We've all heard the tag lines "all under one roof", or "big savings with our in-house services", or "one-stop shopping". They all sound like great ideas, as they insinuate that we are receiving a bargain by getting more than one service from the same place.
Such is the case with diversified companies that do property management. The most common examples are the Management and Sales company, followed by the Management and Maintenance company. As a Property Management Broker with 16 years experience doing only property management, I have my own beliefs on the subject of diversification, especially when it leads to a possible conflict of interests. Here are a few points to consider:
Management and Sales- It sounds efficient enough, as both have a great deal to do with real estate investment properties. In a down sales market, the focus shifts primarily to managing real estate, and these offices may do a fine job of handling the day-to-day operations. However, when the sales market goes back into favorable territory, the focus must inevitably shift from management to listing activity. Ask yourself, if your agent has the option of making a 5-7% monthly management fee, or selling homes for 3-6% commission, where is their focus going to be? Property management requires a consistent presence, so the temptations posed by large sales commissions could get in the way of giving the job his/her complete attention.
Management and Maintenance- While it cannot be denied that every property manager has maintenance duties, some have chosen to make this a second profit center for their property management business. By hiring their own "in-house" contractors and handy persons, the owners of these large companies can tap into a virtually endless supply of maintenance work. The purported bonus for the Landlord is a well-maintained rental, with quality work done at reasonable prices and likely with a faster turnaround time. The conflict in this scenario could occur when a Landlord has a problem with workmanship. In a dedicated (property management only) company situation, the property manager has no ties to any of his/her vendors and does not make any money on maintenance, thus the manager's focus is always on getting the Landlord the best deal. However, does it not stand to reason that a Manager/Maintenance company owner would do his/her best to defend the workmanship of his/her maintenance company, as taking the Landlord's side would mean losing money?
The bottom line for Landlord's- If you decide to retain a property manager, decide what kind of manager works best for you. Some will prefer a diversified company that can handle multiple facets of the industry, while others will prefer the focused effort in one area of expertise. Regarding maintenance, do not be afraid to question an invoice if it looks out of line. Get a second opinion, and conduct periodic inspections of your property to make certain you are getting exactly what you are paying for. Watch out for more installments of "Landlord Learning Center" coming soon.
If you have an issue you would like addressed on our blog, please do not hesitate to comment or email.
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