VIDEO: Why Should I Hire a Management Company for My Small Apartments?

Posted on Jan 2 2014 - 11:45am by Lance Edwards

In this Q&A session with best-selling author and nationally-recognized real estate educator Lance Edwards, we’re answering your questions about outsourcing the care of your small apartment tenants and toilets to management companies.

In this lesson, you will learn the three benefits of property management companies, including:

  • How their roving maintenance staff saves YOU money
  • How their economy of scale can reduce YOUR insurance costs
  • How they free up your time by managing day-to-day operations

Lance Edwards: Alright, here’s a question from Ray J.J. Ray asks, “For new investors starting part time, what is the best way of outsourcing maintenance and filling vacancies for properties, especially if they are in different areas or states?” Great question, Ray. The answer is management companies. 

I don’t want anyone self-managing your properties. That is not the highest or best use of your time. What you’ll learn in our program is how to go out and select managing companies that do this for a living.

Many Savings Benefits with Management Companies

Now, when I say management companies, I want you to find some companies with some depth to them. I do not mean a single person who is a realtor who does property management on the side to earn some bucks. No, you want management companies that are focused on the management of apartments.

You are looking for property management companies that have:

  • Lots of owners under management
  • Lots of buildings under management

Why are these things important? If they have lots of buildings under management, that means they have their own systems in place for managing. It also looks like they have a roving maintenance staff who are experts. They could have a, for example, certified A/C tech who goes from property to property to handle all the A/C needs.

That saves you a lot of money, because you only pay them when they work on your property–plus the hourly charge is going to be far less for what you’ll pay to call a contractor to come out and fix one of your units. One of the advantages of a management companies of scale is they are going to have resources available to you that can leverage that economy of scale at less cost.

The Economy of Scale and Insurance Savings

Another example of why you want to go to a management company with a lot of units under management is the presence of a master insurance policy. What does that mean? Well, a property management company could have a master insurance policy that covers all the units under management, but there is individual riders for each building.

They might have 2,000 doors under management, and they may have a policy that covers all 2,000 doors, but let’s say I have 25 doors. Well, I have a rider under that master policy that covers my 25 doors. So, if something happens to my property, I’m getting paid.

The advantage of that is because they can have an economy of scale on the insurance policy, they get it at a far reduced premium and they pass those savings on to you and the savings in your insurance premiums could actually be higher than the fees you will pay them.

Leave Day-to-Day Operations to Someone Else

The other reason I want you to have a property management company is because I want you to have someone to handle the day-to-day operations of your small apartments or multi-family properties.

When I say that I want you to understand how to market to find residence to fill vacancies, I do not mean you are the one actually doing the work or taking the calls. I want you to direct the strategy that is being implemented by your management company. “Do this over there, do that over there.” You are showing them the things you want done, you are putting the systems in place, they are dealing with the inquiries, and you are monitoring the performance of those marketing campaigns.

You are going to run your own metrics, but they are going to do the heavy lifting.

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