There are typically 8 reasons why property management companies don’t make enough money.

1. They don’t charge enough money

2. They don’t have enough staff to get the job done ( because they are not making enough money).

3. Their portfolio is too distributed. i.e. too many small accounts and not enough large accounts.

4. The kind of portfolio managed is not focused, meaning lack of ability to create operatingefficiencies.

5. The operating systems are not refined, they don’t have enough processes in place

6. Showings are completed by remote( without a leasing agent) and as a result it takes longer toget units rented.

7. No marketing program to obtain new accounts.

8. No accounting processes and goal setting for the company ( vs the clients)

https://www.spirepoint.com/top-6-reasons-why-small-property-management-companies-fail/

Can these problems be solved? As a business owner you may have some options.

First of all, in order to manage your property management company in the most efficient manner you should be reviewing your monthly financials and tracking your key performance indicators ( KPI’s) on a monthly basis. If you don’t have KPI’s, have your accountant help you establish a set of indicators that you can track.

Create an annual budget that you can compare your monthly financials with. Compare them to the previous month, to the same time as the previous year as well, to allow you to identify both positive and negative operating patterns.

Is it all about numbers and planning?

Not only, but it is an important part.

Consider the following steps to add to your action plan as you grow and stabilize your company:

1. Develop and implement your vision

2. Do your best to have experienced employees working with you.

3. Don’t be the low-price provider in your marketplace.

4. Network, Network, Network – be visible and meet people that will send you business.

5. Be focused and targeted regarding the type of properties you want to manage.

6. Discover which business generate the most income for you.

7. Use state-of-the-art software to save as many work steps as possible.

8. Implement AI solutions for as many client/tenant contacts as possible.

9. Develop operating processes that allow you to solve problems with one touch/one email/one call.

10. Consider offshore staffing for part of your team to lower your operating costs.

11. Compare your management agreement to others and make sure it has all you need to cover your operating costs (See my article, Your management agreement is the key to a successful client/manager relationship)

12. Become a CPM, RPA or MPM to gain technical knowledge about the industry.

13. Be involved in a national organization like IREM, NARPM or NAA

14. Hire a real estate property management consultant to help you develop and implement your growth plans.

Summary

It’s very hard to stay in business if you are not making money. As you look at your financials and realize that you are not returning 10% before taxes to your bottom line you need to consider how you are going to increase your revenue and net income.

Take the time to think about the operation of your company and what you are charging your clients. Survey the marketplace and establish what your competition is charging. Identify the companies that are doing well and get a better idea of what they are doing to be successful. Use that as your marketplace guide.

This article from Doorloop https://www.doorloop.com/blog/property-management-companies-money itemizes some fees you could charge that might help you increase your operating margins. Don’t forget to check with your state, county, city to make sure you can charge the fees. In some states there are limitations to fees that can be charged to tenants.

You are the company leader, but you are not alone. Don’t operate in a vacuum. There are others that have experience that can help you. Form a best practices group (one that does not compete in the same marketplace i.e. from different cities/ states so you don’t run into antitrust challenges) and share learned skills. Use the national organizations you are a member of, to meet people and learn as much as you can. Plan to succeed, rather than fail from lack of planning.

Clifford A. Hockley, CPM, CCIM, MBA

Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.

He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.

Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses.  He can be reached at 503-267-1909, Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.