An article by Bob Walters
  

Common Questions from property management business owners

1. How many properties can a Property Manager manage?

Answer:

There is no universal answer to that because of the following variables:

• The distances between managed properties
• The distance of managed properties from the office
• The type of properties under management
• The type of clients who own the properties
• How well systemised the business and the individual team members are
• What the business is trying to achieve: -  maximum profit  -  growth   -  just maintaining the existing client base and staffing levels   -  running the business primarily as an appendage to Real Estate Sales.   

A better approach is to work on how many staff do I need to delight the clients with service and still make an acceptable profit. That is, to calculate staffing requirements based more on the total income being generated, rather than purely on the number of properties managed.

2. What is the best staffing structure to have?

Answer:

Once again, there is no BEST or RIGHT staffing structure. There have been differing opinions for decades as to whether the most efficient structure should be pyramid (or task management), portfolio or some combination of the two.

Some experts believe that the best staffing model is to employ Property Managers who have the total responsibility for all aspects of the leasing and management of clients’ properties, including a responsibility for growing the rent roll.

This model has some attraction due to the ‘holistic’ nature of the Property Manager’s role and the fact that there would be a wide variety of duties undertaken by the Property Manager.

However, it is my view, that leasing and rent roll growth are now specialist areas that require different types of skills to that normally required of Property Managers. In a nutshell, today’s Property Manager is primarily an administrator, while leasing and business development require a high level of SALES skills.

Another factor in establishing an efficient staffing structure is the availability of people in the market area of the business who have the knowledge, skills and attributes to fill the available roles.

There is a shortage of competent, experienced Property Managers in many parts of Australia. Therefore, even though it may be more desirable to find a Property Manager to complement the ‘portfolio’ structure of the business, a good Property Manager may not be available. On this basis, some property management businesses may need to adapt the staffing structure to the competency of the employees available.  

3. When do I need to hire an additional employee            

Answer:

One of the most difficult problems in managing a property management business is when to increase the staff numbers.  Profitability reduces every time a new staff member is employed so it is often put off until the business cannot function without one. 

The question is “What is the cost of waiting?”

Let’s say, you have the “average” size rent roll of 350 properties that generates $1,500 in revenue per property per year (a total of $525,000), have a properties managed to staff ratio of 87.5:1 (i.e 4 staff) and a profit of 20% on gross annual revenue (i.e $105,000).

You want to grow the business, but you think you should put off employing an additional staff member at the moment because everyone in the team appears to be coping and employing an extra person will reduce profit.

Over a period of time, the number increases to 390 properties, generating gross revenue of $585,000 and a profit of $117,000, but the staff are really under pressure.

The burning question is “Is the additional $60,000 income is sufficient to justify employing an additional staff member because you will probably have to pay all the additional income out in salary costs?”. The problem is that the properties managed to staff ratio, nearly 100:1, is escalating to a level where service levels may be starting to go down while the stress levels of the staff is going up.

Every property management business has it’s own idiosyncrasies, but the ability to meet the cost of an additional staff member places demands on all business owners to meet that cost by making a sound business decision.

The question must always be asked – “Can I afford not to employ another person?”, and not “Can I afford to employ another person?”

Some useful tips

1. Avoid creating a position purely to match the person’s skill set

2. Do not organise work as if they were separate, isolated functions dependent on the skills of separate, isolated people.

3. Create the structure you want first, then find the people to fit the structure.

4. As a business grows new muscles, sometimes the structure needs to be modified to provide maximum efficiency and profitability.