When you think about the property manager managing your property investment, whether it’s valued at $600,000 or $1 million, you might imagine a dedicated professional solely focused on your property. However, what you may not realise is many property managers are responsible for overseeing 120 to 150 other investment properties as well.
You are right to envision a season property manager with years of experience.
Unfortunately the reality is different. In many property management agencies, it’s common to find 18 to 25 year olds managing portfolios with 120 to 150 properties, each valued at around $700,000.
This means an inexperienced property manager is handling assets worth up to $150 million dollars.
So, why do agencies entrust such significant investments to individuals with limited experience?
The Hidden Costs of Inexperienced Management
Property management is complex, requiring knowledge of legal regulations, market trends, tenant relations, and maintenance. Inexperienced managers often lack the depth of knowledge and practical skills needed to handle these aspects effectively.
This can lead to costly mistakes, legal issues, and unhappy tenants and damaged investments.
Managing a large property portfolio involves making critical decisions that can impact the value and income of the properties. Inexperienced managers might not have the foresight or experience to make the best decisions, potentially and most commonly leading to financial losses.
Experienced property managers are proactive, anticipating issues before they become major problems.
In contrast, inexperienced managers often operate reactively, addressing problems only after they arise. This approach can result in higher maintenance costs and tenant dissatisfaction.
So lets get to it…Why Do Agencies Hire Inexperienced Staff
The primary reason property management agencies hire young, inexperienced staff is cost.
Agencies are focused on their bottom line, and hiring less experienced managers is cheaper.
Inexperienced property managers typically earn around $50,000 – $65,000 per year. This is significantly lower than the salaries of seasoned professionals, allowing agencies to save on costs.
The property management industry often sees high turnover rates. Agencies prefer to hire younger staff who are easier to replace and train, rather than investing in long-term, higher-paid professionals.
By cutting costs on salaries, agencies can increase their profit margins. This focus on profitability often comes at the expense of the quality of service provided to property owners.
What does this mean for your investment property?
Reduced Property Value
Poor management can lead to decreased property values due to neglected maintenance, legal issues, and unhappy tenants.
When you have an unhappy tenant, your investment suffers.
Inexperienced managers may struggle with tenant retention, building relationships, and rent collection, leading to inconsistent rental income and higher vacancy rates.
Increased Stress
Property owners rely on their managers to handle day-to-day operations smoothly. Inexperienced managers can lead to increased stress for owners who may need to intervene more frequently.
If you are stressed with your investment property, what do you do? You sell it!
Who do you sell it through? The agency managing the investment property.
While it may be tempting for property management agencies to hire inexperienced managers to save on costs, the long-term repercussions can be significant for property owners.
Managing a portfolio valued at $150 million requires expertise, proactive management, and sound decision-making qualities that are often lacking in younger, inexperienced staff.
Property owners should be aware of these risks and consider the value of hiring experienced professionals who can truly protect and grow their investments.
Remember, the bottom line for property management agencies shouldn’t come at the expense of your property’s value and income.
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