Asset Manager vs Property Manager (Scope of Services)
Some owners think you should manage everything that remotely touches their property. Most have never owned a rental property and have no idea what property managers do. If you don’t manage their expectations they will instinctively ask you to manage mortgage issues, utilities, home warranties, set up bank accounts, file foreign tax compliance forms, manage HOA issues, insurance claims and whatever else needs to be done, in addition to managing the tenant and maintenance. That’s a perfect definition of an asset manager but most owners don’t know the difference and neither do most property managers.
Often, large asset managers (or foreign investors) will ask you to set budgets, estimate NOI, get bids on insurance coverages, manage the code enforcement officer, manage property tax disputes, oversee insurance claims and a whole host of other duties you’re not trained to (or have the experience to) manage. To make it worse, you’re not being paid to do all that stuff for the lousy $70 a month management fee.
Private owners sometimes have the same ideas and need help understanding what you do for the fees they pay you or, better yet, what you don’t do. If you don’t define it, they will, and often their expectations are off the chart and totally unacceptable. If you don’t have a way to explain the limits of your services there will be tension between you and your client as you attempt to quell their unrealistic expectations as they come up. Defining the difference between an asset manager and a property manager is a great way to address the issue.
Managers need a document to send their owners (or make it part of their new owner sign up package) that identifies the differences. Over the years we developed a document differentiating one from the other so the owner can get their heads around what you do and don’t do for your fees. It’s a editable document so you can add your company name, tweak it to your model and publish it.
The property management business is a thin-margin, nickel-dime, service business and managers need lots of different ways to generate revenue to survive, including setting up separate businesses that can support (and profit off of) the management business.
We all know that disclosures to our owners is critical to keep your license but often struggle with the question ‘When And How Do I Disclose’ so I can charge fees, receive referral checks, take commissions, make spreads, profit on maintenance, markup ancillary services and make money through outside companies I own. The question is, “what do I say in the PMA (that owners will accept) that permits me to make this additional revenue … and, how can I word it so the owner doesn’t get mad, or the real estate commission come down on me for not disclosing properly?
So, this challenge has three criteria. First, it must allow us to generate profit from any and all sources (including from sister companies we own); secondly, that the owner would be ok with it, and lastly, language that satisfies the real estate commissions requirements for adequate disclosure.
We struggled with this for years and tried lots of different methods of disclosure that met these three criteria. In the mid 90’s, with attorney Monica Gilroys help, we finally settled with this language. Owners feel it’s reasonable and fair; it opens up the floodgates of new revenue streams, and, it satisfies the real estate commission's requirements of Full Disclosure. It’s called a Broad Standing Disclosure. We’ve signed up over 2,000 owners with it and few request more explanation. Part of this document is ... The Language .. the other part is ... The Explanation (when owners ask for clarity), and strategies for your implementation.’ We give you several options on How To Say It … along with lots of talking points when you’re asked about it by an owner.
Since we included this language in our management agreement we’ve made several million dollars from ‘non-management related fees’ (ie, Procurement Fee, Renewal Fee and Monthly Fees) in our businesses. Today, over 40% of all our revenues come from ‘non-management related fees.’ This language is your Launching Pad for generating tons of revenue off your managed properties. It’s the gateway to Cashing In On Property Management.
For folks with lots of existing PMA’s in place, needing some strategies to get old owners to agree to this new language, see our Cashing In On Property Management Resources section on this site and review the section called Disclosing Fees.
““This disclosure language has served Roberts management company (and many of his colleagues) for well for over 20 years. It clearly satisfies the requirements for disclosing to owners (and the real estate commission) and meets the criteria we set up for it in the beginning. (note: never add language to your management agreement without reviewing it with your Broker and legal counsel first):” Monica Gilroy Esq, managing partner Gilroy, Bailey, Trumble LLC.
Let’s talk about price.
If you have a vault full of money a simple key might be needed to open the vault. The actual key isn’t worth much ... it’s a small piece of metal with some points carved in it, but, it’s the one thing that opens the vault where all the money is. So, you might feel like you’re paying too much for this small piece of metal (the language), but it’s not the metal you’re really paying for, it’s access to the contents of the vault. So it is with the price of this tried and tested idea. When put into place it frees you to generate lots more revenue, safely and legally, off your management business.
New Owner Sign Up--Broad Standing Disclosure Language $145.00
(subscribers get another 20% off)