Owners sometimes are more conscious of fees paid to
property managers
, rather the quality or type of management they have to offer. This week we will take a look at the differences between active and passive managers, and how these two management styles affect the return on your portfolio.
First, a passive manager is someone who does the minimum to collect rents and reduce portfolio deficiencies enough to retain a client base. These types of managers usually are only acting an extended hand to receive income, hear complaints and answer you questions but never go into depth. Examples may include:
- Inaccurate rents based on lack of market education
- Inadequate follow-up on cost/repairs pertaining to work order requests
- Not being involved in negotiations but simply pushing notices rather than attempting to reconcile payments
- Lack of preventative maintenance increasing degradation of asset
these examples scratch the surface of this management style, but generally explains the characteristics of someone who is not looking out for the best interests of their clients.
Next, an active property manager is at first striving to reduce portfolio reducers such as (Vacancies/Evictions/Repairs). Also, your property manager will have a full understanding of your property and how to receive highest rents; to include an understanding of occupied properties and possible limits before a tenant may be persuaded to vacate. Further, an active property manager will be involved in risk management and be able to minimize any losses before they may occur. This is particularly important with non-payments/postings and eviction handling, as there may be negotiable terms to receive possession of the property before heading to court, drastically reducing costs. Below is a snapshot of skills/qualities an active property manager should posses:
- Below industry average vacancy/eviction/repair cost rates
- Ability to maintain accurate market/leased comparable rent pricing
- Active Marketing (Face time with applicants)
- Risk management
This is the beginning to understanding why an active property manager is worth his fees, in our next blog we will discuss how this property management style can be translated into dollars, possibly causing their services to be free after the incentives gained.
