Rent Real EstateCounting the Cost of Professional Homeowner Association Management
Homeowner association management companies work by contract for a monthly fee. But how is that amount computed? Few management companies have
detailed time reporting systems to calculate costs accurately. But a management company sells its time and the more time spent on your homeowner association business, the greater the cost. The management fee is often a "SWAG" estimate of what it"s going to take to manage your account and make a
profit.
So what goes into the management fee? There are fixed costs like rent, phones, copier, insurance, computers and fax…the standard modern office expenses. Then, there are labor costs which vary according how many associations managed and the time needed to handle each account. Then there is a funny notion called "profit". Total fixed and labor costs plus profit margin divided by the total number of units managed yields the company"s average charge "per door" In Oregon, the average is between $10-15/door. Small communities will pay more and larger communities will pay less than this. Costs per door vary by region.
Typically, a management company will assign a manager, a bookkeeper, a supervisor, a support staff person (usually a receptionist) and possibly an administrative assistant to the account. All will handle multiple associations. The manager may handle 7 associations, the administrative assistant may be shared by two managers and may handle 14, the bookkeeper may handle 10-14, the supervisor may have 3-4 managers under them which means they may deal with 21-28 associations and the receptionist gets them all.
The salaries, benefits, taxes and expenses of these people are allocated to the associations they deal with. Staff costs are directly related to how many associations the staff manages. The more associations they can handle, the more cost efficient and, theoretically, the cheaper for you.
The salary levels of the staff can have a major impact on the management fees. If an association wants experienced professionals, there is a price to be paid. A professional association manager should attend seminars, have professional designations and focus exclusively on this form of management. This is one of the most challenging forms of management there is and a jack-of-all-trades just won"t do. The association will benefit from proper training and experience. Expect to pay accordingly.
Managers spend sometimes as much as 80% their time preparing for and following up on Board Meetings. For a typical Board meeting, the manager
gathers the information and prepares a management report, reviews the financial statement, attaches relevant correspondence, puts Board packets together and mails them to individual directors. That could leave just 20% of the total schedule for inspections, supervising contractors, responding to owners, processing collections, reviewing contracts and other important things a manager is supposed to be doing.
Most Board meetings are held on weekday evenings at the community so the manager is required to work after hours and travel, both of which cost the association money. (It"s built into the contract.) After the meeting, the manager usually has a laundry list to follow up on that occupies most the following week. A manager can easily spend from 14 to 20 hours on Board meeting related business.
What can you do to reduce management costs?
Limit Board Meetings to 2 hours. Rarely will more time be needed and if a deadline is known, the agenda will get done. Less talk, more action.
Hold daytime, weekday meetings to avoid manager overtime costs.
Move Board Meetings to the management office to save manager travel time and mileage.
Reduce Number of Meetings. With a good budget and management plan, the manager should be able to handle most issues with only occasional input from the Board.
Let the Manager Manage. Board micromanagement duplicates effort and inevitably runs up costs. If your management company is incompetent, get a
new one. If qualified, let it do its job. This may be your single biggest cost saver.
Insurance Claims. Insurance claims can take many hours of a manager"s time. If the management agreement specifically states that insurance claim
work is an extra cost to the association (key component), the management company can bill the insurance company for the time it takes to administrate a claim.
Collection Activity. Management time for involved collections should be billed to and recouped from the delinquent owner whenever possible.
Disclosure Information. Manager time and costs to compile disclosure information for owner home sales should be charged to the owners.
These are but a few ways that management costs can be trimmed. Be sensitive to your manager"s time and don"t pile on unnecessary tasks that ultimately
will raise the cost. While it"s important to get what you pay for it"s equally important to pay for what you get. Sit down with your management company annually to count the cost and work together to improve your partnership.
For more on this subject, see www.regenesis.net.