For some people, property management seems like a losing game. You have a building, and as the management of it, you need to make sure things work. Anything that breaks falls on you to fix, which means you’re keeping a lot of professionals and contractors on retainer.
However, it’s not the cost of keeping up this sort of business that is the problem. In the long run, the real issue isn’t a matter of business costs. It’s a matter of the myriad mistakes that keep getting made by the management companies themselves.
Here are the key mistakes made by property management firms that end up costing them in the long run.
The first mistake is not charging enough money. This is an error that a lot of businesses and companies make without knowing or realizing, and it’s one that tends to cost them.
Think of property management as an investment. As such, you want to get your income as high as you can while minimizing expenses. Low management fees seem attractive to this mindset, but this is actually not the case. However, it takes years before the error kills your finances.
Low fees mean that there’s a low-profit-margin to the property. The low profit means you lack the money to hire the staff you need to get things done. Without that staff, you have more properties than you can handle effectively. This leads to more costs, which in turn cycles back to the low fees.
You need to learn to adjust your fees, to charge more. Sometimes, this means going for a property that has higher management fees, just to make sure you have greater profitability. Yes, going for what charges more can seem counter-intuitive, but you have to spend money to make it.
Another error people make is a lack of staff.
For every one customer a property management company takes on, they could potentially double the number of units they manage. This doubles their revenue, but it also doubles the work needed. The 50 people you had managing one building won’t be enough to manage two.
You need to add more people. The workload increase if you don’t can cause you to lose people, not to mention fail to live up to the quality of service that got you your original clients. Complaints increase, and that means your stress goes up – all while your finances are being chipped away.
Finally, you want to make sure your company has continuity.
Property management companies tend to start from scratch. Like most businesses, they’re running with little experience in the field. This means things like marketing, customer interaction, and the like are learning on the fly.
This has two effects. First, it builds up “old timers” who seem to know everything there is to know if the company survives that long. The second is when one of these people leaves. Their knowledge goes with them, and if your company doesn’t have a sound training program, you’re never recovering.
If you need more financial advice of a general variety, contact us.