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Subject: Property Management Company vs. Self-Managed
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JenniferD8
(Michigan)

Posts:39


02/12/2020 7:05 PM  
Hi,

I'm a newer condo board member in a 180 unit development. I'm quickly noticing that the other board members, while seasoned, do not have a lot of knowledge or ambition when it comes to making decisions, determining what projects to tackle, establishing a sensible budget, etc. As they sit back, the complex is slowly deteriorating from neglect. I've been working on obtaining quotes for our lawncare. Ironically, one of the references that I called for a lawncare company was a property management company. After checking the reference, I asked for some information on what the property management company offers. I know there are pros and cons to having a property management company vs. being self-managed. However, I think the property management company would be extremely beneficial and get our condo complex back on track. They gave me a rough estimate of $16-$20 per month for each unit, depending on what services were selected.

I'd like to hear if others out there found property management better or worse than being self-managed?

SteveM9
(Massachusetts)

Posts:3599


02/12/2020 7:39 PM  

180 unit condo building? Must be some kind of property manager already. That is a lot of systems that need maintaining on a regular basis
SheliaH
(Indiana)

Posts:3054


02/12/2020 7:43 PM  
I wasn't an owner at the time , but I'm good our community was self managed at first before the went to a property manager. Then they went through three companies before we found our current one (it's since been bought out by a national company, but there haven't been too many problems.)

The main thing to remember about property management is that they work for the association at the board's direction. Your board still has to do its job in making decisions, settling on a budget and setting priorities. Many associations get in trouble when they think they don't have to do much because "we have a property manager for that."

It may be your board is overwhelmed by managing a property your size because there is a lot to think about and developers rarely provide education on best practices. They turn over the community and say "goodbye and good luck.". Most of us have trouble managing our own households - now try expanding that to a community worth several million and has tens of thousands of dollars to be responsible for.

Your board should begin by considering what they find easy and hard concerning property management, then the can decide what the property manager can do. You should check your documents to see what the association is responsible for because the more extensive the services the more useful a property and should be. Prepare a request for proposal and send it to several companies in your area. Make sure you talk to companies who have experience with a community your size.

Do your due diligence by asking for references and checking them. If all if this sounds like a lot of work it is, but better to put in the time to find who works best for you. You may want to check out the community association institute website to get some books on selecting a property manager to help you. While you're at it, take a look at the educational resources for board members so All of you can learn best practices you could adapt to your community. There may even be a local chapter that presents training all of you can attend to network and pc learn from folks who've walked down the same oath. And you can always check out conversations on this website for stories in the care and feeding of management companies so you'll know what to do and what to avoid. Good luck!
JenniferD8
(Michigan)

Posts:39


02/12/2020 7:54 PM  
Thanks for the feedback so far! I should have included that the complex was built in the late 80s - early 90s. The board consists of the president, treasurer, secretary, and three other board positions that handle community relations, grounds, and buildings. As you may suspect, approximately 70% of the work falls on the two board members handling the grounds and buildings. It's a tad overwhelming!
GeorgeS21
(Florida)

Posts:2308


02/12/2020 8:11 PM  
While I don't live in a condo, and never have, from the hundreds of posts I've read, you need professional management - without it, you are correct, the material condition of your home and grounds will continue to erode.
MarkW18
(Florida)

Posts:717


02/12/2020 9:06 PM  
I'll wait until Melissa chimes in with her "expert" opinions!
CathyA3
(Ohio)

Posts:832


02/13/2020 8:21 AM  
I live in a 74-unit condo community with no amenities, and we've always employed a property manager.

One thing you need to consider is your membership's level of knowledge and engagement. If most are indifferent to what goes on, then you're not a good candidate for self-managing. It's a LOT of work and requires some specialized knowledge and skills - if you don't get enough volunteers or ones with the right skills, then the work won't get done and the community will start to look neglected. And don't be fooled by a lot of big talk. Everybody's all on board when it comes to saving money, but when it's time to step up and actually do the work, they're nowhere to be found.

