at Real Property Management, we view the negative perception of property management as an opportunity…for a few reasons.
When you’re evaluating the multitude of franchise options available to you, one of the typical factors assessed is the competition. How much is there? How sophisticated are they? What market share do they currently have? Part of the beauty of this industry is that it is young. Only 20% of residential investors currently use a professional manager like us, leaving 80% of the market self-managing their rental inventory. Therefore, building a business in the property management space is not dependent on stealing market share from an established player. Although we hope to a certain extent that does happen based on the service level offered through the Real Property Management brand, the vast majority of the opportunity is sitting in your backyard for the taking.
Why is that? Let’s be honest. Property Management isn’t glamorous. It involves putting yourself in the middle of a property owner and a tenant, after hours calls/emergencies, and evictions. If this doesn’t sound like a dream job to you, chances are it doesn’t to others as well. But, being willing to do what others won’t can work out very nicely to your financial benefit.
Speaking of doing what others won’t, take a quick glance at the competition you’d be facing in this segment of Real Estate. The barriers to entry as a property manager are low. In most states, you just need a Real Estate license and a local broker to hold that license for you, and you’re in business. The exact same requirements and curriculum needed to sell real estate. Property management is often an honorable mention at best in the courses. In some cases, that has led to people dabbling in property management part-time. Part-time effort almost always equates to part-time service. Do you want competitors who are working part-time or full-time?
Unlike many other franchise industry options that are saturated with well recognized brands, or have a limited shelf life before the next “it” concept comes along, the property management industry is here to stay, stable and in need of heightened professionalism. Right now, on average, more than 1 out of every 3 homes in your neighborhood is a rental.
The Real Property Management team includes almost 300 locations nationwide, more than 1,000 employees across the country and a support center staff who are dedicated to changing an industry. Would you like more information about being a part of the change? Contact us!
The Franchise Doctor did a podcast interview with James Campbell, the owner of Real Property Management Midlands. James spent 30 years in the US Army, and upon retiring, soon became a real estate agent selling houses. A few years later, he learned about the Real Property Management franchise and soon became a franchise owner. In the podcast, James describes how he learned about the Real Property Management franchise and why he chose to become an owner. Click here to visit the Franchise Doctor’s website and listen to the podcast.
Darus Trutna went from high school to directly joining the US Army. He was soon deployed overseas, including a year in Egypt. Upon returning back to the US, he enrolled at Humboldt State University in Arcata, California, where he began studying business. While at Humboldt, he began exploring investment property options, and along with a partner, he bought his first investment property and fixed it up. However, rather than selling the revived property, he and his partner decided instead to put a renter in the house. Additionally, Darus decided to manage the property by himself, and acquired tools and other items needed for a single unit. He later purchased a second investment property and repeated the process.
Darus soon realized that property management could be a business for him. He knew about other companies’ poor reputations and saw an opportunity to compete. He started as an independent property manager, and soon started growing, and then reached a point of needing employees and better structure. As such, he started exploring franchising, which led him to RPM.
In June 2012, Darus started his Real Property Management Humboldt franchise with 35 units and by November 2013, had grown to 135 units, along with two full-time employees.
Then in November 2013, he began the acquisition of a significantly larger competing property management company, the owner of which wanted to retire.
The acquisition has presented a number of challenges. In particular, Darus needed to know how the previous owner had done things to continue servicing existing customers. He could not simply stop the previous owner’s machinery and immediately shift to his own process. At the same time, though, he built out new methods and trained staff, so that he could then replace the previous methods with his own for a smoother transition.
Darus is now at 1,585 total properties, about 1,300 are residential, along with some mixed use and commercial properties. He has a team of 17 in the office and six full-time maintenance technicians. How did he achieve such an undertaking? Darus says that he focuses on empowering his team to manage day-to-day operations. Rather than solving all the problems himself, he focuses on empowering the team and removing the obstacles for them to serve clients.
Darus says he looks forward to the bright future ahead for his team and his RPM family. One of his favorite quotes is “Entrepreneurship is living a few years of your life like most people won’t so that you can spend the rest of your life like most people can’t.”
Are you ready to grow your property management business? Watch this video to learn more about how joining the Real Property Management franchise can assist your business.
Video Transcript: Are You Ready to Grow Your Property Management Business?
As you know, demand for residential property management is growing faster than ever, and you have the competitive edge as part of the leading brand. It’s an exciting time for property management, and a critical time for you. But are you ready?
Have you checked your p’s and q’s, dotted your i’s, crossed all of your ts?
How do you take full advantage of the opportunities a growing rental market has to offer? How do you avoid the pitfalls and obstacles that keep too many property managers from rising up to the next level? From scaling their business to building a future, not just a career.
