So you may be thinking about hiring a property manager (PM) to take over operations for your homeowners association. Or perhaps you are unhappy with your current property manager, so you are shopping around to see what services other companies offer.
When interviewing a PM, the first question board members usually ask is, “So what is this going to cost?” The reality is, that should be the last question asked, not the first! Putting costs first sets a bad precedent when starting the interview process!
It puts the focus on the expense of your property manager, and not on the investment you may be making for your development.
The better question would be what does a property manager bring to the table when being hired.
By putting the cost first, you are basing the decision on a price tag, and not the true value you may get overall. That would be like asking a doctor his fees before doing open heart surgery on your mother. The right question should be what are the doctor’s skills and background, and better yet, their success rate! I think your mom would agree…
Trying to gauge the cost of hiring a manager can be a bit tricky. There are no set fees (unless your state mandates them) and charges and fees can vary widely from company to company. When interviewing multiple PM’s, an easy way to compare fees may be on a cost per unit measurement. An HOA with a lot of units may have a lower cost per unit than one with less units. There are some basic costs inherent to running the HOA, such as staffing and bookkeeping, and the more units the contract entails, the more easily that price is spread among many owners.
HOA property management fees will typically fall into three categories; initiation, ongoing and exit.
Initiation fees are the fees a PM will charge to take over the day to day management of the HOA. The fee will be negotiated based on the work load required, including bookkeeping, transition of files, physical or digital records transition, banking and software changes, etc. This fee can range from a couple of thousand dollars for a small HOA or upwards of $30,000 or more for a large HOA with several hundred homes.
Ongoing management fees are typically paid monthly by the HOA to the management company. This will almost invariably be a set fee, pre-negotiated as part of the contract. Contracts can range from 1 – 3 years, but are usually on a year to year basis. You can expect to pay roughly $10 to $20 per unit, per month, for management services. Expect higher fees in areas with a higher than average cost of living.
Exit fees are exactly what they sound like; the fees incurred to transition the HOA from one firm to the next. While no company wants to lose business, it happens. If you are thinking of switching from one firm to another, don’t expect the PM to work for free transitioning the HOA’s books to another company. Ethically they should be there to make it a smooth transition, but at the same time, you should expect to pay them for the service of assisting that changeover.
When comparing companies’ prices, be sure to compare the services they offer and not just the price. Remember that not all that is cheap is a good bargain, and not all that is expensive has implicit value. A Rolex may look fancy and cost a lot of money, but at the end of the day it tells time the same as a cheap Casio!
If you value your time, hiring the right HOA property manager can be the best time management/investment any HOA board can make on behalf of the owners. It gives piece of mind knowing you have pros watching over and guiding you along the way!
Since 1997, real estate investor and broker Christopher Benedict has been involved in all phases of realty investment and property management. From agent, to broker and business owner, he now focuses on growing his base of investor clientele.