Originally posted by @Gautam Shah:
@Michael Tempel
Great response. Thank you. This is similar the what we currently have set up, where costs for the onsite staff/contractor are reported to the appropriate properties proportionately, eg 80 unit bears 60% of the wages, and 50 unit bears 40% of the labour costs.
However, there is still a property management company charging 5%, and one site manager, one assistant, and one contractor.
Would you still make this leaner? If yes, then how? (I read somewhere else by a note from @ChadCarson, that 80 unit should have only one site manager and one contractor. ie no property management company in the mix. Wondering if this will work for 80 unit and 50 unit properties nearby to be managed simultaneously). Thank you in advance for the input.
The answer is both answers can be correct. I am the management company and have a partial ownership in our properties so obviously I don't want to push not using a management company :-).
You can always self manage and many owners do. I have seen this on a small and large portfolio basis. I think if I can have one manager handle 140 units total (one is going through a full renovation/transformation) - you can see it on our website "The Avenue Apartments" that you probably could have one less manager and reduce payroll.
Always remember that self management and understaffed properties can lose money by not maximizing rent/leases and lack quality customer service. It is usually due to lack of experience and learning the hard way. My acquisition targets have always been self-managed portfolios that were poorly managed in one way or another. We love properties that have rents way below market, vacancies (the more the better), this seems to be the case in many portfolios without professional management.
We buy at a discount and get to work solving problems to reach profitability very quickly, because we have long term experience solving issues newer self-managed owners haven't had. We also put our team through a ton of training and constantly mentor daily while using systems that took over 15 years to put in place. The systems and ability to quickly increase a properties value is where a PM company earns its money.
Of course, this isn't true with all self-managed portfolios by any means, there are some fantastic self managed portfolios in our market. Another flip side is the wrong PM company can run a portfolio to the ground or even worse, hold it hostage during contract (we hear about this all the time).
Final thought, is if you are looking to grow, sometimes it is okay to have a little extra on the payroll if you have a great employee and they can quickly take over a larger acquisition effectively. The quality of service and ability to take action with the right team members is crucial in our market in Minneapolis for example.
Probably gave a little more than you are asking, hope it was helpful. Staffing is always one of the largest challenges. My biggest rule is to always hire the best and don't waste time on poor performance to save a little on payroll if possible.
