I would like to share my experience working with a hands-on owner who decided to take the management of his properties in-house. The owner was frustrated that his management firm was not being responsive. He had five multifamily communities in Texas totaling more than 1500 units and felt he could get better attention with that size of a portfolio.
Paying a 3% management fee, the owner spent more than $44,000 in monthly management fees or an average of $8900 per property. Unhappy with the services properties were receiving, he hired a consultant to help him improve his property performance. Given his nature to be a hands-on owner, the consultant advised him to take the property management in-house.
After a thorough analysis of the properties and their accounting needs, the owner decided that outsourced accounting (including payroll and human resources) offered him the ability to bring the management in-house without a major disruption to his current operations.
To assist him in managing the properties, the owner decided to hire one of the two regional property managers working on his properties. He also chose Ascent Multifamily Accounting to handle the accounting, payroll, and financial reporting. The owner calculated that he would save almost $300,000 per year by making these changes.
Look at this table [in the video] to understand how he created these savings.
The fees he paid to the third party manager were more than $44,000 per month. With benefits and taxes, the cost of the in-house regional property manager was less than $10,000 per month.
Our fees average $1500 per property or $7500 for all five properties. There are a number of small costs that the owner had to assume that were less than $2,500 per month for the first year, and even less after that.
So the total cost of taking the management in-house was less than $20,000 per month, creating a savings of more than $24,000 per month, or $292,000 for the first year.
A surprising result also occurred: with fewer properties to manage, the regional manager could spend more time on the owner’s’ properties. As a result, the property revenues increased and the operating expenses decreased. This gave the owner more than $55,000 in additional income per month or $660,000 annually.
As a result of taking his properties in-house and using Ascent Multifamily Accounting, this owner saw him net income increase by almost $1 million annually.