A community association management company serves two principal sets of stakeholders. The association desires attractive amenities and an aesthetically-pleasing community. While property owners want the same to maintain their assets’ values, they also seek to avoid burdensome dues.
For a community association management company to profit in such an environment requires a carefully-crafted business plan. While the strategy certainly needs to address revenue streams and reducing costs, your company is not engaged in a mere accounting or budgeting exercise. Your company should strive to optimize service to and satisfaction from the association and the property owners.
One Manager for Multiple Properties
Portfolio management describes the practice of having a single property manager oversee multiple properties.
The theory is to have multiple revenue streams from management fees without the additional managers or staff. Stated another way, portfolio management allows the company to spread the salary of the manager across as many lots and properties as practicable.
In many cases, a single management fee may barely, if at all, cover or exceed the salary of the community association manager. According to PayScale, the mean salary for community property managers stands at $48,268 per year, or roughly $4,022 on a monthly basis.
Consider also that community associations feel pressure from owners to avoid high dues. Out of the charges come not only the property managers’ fee, but maintenance of common areas and yards and garbage collection.
While portfolio management can grow profits, overtaxing a manager can heighten stress and reduce the attention needed for each property.
Save Some Trees
Community association management businesses become more profitable with paperless property management, or at least reducing paperwork.
Here’s where HOA management software reduces the need for printing, mailing, staffing and similar costs. Via electronic means, residents receive and pay dues (in some cases automatically) and elect officers. Community news, bylaws, rules, violations and meeting notices are delivered to smart phones, tablets and computers. With HOA management software, a manager does not have to be present in an office to field requests for guest passes and clubhouse reservations.
The association managers can place and track orders for repairs, maintenance and other work on the property.
Don’t Bear the Costs Alone
Using a management contract, your management company is reimbursed for incurring expenses on the community association’s behalf. These expenses include postage, handling claims, refinance fees, time spent in court proceedings for dues and rules enforcement, compiling and sending resale notices and printing notices.
Where mailed notice may be required, HOA management software might not serve as a legally sufficient substitute. In these situations, your contract can allow you to pass these costs to the homeowner or community association.
When you include reimbursable expenses in your package, be sure to provide for periodic review. For example, court costs for filing enforcement or collection lawsuits may increase. Some of your services may involve frequently changing costs such as fuel or electricity. Stay abreast of the prevailing prices for supplies such as paint, building materials and other items needed for maintenance or repairs.
The Power of Bulk
Building a portfolio with numerous lots also creates opportunities for bulk-buying and the resulting ability to get lower prices for association services.
Bulk buying refers to the practice of acquiring large volumes of goods or services at a single time. This is the premise behind buying clubs such as Costco and Sam’s Club. As the theory goes, members actually save money with purchasing larger quantities. How so?
The savings manifest themselves in the per-unit or per-service cost. Larger quantities of cleaning, restroom and office supplies translate to fewer boxes and other containers. At your retail store, you might notice that two bottles with 25 pills each costs more than one bottle with 50 pills. The manufacturer has saved some on packaging and shipping costs by reducing the number of boxes in half. In other words, the cost of packaging and shipping is spread over more pills.
That same principle can work with the costs of managing properties. With more lots and properties come the ability of lawn-service and garbage collection companies to spread costs such as for transportation to properties, maintenance of equipment and manpower. In particular, the trucks that carry the garbage and lawn equipment serve more lots on fewer trips. For landscaping, buying seed, soil and other supplies in bulk requires fewer containers.
Bargain power also contributes to discounts the community management company can obtain and pass to the property owners. Significant numbers of lots signals enhanced spending power and potential revenue streams for vendors, suppliers and service providers. These businesses may covet management companies that can buy in bulk to a point of reducing their prices.
Keep It In-House
Rather than farm out, community association management companies may perform services themselves and bill the association in an effort to widen profit margins. Divisions for tasks such as security, landscaping and maintenance replace are staffed by employees of the management company.
The in-house approach keeps payments for the fees completely within the company.
Without an independent contractor, the management company may provide the kind of customer service that encourages continued goodwill and business between the company and the community association. Employees in company divisions develop familiarity with their properties and the residents who occupy them. Staff of outside contractors may have more sporadic contact with the community. Prompt responses and scheduling are more likely to flow from the management company’s ability to select, control, evaluate and dismiss those performing the services. Satisfied community associations may recommend the management companies to other developers or associations.
The primary disadvantage of not outsourcing lies in responsibility for the employees performing the services. The management company must pay the salaries, carry workers’ compensation and perhaps other insurance, keep up with payroll and bear other administrative responsibilities. Other liabilities may include the need to store equipment and materials on the property sites, which in a calamity might expose the association and management company to liability.
A profitable management operation may draw from more than one of these options. Having management software can foster efficiency and cost-reduction, but prompt and quality service can build the intangibles that sustain demand for your services.