Those of us who have been in the industry for a little while have seen it go in phases. My own PM company opened for business in January 2021. At the time, it opened because I was paying my broker a huge percentage of my income just to keep my license under his, so I became a broker myself and started my own boutique property management business. I was fortunate my former broker was and still is a great guy – who I still turn to for advice and am grateful for the opportunity to learn from his experience.

While there is an ebb/flow for accidental landlords, most property managers focus on intentional investors. With every boom in real estate always comes a boom of people who fancy themselves real estate investors, usually spurred by Bigger Pockets podcasts and such. So the PM companies who boomed with growth from 2015 thru 2023 or so were usually in investor-focused markets such as Ohio, Arizona, Alabama, Florida, etc. Meanwhile, everyone else stagnated or shrunk. It isn’t something that a lot of people talked about, because of course, people like to brag about door count, so when doors are shrinking, people stay mum. But for vendors who price by the door, we could see it happening. Most clients were losing doors month after month. The lucky ones were holding steady. Precious few were growing, and they were in those markets where intentional investors were flooding in. But as with all cycles, the pendulum has swung yet again…

The Triumphant Return of the Accidental Landlord

Intentional investors are now the endangered species. Sure, they’re still around. They always are. Smart money is always in real estate in one way or another (“land is the only thing…that lasts” – Gerald O’Hara). But they’re the minority, and many of them have left and shifted to focus on other investment strategies as interest rates have spiked and property values have failed to collapse from their insane highs due to lack of supply. Now, we have the triumphant return of the accidental landlord.

The problem is that a lot of property managers really have no idea how to work with these clients. It’s rare that I talk to a property manager at a conference who was in business back around 2008-2015. Most companies started up around the tail end of that time. As is usually the case, people tend to jump into an industry at the tale end of its massive growth cycle. They hear of the amazing opportunity, but only after the opportunity has already existed for years and they’ve missed the best part of it. Many of those PMs have had to focus their growth strategy almost exclusively on intentional investors, and their businesses are built around that type of clientele. But with intentional investors being the minority of leads nowadays, you’ll need to tailor your growth strategy to these new kinds of clients that you aren’t used to dealing with.

So who is the accidental landlord, exactly? The first thing I’ll say is that they are not a monolith. Unlike intentional investors who are solely focused on their ROIC, accidental landlords have a wide range of motivations and personalities. When you’re doing business with accidental landlords, you need to be able to deal with the divorced single mom who doesn’t have enough time in her day to think about that leaky water heater and just wants you to take care of it, and you’ll also have to deal with the retired dad who has too much time on his hands and wants to question every decision you make. You’ll have tenured academics who couldn’t tell the difference between a nail and a lag bolt, and you’ll have truck drivers who do carpentry in their spare time. And not a one of these people know or care about their ROIC, cap rate, or cash-on-cash return. For the most part, they aren’t even expecting to make money at all. They’re handing the property over to you to preserve it until some unknown date in the future when they can sell it or move back into it. They’re hoping largely to just break even, and any free cash flow is treated as a happy surprise. What they really want to make sure of is that their house is still standing, it’s still largely in the condition it was when they moved out, and they’re not losing their shirt while they want for the opportunity to sell it.

For some of you (like me), this is your ideal client. Sure, some of them are massive pains in the ass who email you every ten seconds about the latest work order that came in, but for the most part, if you screen properly, these clients will leave you the hell alone and let you do your job. Unlike intentional investors, they don’t have fifteen spreadsheets they’re tracking your every move on and then bitching that the hot water replacement cost them $2,200 instead of the average $1,400 cost just a few short years ago. Did they not have to deposit any money this month? It’s all good! But for some of you, you simply don’t understand this client and how to deal with them. Your systems and processes are entirely built around intentional investors, and your team has never had to console a crying client who is going through her first eviction. These are foreign concepts to you. But you need to be able to cater to this clientele, because for the next few years, this is like 2008-2015 all over again. In fact, we’re in the heart of it right now. It’s 2010 again, and if you’re smart, you can add hundreds of doors over the next few years.

Catering to Accidental Landlords

Here are some key pieces of advice I offer as someone who has focused almost entirely on this accidental landlord client most of my career:

