Many buildings, both large and small, manage their properties in-house, without a professional management company involved. These buildings can be cooperatives or condominium complexes (or a mixture thereof). There’s certainly a benefit to self-management; the building saves on the fee that they would pay an outside company, but in some cases the dollars saved are not what they seem to be. There’s an upside to everything, but also a downside. Let’s explore this more in depth.
How Much Is Your Time Worth? This question is really geared towards the Boards that choose to self manage their properties without a manager on their payroll attached. Managing a property takes a lot of time, something that there is a finite amount of. When talking to many members of Boards that do all of the work themselves, they’re eating into their personal and professional lives to manage the day-to-day of their properties. Taking care of general maintenance projects, common charge collections, vendor payments, financials, employee issues, city filings, payroll and more can take a considerable amount of personal time that they’re not going to get back.
Hiring an outside firm can free the Board up from the painstaking tasks that are needed. Management companies are performing these tasks in scale and because they have an office full of individuals that do nothing but these tasks all day for multiple projects at a time, they can handle these issues quickly and allow you to sit back and receive the reports once they are completed. We can give you your time back.
What’s The Lost Opportunity Cost Of Self Management? There’s a cost to everything, right? Besides losing your personal time as a Board member that manages, your building can lose a lot more by way of money. When we’re managing multiple properties, we’re often stacking all of our properties together for products and services to receive a reduction in costs from various suppliers, vendors and the like. Here’s one specific example; every winter, we send out requests for pricing for snow melt to a handful of suppliers. We always send out one order for our entire portfolio’s needs and we ask for pricing based on the huge amount needed. We’re able to drive down the price of snow melt and save our clients thousands of dollars every winter. This is just one instance of us looking to the marketplace to give an edge to our clients.
Having a large portfolio means that we have leverage and can use that to cut down the cost of elevator service, legal representative fees, insurance, energy, plumbers — and the list goes on and on. Once a building gets into the fold of a management company with leverage, they can start to make back the money they’re paying the management company in those reduction of costs — it’s a way for them to offset their spend with savings.
We Don’t Want To Lose Control. Self-managing means a lot of things, but more than anything it means control. Those Boards have control over everything and it’s hard to give that control up; control over finances, bank accounts, shareholder or unit owner records — control goes all the way down the line. Guess what? By going with the right company you don’t have to give up control at all. That reserve fund that is the safety net of the building, the Board can have complete control of that and keep it away from management (please send us monthly statements, though, so we can keep accurate accounting). The shareholder or unit owner records — keep those in your possession until we need them.
A way of keeping more control over your documents is to have open and transparent use of them on the management company’s end as well. In our firm, we hook in our clients to the Dropbox could services that we use to file away all of your electronic documents. If the Boards wish to have access to the reports, contracts, minutes, financial statements, proposals and more, they can have it freely and openly. They’ll also get an alert when we add information to their Dropbox, so they can always have a front-seat view of how we’re managing their property and what is happening.
Did You Miss That New City / State Filing? If So, It Could Cost You More Than The Management Fee. We all know that laws are changing — all on the city, state and federal level. There are quarterly, yearly and less often filings that are required. It seems like there’s an amendment to these rules and regulations each month. In a self-managed building, tracking all of these changes may become an issue if there isn’t someone who is on top of everything.
Here’s an example — we took over management of a building that was operating their boiler on oil. In New York State, each building that has an oil tank in operation has to file a Bulk Petroleum Storage Certificate every five years with DEC. In this case, the building failed to and once we got on the scene, we noticed that they had an outstanding violation and fine for not having a valid permit for two cycles of the filing. The charge was $20,000+ for missing a purely administrative filing and small fee that should have gone out. Professional property management companies have these and all other filings on their watch-list, and we’re keeping track of all changes, monthly, to ensure that this happens. This particular building blew through all of their “savings” by self-managing. Try explaining that one to the Shareholders.
Understand That Culture Of Meetings May Change. This example also comes from personal experience. When I took over a self-managed building in New York City’s Village area, they were used to having meetings whenever they felt like it — and of course they did, they all live in the building. In the first six weeks of our management, they called six Board meetings. Being that the contract called for one Board meeting per month, we had to adjust the expectations of the Board and also advise them that we don’t need to meet for each little item that comes up. The Board is the boss at the end of the day. Once they make a decision, it’s on management to carry through and implement that directive. We can do most of the legwork via email and telephone in between monthly meetings and by doing so, this will cut down on meeting times and allow for a more streamlined process, in general. This goes up to the top point as well — we can save you time.
Is self management for everyone? No. Just like hiring a professional company, you have to weigh the positives and negatives of each expense and see if in the end, it will work for you. There’s a benefit to each type of management set-up. Of course, as we went through above, personal time saved, leverage of portfolio, tracking of laws and more through using a professional management company can pay off in bigger dividends for the Board and can leave you with more time to enjoy the non-building world around you.