Well, you need tools that help you track, sell, service, and retain more customers. And Training. Step by step guidance for both you and your staff. From simple daily tasks to more complex demands like accounting and new technologies. You need innovation. New programs and streamlined process, so you stand out from the competition.
Next, your partnerships help you build trust and credibility for driving referrals. And finally, we need to measure to clearly see where your decisions are taking you and form your strategy for the future. All of these resources are yours as part of the Real Property Management family, providing you a solid foundation in a strong but challenging industry.
Yet there remains one more key component to building your future. You. Your time, energy, knowledge and commitment. You are the final critical piece of growing your future.
With 25 years of experience, and a nationwide footprint of over 200 locations strong, Real Property Management is ready to take advantage of everything the industry has to offer. Are you ready?
The 2016 Real Property Management Mid Year Conference last week in Park City was a success! We had a large number of Real Property Management franchise owners and employees attend to network with other franchises. They also attended a number of break out workshops on operations, accounting, and marketing. Franchisees also took advantage of a Franchise Support Center Showcase, in which they could talk face-to-face with a number of support center staff.
The 2017 Real Property Management Annual Conference will be held February 20 and 21 in Atlanta, Georgia, at the Regency Hyatt Hotel.
Dan Hayes purchased a Real Property Management franchise in August 2015. Within the first year, his Real Property Management Solutions office in Portland, OR, received the 2016 Rising Star Award by the Real Property Management franchisor, Property Management Business Solutions, Inc.
Q: How long have you owned a franchise?
I opened in August 2015.
Q: Why franchising?
Joining a franchise provides access to proven systems and resources for franchisors and franchisees to achieve their respective goals. The Real Property Management opportunity specifically provided important business resources to help with marketing, training, and operations, which ultimately offered a competitive advantage over independent operators.
I’ve also found that being part of a trusted national franchise organization has attracted business because clients identify this credibility as part of my value proposition.
Q: What were you doing before you became a franchise owner?
Before joining the Real Property Management franchise, I worked as a full-time senior executive with the Coca-Cola Company and as a part-time residential rental real estate investor.
Q: Why did you choose this particular franchise?
The professional property management industry is largely made up of small mom-and-pop operations. I was impressed with what the founders of the Real Property Management brand had built, the culture of the organization, and the overall power and knowledge I knew would come with their 25 years of experience.
Q: How much would you estimate you spent before you were officially open for business? (Please give us a cost breakdown.)
The franchise fee was $40,000. I estimate spending an additional $3,000 in marketing materials, $3,000 in furniture and fixtures, and $5,000 on miscellaneous expenses.
The average total first-year investment to open a Real Property Management franchise ranges from $75,000 to $100,000, depending on size and location.
Q: Where did you get most of your advice/do most of your research?
Outside of the information I found online, most of my research came through a series of discovery calls and meetings with the corporate office. I also spent time talking with current Real Property Management owners.
Q: What were the most unexpected challenges of opening your franchise?
Our marketing efforts really worked well and the growth we saw, as a result, was dramatic. It’s a good problem to have, but the learning curve was steep and at the same time, our capacity was challenged. Having the support of fellow franchisees and the Real Property Management HQ office was a huge advantage.
Q: What advice do you have for individuals who want to own their own franchise?
Do your research and make sure that the goals you have for your franchise are achievable within the parameters of your franchise agreement. For example, we have complete control over our pricing structure, organizational design and growth aspirations. The franchisor has complete control of brand imagery and territory, which is the way it should be, I believe. This is very much in line with our goals.
Q: What’s next for you and your business?
We plan to double our business again this year and hope to begin plans to open our second Real Property Management office.
Real Property Management is the largest property management franchise organization in North America, with over 280 locations. The brand specializes in managing single-family homes, townhomes, condos, multiplexes and small apartment buildings. Its services include finding and screening tenants, completing the lease agreements, collecting rent, arranging for any necessary repairs, and processing evictions when necessary. Real Property Management offices also manage the legal compliance for local, state and federal real estate law.
Here’s a video that includes comments by Marcus and Emery Phillips, owners of the Real Property Management Palm Beach County franchise office, discussing aspects of the property management industry.
One of Marcus’s observations about both the industry and Real Property Management: “So what really excites me about the industry today is that there are more renters than ever, and with the Real Property Management platform, we’re able to bring those best practices to bear. Real Property Management is really leading the charge for other property management firms.”
- How Real Property Management’s Marketing Research Provides a Competitive Advantage
- How Preferential Pricing Provides Our Franchise Owners with A Competitive Advantage
- Add a Predictable Revenue Stream to Your Real Estate Brokerage
- What Is a Good Ancillary Revenue Stream for Brokers?
- Has Traditional Real Estate Brokerage Changed?