Another thing to consider is the need for physical work. You don't want to rely on volunteers to perform tasks that may result in injury unless you really beef up your insurance to cover the resulting liability. When you look at the cost of employing a property manager, you should estimate the expenses you can avoid and subtract them from the total cost. (I'm not a big proponent of using volunteers. When you look at the overall quality of their work, plus the added expense of increased insurance costs or doing some jobs over again, you often don't save any money.)

The quotes you got from area property managers are in the right ballpark. Don't forget to check references. I found our new property management company by hearing (unsolicited) rave reviews from people in other communities.

And finally, people don't value what they don't pay for. Board members already are often treated badly for the many hours they donate to their communities. You don't want to make it even worse.

CathyA3
(Ohio)

Posts:832


02/13/2020 8:31 AM  
One other thing I forgot to mention: a good property management company will often have a "portfolio" of contractors who have done good quality work in other communities that the company manages. This can save you a lot of time when you need to get bids for particular jobs.



KerryL1
(California)

Posts:7044


02/13/2020 11:18 AM  
Are you saying, Jennifer, that there's no property manager whatsoever? Not even to look after your finances?

Along with 180 units, are you an elevator building?

Whether or not you have elevators,, condo buildings like ours usually have more complexity than detached homes and the reserves can be considerable and numerous. I'd say you really DO need a management company.

Sheila offers good advice, and, also you might want to check with other HOAs that are similar to yours for references. Find out what the companies offer, make sure their managers are certified.

You might not need a full-time onsite PM, so consider a management company where some of their managers have "portfolios," i.e, manage more than one HOA.

Does your HOA have a place onsite for even a part-time manager to have a desk, etc.? You might have a PM, for instance, who's on your premises a few to several hours a week.

Your board needs to figure out how to pay for this service.
JenniferD8
(Michigan)

Posts:39


02/13/2020 12:26 PM  
Cathy - - you are describing our condo development to a tee! A majority of our co-owners are wanting everything done for nothing. Every year, they complain if the monthly HOA dues increase at all. With our aging buildings, I don't think they realize that more and more repairs are needed. I joined the board in October, since I wanted to help turn the complex around. I'm starting to do walk-arounds to evaluate repairs, since these haven't been done in over ten years. The board expects that co-owners submit work orders if they need repairs. They definitely don't take a proactive stance for the maintenance. I'm also finding that our budget is woefully underestimated. There isn't a plan of attack each year on projects to tackle. They just react to issues that arise. It is really mind-boggling.

We do rely on co-owners to volunteer to plant flowers, however, we hire skilled help for other improvements and repairs. In the past, we've had a mixed bag when it comes to some of the board members attempting to complete the repairs themselves. Some are actually quite terrible and cost us more money in the long run. I, and many others, are getting frustrated by the board's inability to make changes.

I did send the president an email a week ago regarding the property management idea and my findings. He hasn't responded yet. I'm planning to send a follow-up email tomorrow.

JenniferD8
(Michigan)

Posts:39


02/13/2020 12:33 PM  
KerryL1 - - We do not have a property manager whatsoever. The 180 units are single story buildings that are grouped in pairs and fours, so there's a lot of grounds, buildings, and roads to maintain. For the finances, we have a board member serving as the treasurer. He's older than old and pays himself $400 per month plus waives his HOA fees. It's CRAZY!

Unfortunately, we don't have any place for a property manager to sit, etc.

For payment of this service, I think we would have to raise the monthly HOA fees. We don't have a healthy savings to fall back on.
CathyA3
(Ohio)

Posts:832


02/13/2020 1:08 PM  
Posted By JenniferD8 on 02/13/2020 12:33 PM
.... For the finances, we have a board member serving as the treasurer. He's older than old and pays himself $400 per month plus waives his HOA fees. It's CRAZY!




Yipes. It's likely that this is unlawful. Board members usually are required to serve without compensation, and even for those who may be compensated, waiving assessments is an absolute no-no. So you know right off the bat that this guy doesn't know what he's doing (or does know and is dishonest). I think an audit of the books is in order, and in fact your governing docs may require regular audits.

