Property Management
Choosing a Chicago Condo Management Company as an Investment
Making an Investment Decision.
A Smarter Way of Selecting a Condo Management Company
A Smarter Way of Selecting a Condo Management Company
On a condo association’s income statement, “Management Fee” appears as an expense, and oftentimes boards make their decision on choosing a management company on the basis of cost. Such a decision will likely result in the lowest management expense, but also the lowest Return on Investment (ROI).
A smarter way for an association to select the best management company, would be to think in terms of the return on investment (ROI). From this perspective, the false economy of a low management fee is eclipsed by the higher operating costs that are foreseeable by hiring a cheap management company.
Factors that make Property Management an Investment or Expense?
High Performance Management
Every property management company claims to save money. High performance management is on a different level.
Operational Efficiency
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Luxury Management
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Key Performance Indicators (KPI)
Know your numbers. Measure what is important. Assessment to Property Value (APV), Capital Expense to Total Assessment Ratio (CETA)
Risk Management
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Financial Management
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Now Is the Time to Spend More for
Better Property Management
Most condo boards look for ways to reduce expenses, without sacrificing quality. In challenging economic times, the property management company can make a huge difference in the fiscal health of the Association.
Choosing a property management company as an investment -Not an expense
Welcome to a new perspective —
Property Management as an Investment.
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Return on Investment (ROI)
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Condo Management Key Performance Indicators (KPI)
Capital Spending
Ratio of Capital Spending and Net Reserve Change to Total Assessments is a key indicator with respect to the financial health of the association.
Assessments
Assessments are very relative, but need to be very carefully examined, because high assessments can be covering for operational inefficiency or for making up for deferred maintenance not addressed in previous years.
Governance
Governance is an important intangible, that has a significant impact on property values. A condo association or management company that cannot enforce the CC&Rs (Declaration of Covenants, Conditions, and Restrictions), has problems, that most buyers would wisely steer away from.
Deferred Maintenance
A measurement of deferred maintenance, as evidenced by condition assessment or reserve study is a key real world assessment of association value.
Homeowner Satisfaction
Unfortunately, litigation is sometimes an indication of low homeowner satisfaction. But, the emphasis should be on homeowners who love the association.
Property Value
Board decisions and management can significantly effect property value. Inefficient management can result in higher assessments which negatively impact property values. Alternatively, efficient management can result in lower assessments, PLUS better maintenance and better amenities which result in HIGHER property values.
High Performance Management
High Performance Condo Management is best understood two ways … on average the Long-Term operational efficiency is improved by about 20%, and with operational efficiency, the association has the funds needed to do things in a high quality manner. Better amenities, better assets, etc.
The Softer Side of Condo Risk Management
Often risk management for condo associations focuses on physical problems that can cause injury or property damage – the uneven sidewalk, the wet lobby floor, mold and other physical hazards. There are other concerns about governance, including enforcement of rules, board transparency, collections, etc. Of course, these are of paramount importance. But, oftentimes these are not the real trigger that results in litigation, higher insurance, and settlement costs. The real trigger is many times the attitude of the property management company and/or the condo board. An introduction to a Chicago lawsuit stated:
“As is unfortunately far too common, however, associations and their attorneys adopt hands-off or even adversarial positions toward damaged/wronged unit owners who have the audacity to complain, and request assistance. Such attitudes, aside from being a clear breach of the fiduciary duties owed to the unit owners, needlessly runs up the costs … “
This is not theory, attitudes needlessly run up costs. Obviously, a condo board or a property management company cannot protect all residents and units from property damage, and other problems – but how people are treated in responding has an awful lot to do with how much the total cost of dealing with the issue will be.
The moral of the story is to follow the Golden Rule, it can save your condo association a lot.
“What really turned me over was the ability to understand how everything works without any prior knowledge.”
Emily
Condo Association Board President