  1. Invest in empathetic client support employees. This is where personality testing that I’ve talked about previously comes into play. You need the kind of person who is patient, sociable, and detail-oriented. It’s not an easy person to find. But when you’re dealing with accidental landlords, this is no longer a B2B industry, it’s a B2C industry. You’re now dealing with a normal consumer and not a businessperson. So you need that rare individual who is capable of drilling down into the details of a financial statement to explain it in plain language to a teacher or nurse, while also being patient and understanding when that person starts crying over the phone because they don’t know how to handle the HVAC replacement that’s costing them $8k.
  2. Have a thorough onboarding process. Unlike intentional investors, this is probably your accidental landlord client’s first rodeo. They don’t know how an eviction works. They don’t know how you screen and place tenants. They don’t know what the requirements are for habitability in your state. They’re relying upon you for all of that, but at the same time, they need to be educated on it so they don’t think you’re cheating them when you tell them that they have no choice but to repair that leaking refrigerator they left in the house for the tenant. And education can not take place after the fact. That leads to distrust. There is no perfect onboarding process, and you will always realize too late that you let a bad client slip through the cracks, but for the vast majority of accidental landlords, if you just have a thorough onboarding process that explains things to them in detail, you’ll have a client that understands and lets you do your job. You should have some thorough disclaimers on your onboarding forms that new clients have to acknowledge, you should have educational drip emails that go out during the first 90 days, and you may even want an onboarding training course for new clients. However you do it, just make sure you take the effort to bring the rookie client along with you.
  3. Give them options. As I mentioned earlier, accidental landlords came all shapes and sizes. You’ve got people who don’t give a damn as long as the house is still standing five years later when they come back to town, and you’ve got people who want every possible contingency taken care of because risk makes them break out in hives. If all you offer is a base level product that’s the same price for everyone, you aren’t properly catering to this clientele. You need to give them options. You need a bare bones package for the landlord who just doesn’t want to pay much out of pocket, and you need the premium product with tons of guarantees that gives the risk-averse client the warm and fuzzies. This isn’t just about haggling over price and giving volume discounts for multiple properties anymore. That’s fine with intentional investors, but accidental landlords are a different breed. You need to have different levels of products that appeal to different personalities. Because while intentional investors tend to be somewhat homogeneous in their desires, nothing could be further from the truth with accidental landlords.
  4. Be the trusted expert. Unlike intentional investors who all too often think that they’re the expert and you’re their gopher, accidental landlords usually know that they’re not the expert, and they’re primarily looking for someone who they feel they can trust. So more than competing on price, you’re really competing primarily on trust with this clientele. That’s not to say that price doesn’t matter (it always does), but if they have to choose between a 10% manager who they trust and an 8% manager who they just aren’t quite sure about, they’ll pay the extra 2% to feel more comfortable. This means you need to invest in building trust. That’s about solid Google reviews (if you aren’t over 4 stars, you’re a red flag), it’s about lots of educational video content on your web site and YouTube page, it’s about having BDMs who come across as normal people rather than sleazy used car salesmen, etc. You want this person to feel that they can trust you even when bad things happen. When that water heater breaks at 2am and you go ahead and have your emergency plumber fix it without waiting for owner approval, you want them to feel comfortable that you did the right thing and not question you. That only comes by building trust and the client believing that you’re the trusted expert.
  5. Prepare for the exit. An accidental landlord is almost never a permanent client. Very rarely you’ll have someone who started out as an accidental landlord and then realizes how great of an investment real estate is, and they morph into an intentional investor who sticks around for decades. But that’s damned near a unicorn. The overwhelming majority of accidental landlord clients you bring on are just biding their time. As soon as the market rebounds, they want to sell, or as soon as they retire, they’re moving back into the house, etc. The good news is that unlike with intentional investors who may have dozens or even hundreds of properties with you, when each client leaves, they’re usually just taking a door or two with them. You have diversified your risk by diversifying your portfolio. No single client is all that important to your top or bottom line. And rarely do they leave en masse. Even though the market recovers at the same time for all of them, their timelines and expectations are never the same, so while some will sell as soon as interest rates drop below 5.5%, others are waiting for 4.75%, or they’re waiting for a certain price they can get for the house, or they’re giving it time to see if their kid wants to take it after college, etc. So you don’t really have to worry that you’re going to see a mass exodus of doors at any one time. But, they will pretty much all leave eventually. So you need to prepare for that. Educate your clients on the fact that you also sell homes (assuming that you do, or educate them on your ability to refer them to the right sales brokerage). Educate them on how their net worth has increased from owning that home and how they’re getting tax advantages from owning it. You might extend the length of that client relationship, or even turn them into an investor. Remind them that they have a paying tenant who is basically paying their mortgage down, so there’s no need to sell until vacant. Etc. Just be proactive with it. Don’t sit like a bump on a log and wait for clients to start leaving. That’s when you’ll start to see problems with not capturing the potential revenue.

How Long Will This Last?

So how long will this era of accidental landlords last? Well, as an Econ major, I can tell you that there’s a reason that economics is referred to as “the dismal science.” Economists are not optimistic about where things are headed. Most economists are predicting a protracted period of high interest rates, and most economists who focus on housing economics suspect that most homeowners will not even consider selling their homes until mortgage interest rates drop below 5.5% or even 5%. The real spike in buyers, which will lead to a spike in sellers, is expected around 4.5%.

But here’s the thing: nobody even has a projected year for when we might see interest rates that low again. Right now all of the predictors of such things aren’t even venturing a guess on when we get that low. The NAHB (National Association of Home Builders) is predicting that we’ll be well above 6% thru next year, and even the most optimistic of the predictors, Realtor.com, is predicting the low-6s at the end of this year. All indications are that we’re looking at a multi-year stagnation of interest rates above the 6% market, and we could be looking at many years before we get back under 5%. The prospect of various trade wars with tariff threats make this even more likely.

How, you might ask? Tariffs lead to inflation, as imported goods cost more for businesses who then pass on those increased costs to consumers. The Federal Reserve then sees that spike in inflation and combats it by raising interest rates to stifle economic activity and bring inflation back down. With interest rates higher, investors flock to treasuries and other bonds to make sure their money outpaces inflation, and mortgage lenders have less capital to disperse and they get more frightened that their lending rates won’t be enough to outpace inflation, so they boost rates to protect their returns and prevent losses.

With it seeming quite likely that we’re going to have more tariffs rather than less over the next few years, it is highly likely that mortgage rates will not be going down by much, even if they otherwise would have. We are likely locked into a 6%+ mortgage interest rate environment for the foreseeable future, and that’s a great market for bringing on accidental landlord clients. This isn’t political commentary. I think we’d be seeing interest rates higher than 6% regardless of who is in power just because of the economic fundamentals. But the increased likelihood of tariffs and trade disputes makes it all but inevitable, and I don’t think any rational person on either end of the political spectrum would claim that we aren’t at higher risk of new tariffs over the next year or two.