Quote from @James Hamling:
Yeah @Drew Sygit, I am pretty sure we started the "flat fee" thing.
Not 100% but we were doing that pre '08', and it was based off our model not drawn from anyone else.
You bring up some important points. We never set a flat fee rate just out of a whim, or price strategy, it's part of the operational strategy which is different, as it's all about efficiency.
And with that, we are laser focused in 1-4 unit single family investment real estate.
The model becomes very problematic in low quality assets, and sec8. Because those simply demand a significant level of labor inputs that makes it very hard to effect the efficiency model we invented.
So yes, it's about knowing your business and being very specialized.
Those who just try to copy the price model and not the operational leg, yeah they don't last long.
That's why those who call asking can we take on there 200 unit community, were just not a right fit for each other. Too many just get $$$$'s in there eyes and take on anything and everything.
No, know your lane and get great at it. Specialize.
A/B class is our jam. C+ we will do but we know it's a net 0 so it's on value of relationship because odd's are we will loose $ on 3/4 of those. C, D and below, nope, not our thing.
It drives me nut's when there is those upstart PM's who not only say but brag they "do everything/anything". Just announcing there ignorance and fast-track to insolvency.
And I am NOT knocking those in those segments we don't do, big high 5 to those who have that as there jam, it's just not our thing.
Hey @James Hamling, we compete with RW in Denver. I've lost track of how many doors we've acquired from them. They've not acquired any from RES. I started bringing donuts for their team when I would stop by to get keys from them.
While this anecdote has more to do with client retention than acquisition, I still find it interesting. A flat monthly rate might get more people in the door, but it is pointless if your attrition is out of control.
RW's fee structure is interesting because it's a "look over HERE, not over THERE" approach.
RW discovered that most clients shop with a "what are the monthly management fees" approach and not a "what are all of your revenue streams" approach.
RW competes with a very competitive flat monthly management fee but then charges a minimum of 1 full month's rent for leasing and a host of other fees. IIRC, RW even charges hourly rate fees if a property consumes too much time.
This is smart, and it's part of RWs success as a franchise. I'm not knocking it, but let's call a spade a spade. RW's monthly flat rate is offset by revenue streams where the client is not looking.
We charge 7% but always between $100 and $200. The $200 cap rewards the class A doors we want to manage, and the $100 minimum weeds out the doors we don't want.
Our leasing fee is a flat $1,000, and $700 for owners with >1 door.
I think the best model, and one I'm currently working on, would be more akin to how insurance works. Any repair (perhaps over a certain number of repairs) or time spent on a door outside of routine management is a "claim."
Too many claims and rates go up.
Any management fee structure (monthly fees) is simply a guess with regard to what will keep the PMC in the black in relation to the work that will be needed to manage the door.
I agree that efficiency is a huge part of that equation, and the more efficient the PMC, the more they can stay profitable with lower fee structures.
