Understanding discount property management fees
The familiar saying ‘you get what you pay for’ is true. In property management, there is a vast difference in the quality of service that is given, which can be as varied and different as the fees charged.
Here is a simple step-by-step analysis of how cheap fees convert to poor service levels.
Discount Property Management
The boss said to do whatever it takes to get the business. Therefore, when the new client challenges the property manager over fees, they quickly discount the standard management rate. Sometimes, they will waive some of the cost recovery fees, like marketing & sundry fees, to get the signature.
WHERE IT LEADS
Due to the discounted fees, the agency now has a substantially lower average fee and revenue base. The property manager is expected to control a much higher volume of properties, stretching resources to the max.
BURNOUT AND RESIGNATION
The work overload causes the property manager to suffer stress, which leads to brain fog and inefficiency. As they struggle with the pressure, the tasks build up, calls are not returned, inspections become less frequent, maintenance is not attended to, and ultimately the employee suffers the dreaded ‘burnout’. They will most likely resign because they are not paid enough to handle that pressure.
STAFF TURN OVER
The agency must then find a replacement. An experienced property manager is likely extremely hard to find, so the agency has no option but to employ an inexperienced, usually completely green, naive replacement.
Even if a qualified and experienced property manager were to apply, they would quickly identify that the expectations of the role are unrealistic based on the portfolio size and they are smart enough to run a mile.
THE CYCLE
The overload of properties is too much for the new property manager to deal with. Low revenue levels also result in little to no training (no time for that), and the new property manager has likely been thrown into the deep end. Another resignation quickly ensues. The cycle of high staff turnover continues.
THE RESULT
Due to high staff turnover, staff are untrained, inexperienced and overloaded. This results in a high risk to the client with poor communication, shortcutting important procedures, costly mistakes and ultimately, financial loss that will far outweigh any discount in the tax-deductible management fee.
THE BLAME GAME
The business owner, now disillusioned by their ‘poorly performing’ property management department, tells others how difficult property management is, reinforcing the popular notion that the property management department is still a ‘poor cousin’ to sales in a real estate company. This is why you will often see rent roll sales. It becomes all too hard for the business owner.
ASKING FOR A DISCOUNT IS ASKING FOR TROUBLE
We don't go to the dentist or doctor and ask them for a discount. We don't even ask for a discount on our takeaway coffee and cake. That is because we want the best possible experience. We don't want the cheapest option because we know that, ultimately, we will get what we pay for.