I strongly recommend educating yourself about condo associations and how they work. First off, read your governing documents thoroughly. Then find some decent educational materials on the web, for instance at https://communityassociations.net/ or at https://www.caionline.org/pages/default.aspx. Things that are targeted toward new board members will be very helpful - they'll give you the big picture, then you can start to fill in the details as you gain experience.

Regarding your finances, a community your age should have a pretty good size reserve fund. Without it, you'll have to rely on special assessments or loans, and those can get painful.

Also check to see if Michigan law requires condos to maintain reserves. In Ohio we must fund our reserves at levels recommended in our most recent reserve study, and we have reserve studies every 3-5 years (more often if there have been changes that would affect previous estimates of spending needs).

One of my favorite sayings is "the cheapskate spends the most". So many boards go for band aid repairs or kicking the can down the road, and they end up with more damage and larger repair bills than they would have if they'd just bitten the bullet and done proper maintenance up front. Unfortunately, association funding tends to drive short-term thinking - sort of like folks who live paycheck to paycheck - and one of the board's challenges is to think long-term as well.


You've got yourself a mountain to climb, especially since you can't do everything by yourself and your fellow owners seem to be OK with the status quo.

GenoS
(Florida)

Posts:3673


02/13/2020 1:50 PM  
My 100 home HOA in Florida would be massively better off with a management company. After 25 years of self-management (self-mis-management would be more accurate) we decided to hire a PMC at the start of 2019. Unfortunately, it was a bad one. The CAM they assigned us (not on-site) was bad. Many people didn't want to foot the bill for a PMC in the first place, so when things got really bad, it was the nearly unanimous opinion of everyone who lives here that the PMC should be fired. That happened in June.

We still could use a good management company but the well is poisoned now and all management companies are bad according to those who were in a position to work with the PMC to iron out the problems we had, but refused to do so.
CathyA3
(Ohio)

Posts:832


02/13/2020 2:27 PM  
More about finances:

* Study your financials, looking for questionable stuff.

* Audit, STAT. Check your By-Laws to see if an annual audit is required, so that you'll have ammo if/when you get any push back from the other board members. Expect push back: the audit will cost money and your treasurer has a nice little gig going.

* Check your insurance coverage, especially Directors and Officers (D&O) insurance. Your Declaration should have a section that talks about the amount of insurance the association must carry, which will be based on things like your total operating budget and your total reserve funds. Don't even think about going cheap on this.

*** Do not serve on the board if there is no D&O insurance!!! *** Without it, board members are personally liable if the board is sued. We are a litigious society, and nobody should put their personal assets at risk for being a board member. Getting your community on track will likely make some owners unhappy since they've been content to let the place fall apart, and unhappy owners have been known to hire lawyers. I also boosted my personal liability insurance after I was elected to the board in my community.

I bet you thought your question was about property management. :-) However, a poorly managed community is going to have multiple messes, some of which are more important than others. Money is right at the top of the list - you won't be able to do things properly unless you take control of your finances.
GeorgeS21
(Florida)

Posts:2308


02/13/2020 2:33 PM  
You really need a property manager.
MarkW18
(Florida)

Posts:717


02/13/2020 2:40 PM  
Jennifer

You have to wait until Melissa gives her "expert" opinion.
WalterH4
(Indiana)

Posts:119


02/13/2020 5:14 PM  
Woah, $20/month per unit!??? Is this normal in some locations? Here in Indiana, we can get good PM's for $3.50/month per unit. And some charge as high as $7... but those are primo.

For your 180 condo complex, your $20 rate amounts to $3600/month == $42,000/year. I wouldn't think that a PM would need to spend more than 10 hrs/week, 500 hrs/year on your Condo management, which means you'd be paying them about $80/hr. That just seems very high for this skill set.

