Shooting the War

Types of Property Management Companies
As I mentioned earlier, there are many different types of property management companies. The types of properties you will find companies specialize in are:
• Manages commercial buildings ranging from small offices to large skyscrapers
• Leases to companies, not individuals
• Cares for exterior and common aspects of commercial properties primarily
• Enforces policy
• Generates multiyear leases
• Collects money from companies and manages commercial financial accounts
• May offer space planning and architectural services
• May offer leasing services
• Off-site and on-site management
• Manages common-owned properties such as condominiums, master planned communities, and subdivision housing
• Generally manages only exterior elements such as the landscaping, building exteriors, roofs, parking lots, etc.
• Enforces HOA policies
• Manages HOA accounts, collects HOA dues, and pays HOA bills
• Does not lease
• Off-site management
Commercial
Home Owners Association (HOA)
Mini-Storage • Manages storage facilities
• Offers high level of security to protect individual’s stored belongings
• Takes care of exterior aspects of property only
• Collects monthly rents for each storage space
• Leases on a month-to-month basis
• Enforces storage policy
• On-site management
Shopping • Manages shopping facilities ranging from small
Centers/Retail strip malls to large shopping centers
• As with commercial management, rents to companies, not individuals
• Maintains exterior and common areas of property primarily
• Collects rents and manages financial accounts
• Generates multiyear leases
• Enforces policy
• Off-site and on-site management
Multifamily • Manages medium to large multi-unit apartment buildings
• Maintains exterior and interior of buildings
• Collects rents and manages property financial accounts
• Enforces policies
• Generates monthly to yearly leases
• On-site management
Single-Family/ • Generally manages single-family and duplex
Small Property type investment properties to medium-sized properties
• Maintains exterior and interior aspects of property
• Collects rents and manages financial accounts
• Enforces policy
• Generates monthly to yearly leases
• Off-site management
There are other types as well, but these are the major ones. Each of these prop- erty types has specific needs that require a property management company
I ‘p
well versed in those needs.
Beyond specializing in a property type, companies also differ in their operational capacity, each of which will have its pros and cons:
National/ Pros
International • Large well-established company with name recognition
• Generally has standardized systems and policies
• Generally mandates training and education
of employees
• Will be highly involved with professional trade organizations
• Knowledgeable about legal aspects of management
• Large employment base that can absorb employee turnover
• Sophisticated accounting systems
• Sophisticated marketing systems such as comprehensive Web sites
• Offers on-site management
• Can perform high level of maintenance
• Sophisticated purchasing power
Cons
• Smaller properties such as less than 50-unit buildings can get lost in the fold
• May not have in-depth knowledge of your market specifically
• May not have relationship with local vendors
• Will not manage single-family or duplex type properties
• Often will be very red-tape oriented
Regional
Pros
• Will specialize in the local market
• Has well-established network of local vendors
• Tendency to be more enthusiastic about small properties
• Will generally be involved in the local trade association
• Understands local legal issues
• Will have good systems and policies
• Locally established and good reputation
• May offer more personalized service
• Offers on-site management
• Can perform basic to medium-level maintenance
Cons
• May not be able to absorb the loss of key employees
• May not have the capability to manage large multifamily buildings
• Cannot manage effectively outside its region
• May not have strong training or education programs
• May be eager to grow, and will take on properties regardless of qualifications to manage them
• Single-family and duplex type properties may play second fiddle to larger clients
Mom-and-Pop Pros
• Tends to specialize in single-family and duplex type properties
• Highly personalized service
• Good knowledge of local market
• Less expensive than larger companies
• Can perform basic maintenance
Cons
• May not have sophisticated systems
• Cannot absorb loss of employees
• May be eager to grow, and will take on properties regardless of qualifications to manage them
• May not offer training or education to employees
• Cannot manage medium to large properties
• Does not offer on-site management
Realty Company Pros
• Tends to specialize in single-family and duplex type properties
• Will have good knowledge of local market
• Will have sophisticated marketing systems such as Web sites
• Less expensive than larger companies
Cons
• Management not primary focus of business
• May not offer training or education
• Cannot absorb loss of employees
• Cannot manage medium to large properties
• Does not offer on-site management
• Will not be involved with trade organizations
• Will outsource most maintenance
Owner/Resident Pros
Management • Least expensive form of management
• On-site
• Can be used for smaller properties
• Can perform low-level maintenance
Cons
• Will not have professional training or education
• May not be fully aware of legal issues
My company specializes in large multifamily management in the Southwest. I get offers all the time to manage outside my specialization. I always say no. In my previous book, The ABC’s of Real Estate Investing, I wrote extensively on the importance of setting goals. I believe that “goal power” is the key to success. When it comes to my management company, my goal is to be the most successful property management company in the Southwest.
Earlier in the book I talked about the property that we purchased in Oklahoma City. I had no desire to manage that property so we turned to local professionals. Attempting to manage the property ourselves would also take the focus off my goal of buying property. My Oklahoma City property is part of a different, but complementary, goal to be financially free.
As an investment property owner, you need to begin your search for a property management company by evaluating what type of property your investment is and what its specialized needs are, and then find a property management company that fits well with those criteria. It is an important decision and one that will take a little bit of research on your part. As with all good investments, if managed well, yours will reap great rewards down the road.
• Not primary source of income
• Lacks sophisticated systems
• Lacks local contacts with vendors
• Will not be involved with trade organizations
• Can be unreliable