Property management is a huge (and growing), but highly fragmented and challenging industry. Whether you are new to the “game”, well established but want to see your business grow, or looking to diversify your business by adding new services in order to grow, you need to avoid some common mistakes that property managers often make. Although the barriers to entering the property management industry might seem low, finding success in this industry can be a challenge, and sadly many property management companies struggle to set up a sustainable and growing business. The events of 2020 has added extra challenges and piled additional pressure on property management businesses. What are some of the characteristics that struggling companies have in common? Here are 7 of the most common reasons why property management companies fail or struggle to grow – and what they should do to avoid them!
Mistake #1: They don’t really know their market
Property managers often get swallowed up and overwhelmed by the day-to-day operations of the communities they manage. They are so busy working in their business, deep in the weeds of running their business that they fail to track relevant market data that will not only help them grow their business, but also benefit the stakeholders (trustees and directors) they serve as well. If they were working more on their business, they would be able use data to spot, track and respond to relevant marketing trends, whether threats or opportunities. If you truly understand the markets you serve, you can differentiate your business through your service experience, value proposition and value communication. By communicating trends to your clients, you are reducing their risk and protecting their asset. They want to know what is happening with regards to legal requirements, compliance, growth, debt trends, fees, etc. We understand the fact that property managers are busy, but it’s critically important to keep your finger on the pulse of your local market conditions. Find the right tools to manage your business in such a way that it frees up your time to work on your business and get a clear understanding of your clients and the markets you serve.
Mistake #2: They are not really profitable because they charge too little
Property management is a crowded field and unfortunately many managing agents try to differentiate themselves by charging he lowest possible management fee. There is an old saying: Price is an issue in the absence of value. In our experience, many Property Managers really struggle to add and communicate their value to clients. Because clients see you as a mere property administrator, they will always focus on what you charge, rather than seeing what value you are adding. If you charge too little, you can’t really grow. You see, you rely on your management fee to fund all aspects of your operations. When your budget is stretched too thin, you’ll start cutting corners on service levels and it will be harder to respond to your clients’ needs. Charging to low fees will certainly help you get new clients, but it creates an ugly catch 22 situation. You can’t afford to hire adequate staff or acquire the right tools to handle the workload, which means your management quality will decline for new and existing clients – which will actually cost your business in the long run. Your ability to scale is therefore jeopardised, and your profitability will always be under enormous pressure. So how do you avoid this situation? Here are a few pointers to guide you:
- Spend time to get a proper handle on your operational budget. What do you need to charge to cover your costs and make a profit?
- Make an effort to understand what your clients want and value. If you understand their needs, expectations and risks, you can charge them a fee based on the value you offer. Clients value your knowledge and expertise to protect and grow their asset. Clients value a pro-active and organised Property Manager. Clients also value protection from risk through legal and financial compliance. They value hands-on management and feedback on day-to-day activities that occur in their community. Lastly, they value comprehensive reporting on KPI’s to make better decisions.
- Evaluate your staff capacity. Are your staff effective and efficient? How many additional units can you add to their portfolio without adding new staff under exiting fee structures? Do they have access to the right tools to scale? How much you need to raise your management fee to add that capacity so you don’t sacrifice service when taking on new clients
Mistake #3: They grow and expand (or try to grow) too quickly
One reason why property management companies struggle or fail is because they add too many units to their portfolio too quickly. Almost all property managers we talk to have a growth plan or strategy, but it is not always well thought through or methodical. The problem lies in planning. More units means more admin, more meetings, more stakeholders to keep happy, more emails, more operational activities, and more staff. The need to grow is justified, but the approach and plan is often flawed, which leads to management pressure, increased costs, service problems and ultimately value issues. It does not need to be that way. If you’re considering growing your property management portfolio, get the right tools and put systems in place to streamline operations. Start using the right end-to-end property management software that can support your company’s growth. Integrate new technology to lift some of the weight off of your property managers’ shoulders. You need a solid plan and the right technology tools to manage and scale your business, while freeing up your time to focus on your clients.
Mistake #4: Their resources are spread too thin
One of the reasons why Property Management companies struggle or fail is because their property portfolio is very disaggregated. They take on any or all communities – large or small – anywhere. This leaves the property manager running all over the place with a lot of time spend on driving around to be in meetings and attend to tasks and activities. Stakeholders are also spread all over the place. It all adds up to higher expenses and overheads. In order to be a successful property manager you need to be able select and take on the right client in the right area. You need to understand that different clients profiles, communities and areas most often have different needs, expectation, and require different approaches and strategies. If you’re over-eager to add units to your portfolio, you could end up managing properties that are more of a hassle than they’re worth. After all, which do you think is easier: Managing a 60-unit complex, or 15 different communities with 4 units each? As a professional property manager, you need to learn to say no and choose clients that best fit your business and profile.
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Mistake #5: They’re always playing catch-up
Are you the kind of property manager that leave things to the last minute, flying by the seat of your pants – always playing catch up! You are definitely not alone. Many property managers don’t have the proper tools and systems in place to be pro-active and in control. This often leads to a situation where your inbox, WhatsApp’s, client calls and client schedule manages you, rather than you managing the client and community. How do you become pro-active and in control? You use the right tools to oversee, log, track, oversee and report on all that you do. Find tech tools that help you automate activities, pull stakeholders into one cloud-based platform and that is integrated to manage compliance, collections, finances, accounting, etc. Does your current tools enable you to do that? If not, perhaps it’s time to upgrade!
Mistake #6: Their books are in a mess
A sad reality why so many property management companies are struggling or dying a slow death is because of the state of their books. The problem is that most property managers aren’t trained to be accountants; and as a result, they don’t properly manage their own books. You need a strong understanding of your own books, just as much as you need to be adept at managing your clients books. If you have a deep understanding of your own books, accounting and financials, you can spot missing income, identify new income streams, cut unnecessary expenses, manage overdue payments to third-parties and much, much more. The risk of legal and financial compliance is real, so it is critical that you spend time to get your house in order. Either educate yourself, hire a dedicated in-house bookkeeper, or outsource your bookkeeping to a professional accountant. You won’t regret it!
Mistake #7: They’re afraid of property technology that automates and integrates
Many property managers use outdated tools or technology tools that don’t fit the purpose for efficient property management. Do you know how much time you are wasting and losing because you are unorganised, your teams work in silos, or you’re using outdated systems/platforms? There are many ways that property managers can integrate new technology into their business to save time, money, and (perhaps most importantly) eliminate unnecessary headaches and sleepless nights. If you have the property technology that enables you to ensure better compliance, manage more tasks and activities, manage more units without adding more staff, give all stakeholders access to information (from anywhere), how much will it change your world? If you are already using property technology, how much automation and integration does it allow for significant manageability and scalability.
Here’s the thing: Not every property management company will be successful, but there’s no reason why yours can’t be. If you can successfully manage to avoid these common mistakes, you’ll be setting yourself up for a successful 2021! .
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