Evaluating Property Management Claims, Part III
Welcome to Take III of UPM's series on evaluating property management claims. As we've mentioned before, there's been a real rash of direct mail (mind you, not digital marketing) firms are sending.
Direct mail can be expensive. Canvasing blindly is even more so. Without follow up, like phone calls, these mailings will produce little in the way of sales. Such expenditure impacts the bottom line. Meanwhile, we see more PM firms scouting around for new business, at lower and lower rates while touting more and more services.
This begs a couple of related questions. First, if these companies are so good, reliable, and cost-efficient why are they resorting to direct mail to pursue new business? Don't they have a wide network and strong word-of-mouth reputations? Secondly, even if they can actually deliver a high level of service at increasingly lower rates...can they/will they sustain them?
We see a great deal of promises made for even 7 percent or less for management fees--including from firms from which some of our clients departed. If, as the direct mail would indicate, these companies' client base isn't already large enough to offset very low rates, how long will it take them to build it?
Of the possibly many services and types of data access marketed, how many do you really get for say that 7 percent? How many of these attractive features are extra? 24/7 online access to data, online payments, etc., all cost management firms money to run/offer. So do extra or different types of reports. If such expenses are not offset with property management fees, how are they financed?
Two outcomes of very low rates versus high services/costs, and certainly without high volume business, are possible if not probable. One is these firms will be unable to sustain them both without risking stability. Two, these firms find ways to subsidize their level of services through fees other than the monthly management versions.
For investors like you, the question comes back to what you will really receive from any firm. Claims are just that. Quantifiable and consistent service, proven return for the fees charged is always a great place to start when evaluating assertions that come your way. Determining any hidden costs is another.
An absolutely essential attribute of a reliable and successful management firm is follow through. Do these firms canvasing for new business return calls from owners, renters? Do they respond quickly and cost-effectively to repair requests? Can they sign on new tenants in a timely manner? All the bells and whistles won't matter without follow through.
Direct mail can be expensive. Canvasing blindly is even more so. Without follow up, like phone calls, these mailings will produce little in the way of sales. Such expenditure impacts the bottom line. Meanwhile, we see more PM firms scouting around for new business, at lower and lower rates while touting more and more services.
This begs a couple of related questions. First, if these companies are so good, reliable, and cost-efficient why are they resorting to direct mail to pursue new business? Don't they have a wide network and strong word-of-mouth reputations? Secondly, even if they can actually deliver a high level of service at increasingly lower rates...can they/will they sustain them?
We see a great deal of promises made for even 7 percent or less for management fees--including from firms from which some of our clients departed. If, as the direct mail would indicate, these companies' client base isn't already large enough to offset very low rates, how long will it take them to build it?
Of the possibly many services and types of data access marketed, how many do you really get for say that 7 percent? How many of these attractive features are extra? 24/7 online access to data, online payments, etc., all cost management firms money to run/offer. So do extra or different types of reports. If such expenses are not offset with property management fees, how are they financed?
Two outcomes of very low rates versus high services/costs, and certainly without high volume business, are possible if not probable. One is these firms will be unable to sustain them both without risking stability. Two, these firms find ways to subsidize their level of services through fees other than the monthly management versions.
For investors like you, the question comes back to what you will really receive from any firm. Claims are just that. Quantifiable and consistent service, proven return for the fees charged is always a great place to start when evaluating assertions that come your way. Determining any hidden costs is another.
An absolutely essential attribute of a reliable and successful management firm is follow through. Do these firms canvasing for new business return calls from owners, renters? Do they respond quickly and cost-effectively to repair requests? Can they sign on new tenants in a timely manner? All the bells and whistles won't matter without follow through.
Posted by UPM Investor Blog at 5/3/2010 4:39 PM 
Categories: residential property management, property mangement
Tags: property management claims property management claims versus fees
Categories: residential property management, property mangement
Tags: property management claims property management claims versus fees
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