What is outsourced property management?
Outsourced property management simply means assigning tasks to someone outside of your real estate company, usually on a contract basis. When it comes to property management, there are a wide variety of tasks that must be completed every day. Outsourcing some of these tasks can help free up your internal team’s workload and save you money in the process. Let’s take a look at some of the most common property management tasks and why you should or should not outsource them.
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Outsourced property management inspections
Property inspections are a popular outsourced property management task. Inspections, such as move in (entry condition reports), move out (exit condition reports) and in-residence (routine condition reports), are now outsourced by many real estate companies.
This task can usually be divided into two categories. The property inspection service provider conducts the inspections and then passes the information onto the property management company to prepare the reports. Alternatively, the inspections and reports are entirely done by the property inspection service provider in preparation for the property manager to forward onto the rental property owners.
On average, outsourced property inspections cost around $50 per inspection. As a result, a property management company managing 300 doors and conducting four inspections per year (1,200 inspections) would pay $60,000 each year to outsource property inspections. It should be pointed out that this figure is more than the average cost of a property manager’s salary.
Property inspections generally comprise around 50% of a property manager’s weekly work hours. This means that a property manager earning an average salary of $55,000 per year would cost a property management business around $27,500 per year to perform an essential service for rental property owners. As such, the cost to outsource property inspections is approximately 55% more than paying a property manager to conduct inspections.
Not only does a property management business pay more than is necessary if they outsource property inspections, but they are also at risk of losing control and becoming out of touch with properties. How does a property manager provide advice about a property’s market relevance, demographic appeal, upkeep, tenant suitability and rental return to a property owner, if the property manager has not personally inspected the property? The answer is simple- they cannot provide advice without first-hand evidence. What’s more, if concerns are raised as a result of the property inspection, the property manager does not have first-hand knowledge of what is necessary to remediate or rectify the issues. The property manager has a duty of care to be across every property in their portfolio at all times.
Outsourcing property inspections can create more risk and lead to client loss. It provides no value to the property management business or client. The need to outsource property inspections usually comes from a lack of operational systems, which should manage property managers’ workload and workflow. With no systems in place, property managers do not have enough time to carry out property inspections, usually resulting in the task being outsourced.
So, is outsourcing property inspections good for your real estate business? We believe it isn’t. The tangible and intangible costs through potential business loss and liability mean that we do not recommend outsourcing this property management task.
Outsourced property management maintenance
Property maintenance is another task that is increasingly outsourced. The reasons for outsourcing this task are similar to why many real estate companies outsource property inspections. Property management maintenance takes up a high percentage of property managers’ working day. It is an essential service that requires property managers to stay across each property.
In general, a property manager managing around 180 doors receives, on average, between two to three tenant notifications about maintenance or repairs each working day. When you include maintenance as a result of property inspections to this, another five to seven tasks are added each week. This means that, on average, a property manager processes around 17 items of new maintenance each week, or 3.5 maintenance items per day. If each maintenance item takes around 15 minutes to process, this means that the property manager is working on maintenance for less than one hour each day, which represents around 13% of their overall weekly productivity hours. The cost to the property management company at five hours per week in monetary terms is around $140 per week for a property manager earning $55,000 per year.
Outsourcing maintenance represents another area of risk through loss and liability for property management companies. Since property managers are responsible for keeping comprehensive records on maintenance carried out on every property, if you outsource this task the ability to maintain these records is hampered. What’s more, should there be any maintenance double-ups or failure to review previously completed maintenance, the responsibility lies solely with the property management company. Additionally, while outsourcing maintenance does not necessarily cost the property management company, the cost is usually passed onto rental property owners. As such, property owners may fast become dissatisfied with the high cost of maintenance, which may result in client loss.
Is outsourced property management maintenance good for your real estate business? We believe not. As pointed out, it does not provide any added value to rental property owners or property management companies. If maintenance is managed and processed systematically, it is better managed in-house.
Outsourced property management administrative tasks
Outsourcing property management administrative tasks has grown in popularity. When it comes to property management, there are a wide variety of tasks that must be completed every day. Every task can be separated into smaller sub-tasks, which are either ‘dollar productive’ or ‘non-dollar productive’. Outsourcing non-dollar productive tasks can help free up your internal team’s workload and save you money in the process.
It makes sense to outsource virtually all non-dollar productive or administrative tasks. In fact, out of all the activities associated with property management, between 40 to 60 per cent of each task has administrative elements that are ideal for outsourcing. Administrative tasks include the following:
New managements – Preparing the management contract, sending letters of confirmation to relevant parties, setting up the property and rental property owner in the property management software, uploading and syndicating marketing collateral onto relevant web portals
New tenancies – Processing prospective tenant applications, preparing tenancy contracts and associated documents, setting up the tenant in the property management software
Property in-residence inspections – Preparing and issuing entry notices to tenants
Rental payments – Sending emails and text messages to delinquent tenants, sending breach notices to tenants in arrears, preparing termination notices for tenants facing eviction
Tenancy renewals – Preparing CMAs, preparing and sending letters to rental property owners and tenants, preparing tenancy renewal contracts, updating property management software with relevant information
Early terminations – Preparing and sending relevant documents, forms and letters, uploading and syndicating marketing material, updating property management software with relevant software
Water invoices – Preparing and issuing water invoices to tenants, following up late payments
Vacating tenants – Preparing and sending letters and notices to rental property owners and tenants, uploading and syndicating property marketing material
Management terminations – Preparing relevant documents for the transfer of managements being terminated
Insurance claims – Preparing relevant documents for insurance claims against rental properties
Court preparation – Preparing relevant documents for court hearing requests and claims
Contractors and service partners – Preparing and sending relevant forms, documents and letters, setting up contractors and service partners in property management software, issuing reminder notices, updating details for licences and insurance renewals
Each of these tasks requires the assigned team member to have the knowledge, skills and experience associated with carrying out the task. However, they do not require a real estate licence or industry registration certificate since the tasks do not require direct communication with real estate clients. If a property management task does require direct contact with a client, or advice is required, then it is not appropriate, or legal, to have such tasks outsourced to an unlicensed worker. Rather, such tasks should be shared between the internal team and the outsourced worker by implementing team-to-task workflow programs.
Outsourcing property management administrative tasks makes good business sense for many reasons. The property manager’s productivity time increases which allow them to focus 100% on dollar productive tasks that nurture client relationships and generate more income. The property manager’s additional productivity time also decreases overheads, which accelerates the opportunity to grow the real estate business.
As the business grows, the salary savings along with an upsurge in productivity time continue to accumulate. The property manager has an increased capacity to manage more properties and the outsourced property management administrative assistant can increase their workload to support all administrative tasks associated with the portfolio. The property manager may likely now have the capacity to manage 220 doors, offering a full service to each client.
Is outsourced property management administrative tasks good for your real estate business? Absolutely! The cost savings, productivity boost and profitability increase prove that you should consider outsourcing your real estate company’s property management administrative tasks.
Outsourced property management – should you do it?
By now, you should see that it does make sense to outsource some property management tasks. While outsourcing property inspections and property maintenance are not recommended, outsourced property management administrative tasks can have a positive impact on your real estate business. The savings are both tangible and intangible- the rental property owners can deal directly with their assigned property manager and the property manager can deliver a full property management service. Ultimately, this helps retain more clients and bring in more new business, all while reducing operating costs.
If you’d like to get started with outsourced property management or find out more, contact us today for a no-obligation chat about how we can help your real estate business.