If nothing else, having a PM also provides you with indemnity in case you are non-compliant and someone decides to sue for negligence/etc.
KerryL1
(California)

Posts:7044


02/13/2020 5:14 PM  
Cathy's insights are really good, Jennifer, but I'm sure they can feel overwhelming. You must get professional help of some kind given that your board doesn't seem to know what it's doing. For one thing, your board must vote the man out of the if office of treasurer.

I'm thinking you and other owners might want to chip in to spend an hour or two with an HOA attorney for advice.
JenniferD8
(Michigan)

Posts:39


02/13/2020 5:42 PM  
Thanks for the additional work

I have looked at the financials and the treasurer is paying himself from an account that states MISC. I raised the question at my first meeting in October regarding pay of board members. I wanted to know who was paid, how much, and why? Our bylaws do state that officers can be paid as long as a 2/3 co-owner vote is met. Apparently, a vote was taken in the early 2000s. The sticking point is that an amount of pay was never agreed upon. The treasurer then took it upon himself to determine that he should be paid $400 per month plus have his dues waived. The president also waives his dues each month. The rest of us are not paid and pay our dues.

Audit: Our bylaws state that we have an audit every five years. I'll check when we are due next.

Insurance: I checked and found that Board of Directors have a 3,000,000 per occurrence coverage limit and a $190,000 coverage for crime which protects the association's bank accounts.

JenniferD8
(Michigan)

Posts:39


02/13/2020 5:45 PM  
@ KerryL1 - - I do need professional help! I need my head examined for being on this board! Lol! I agree that the treasurer is an issue. As I mentioned, he is old as dirt which should cause concern for the other board members and the co-owners. I remember my Grandma at this age and her judgment wasn't the best.
JenniferD8
(Michigan)

Posts:39


02/13/2020 5:49 PM  
@WalterH4 - - $3.50 to $7 sounds like a steal! I do need to check around for additional quotes. The price that I was quoted was for the following:

Finances
Monthly Cash Report
Attends board meetings
Attends annual meeting and reserves a location
Completes a reserve study to determine if the amount of reserve is adequate for future expenditures
Obtain quotes from contractors and presents them to the board
Completes a Spring and Fall inspection of the complex; determines plan of action
Handles daily work orders (work orders can be submitted electronically or via the phone)
Handles condo sales

* The company that I obtained the quote from indicated that they manage 45 condo HOAs.

Is this the same type of service that you receive at your price?
SteveM9
(Massachusetts)

Posts:3599


02/13/2020 6:36 PM  
Our bylaws do state that officers can be paid as long as a 2/3 co-owner vote is met. Apparently, a vote was taken in the early 2000s.




Typically boards do not have the legal right to waive dues, ever. Even if they vote for it. Its very possible they still owe those dues.
JenniferD8
(Michigan)

Posts:39


02/13/2020 6:50 PM  
@ SteveM9 -- I agree with you. I've been pushing for the board to make some changes. Ok -- a lot of changes! I told them if they do get paid, then a reasonable amount needs to be determined. The amount needs to be transparent in the financials and be reportable to the IRS. Currently, none of that is occurring. Personally, I think the board should be completely volunteer. I even suggested that we have the co-owners vote on it again, since I suspect a 2/3rd vote won't be reached.
TimM11


Posts:337


02/14/2020 8:35 AM  
Posted By WalterH4 on 02/13/2020 5:14 PM
Woah, $20/month per unit!??? Is this normal in some locations? Here in Indiana, we can get good PM's for $3.50/month per unit. And some charge as high as $7... but those are primo.

For your 180 condo complex, your $20 rate amounts to $3600/month == $42,000/year. I wouldn't think that a PM would need to spend more than 10 hrs/week, 500 hrs/year on your Condo management, which means you'd be paying them about $80/hr. That just seems very high for this skill set.




$20 per month per unit would be on the cheap side of average where I live for decent professional management. We were paying $21-22 per month per unit before I moved out of my condo HOA last year, in a community that sounds very similar to the original poster's, but smaller. It's probably up to $23 now. Keep in mind that this money is for the company, not just the PM -- it goes towards office/admin support, AR/AP, etc.


