As promised from a prior blog entry, here is installment part II of our series on evaluating property management claims.

MORE HEADCOUNT VERSUS PRODUCTIVITY AND COST

The most recent marketing claim we've seen is a comparison of "most companies" having a 2/100 ratio of headcount to units served. This particular company claims they have a 5/100 ratio and that this means quicker response to client needs.

Sound good to you as an investor/owner?

Perhaps, but what does it really mean?  Are you getting higher quality service?  Are your properties being rented more quickly and repair and maintenance issues addressed more efficiently and related costs reduced? Below are some questions that come to mind when evaluating the real value or cost behind additional headcount.

More headcount = additional overhead cost?

·         How many people are full time? Part time? Freelance?

o    The answer to these questions tells you what overhead the firm may be incurring and how much that may impact costs and to what degree to you.

·         Are all these people centrally located?

o    Again the answer to this question gives you an idea of the overhead cost and how that translates to fees for you.

·         How many are onsite resident managers? Is there a rotation schedule in the mix?

·         What type of properties is the firm handling with this increased headcount? Large complexes? Small complexes? Single-family houses? Is it a mix and if so, how is it divided up?

·         Who manages the personnel? Is this in turn additional headcount, and at what cost?

More headcount = higher productivity?

·         Does increased headcount automatically translate into higher productivity?

o    Are all these people busy 100 percent of the time?

o    Are they well trained, organized, good at reporting and follow through? What is the personnel turnover rate?

o    Is the firm able to quantify/provide proof that additional headcount adds value by a) filling vacancies faster, by x amount of time, b) reducing marketing and repair/maintenance costs by x amount, and c)adding additional value to investors/owners in very specifically identified means? 

o    Is the firm able to articulate the value generally and specifically to owners with quantifiable data? Are they able to demonstrate a reasonable trade-off between the increased headcount versus overhead? Does it really take more headcount to better manage 100 units? Does the firm have standardized processes and policies in place to streamline operations and headcount productivity? Are these closely managed?

o    Would reliable software solutions make more sense than adding headcount? If not, why not? If part of the rationale for more headcount is higher frequency of property inspections, are these additional inspections necessary? What is the trade-off in terms of cost?

There are more questions that could be asked, but these are a good place to start. As with any other decision making process, gathering and then interpreting data and information is a wise investment of time and energy.