NEW PROPERTY MANAGEMENT BUSINESS MODEL GARY GEIST
Today's investors are interested in
Although in the initial stages of development, this concept would have
changing the property manager's
two primary components defined as:
compensation package to a profit
driven model. What this means is
•
Percentage Fee - This would be a 5% fee paid to the property
that the property manager could
manager on all money collected during the month. This would
receive a bonus each month based
apply to rents, back rents, pet deposits, late fees, and other fees
on a percentage of the monthly
paid by the tenants.
profit for the property. This would
immediately
change
his
•
Profit Based Fee
- This fee would based on how well the
perspective on the property, what
property manager performed his duties each month. This would
materials are purchased, and how
be a great motivator for the property manager causing him to work
maintenance is performed.
harder each month for a more profitable operation.
This fee
structure would be negotiated between the investor and the
For instance, if a water heater goes
property manager and but would be in the 8% - 10% range of the
out, instead of replacing the water
monthly profit.
heater for $500 because there is
money in the account, a competent
technician would be sent to service
the burner assembly and relight the
water heater.
A $65 service call
instead of the $500 replacement
charge. Or if a furnace goes out in
the middle of the winter, instead of
buying a furnace from the first
vendor called, he obtains several
quotes and save 50% on the job.
Summary
Both of these are real examples of
what we have had with property
managers.
If you select a property manager whose underlying goal is simply to
collect the management and leasing fees, pay the salaries of his
maintenance staff, and obtain the over-ride charges on material costs
and hired subcontractors, then you need to look for another property
manager. If you don't, your maintenance cost will sky rocket and the
solution to most problems will be to throw money at the problem.
Their philosophy is its much easier to replace the whole thing as
opposed to diagnosing the real problem to find the cost effective
solution.