AugustinD


Posts:2915


02/14/2020 9:36 AM  
Posted By JenniferD8 on 02/12/2020 7:54 PM
As you may suspect, approximately 70% of the work falls on the two board members handling the grounds and buildings.
I can just hear the owners at a meeting kvetching about the cost of paying someone to do this work. To me, the correct stock response to owners should be: "Would you be willing to do [hand owners a list of all chores and the total hours per month] what Jane Smith here has been doing all these years, for no pay?"
JohnC46
(South Carolina)

Posts:9313


02/14/2020 9:43 AM  
Cost of an MC will vary depending on what is expected/contracted from them. We pay about $5.00 per door, per month. It does not include any site visits. They handle all our money from collections to bill paying. They do not have access to our Reserves. They send out dunning letters based on amount owed. They sent out violations notices and record any fine payments. They attend our Annual Meeting where they make a financial presentation and act as our Election Officials.

The BOD meets with them 2 to 3 times a year (at their office) to discuss issues, procedures, etc.
MarkW18
(Florida)

Posts:717


02/14/2020 9:46 AM  
Posted By WalterH4 on 02/13/2020 5:14 PM
Woah, $20/month per unit!??? Is this normal in some locations? Here in Indiana, we can get good PM's for $3.50/month per unit. And some charge as high as $7... but those are primo.

For your 180 condo complex, your $20 rate amounts to $3600/month == $42,000/year. I wouldn't think that a PM would need to spend more than 10 hrs/week, 500 hrs/year on your Condo management, which means you'd be paying them about $80/hr. That just seems very high for this skill set.

If nothing else, having a PM also provides you with indemnity in case you are non-compliant and someone decides to sue for negligence/etc.



WOW, someone who know not a lot about business operations.
KerryL1
(California)

Posts:7044


02/14/2020 10:02 AM  
Say, MarkW, we know you are/were an HOA property manager perhaps with your own management company. How about offering actual advice to OPs instead of taking useless potshots at other posters?
SheliaH
(Indiana)

Posts:3054


02/14/2020 10:05 AM  
“High” property management fees (or anything else) is subjective – as John indicated, it depends on what services you want the property manager to provide, and that should be based on the services the association must provide according to its documents. In Indiana, like everywhere else, I suspect the cost may also depend on where you are in the state and how many property managers are around who work with HOAs.

As you know, the more common areas in the community, the more time and money it takes to maintain them, and so the price goes up. If you have lots of homes, the price goes down because you can spread around the cost, but smaller HOAs may have to pay more because of a smaller economy of scale. If you don’t want to pay a property manager, your options are (1) hire another contractor(s) and personally oversee the work (2) get the homeowners to do it (which is like herding cats) or (3) amend your documents and turn over that part of maintenance to the homeowners themselves (good luck with that).

Either way, you get what you pay for, which is why you get at least three bids and check references (preferably communities that are similar in size and services to yours).
CathyA3
(Ohio)

Posts:832


02/14/2020 10:12 AM  
Posted By WalterH4 on 02/13/2020 5:14 PM
...
If nothing else, having a PM also provides you with indemnity in case you are non-compliant and someone decides to sue for negligence/etc.



Yipes, no. The PM works at the direction of the board, not the other way around. The board is always held accountable for what happens on their watch - it's one reason D&O insurance is so important.
MarkW18
(Florida)

Posts:717


02/14/2020 10:24 AM  
Posted By KerryL1 on 02/14/2020 10:02 AM
Say, MarkW, we know you are/were an HOA property manager perhaps with your own management company. How about offering actual advice to OPs instead of taking useless potshots at other posters?



After you
KerryL1
(California)

Posts:7044


02/14/2020 10:43 AM  
Please read above suggestions, MarkW.
MarkW18
(Florida)

Posts:717


02/14/2020 11:30 AM  
Posted By KerryL1 on 02/14/2020 10:43 AM
Please read above suggestions, MarkW.



You are on the Board of a condo of 211 units. Are you paying $16-$20 a door for your PM's services? What extras are you paying for that the OP might not need?
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