Five Reasons Your Property Management Company is Not Making Money


The dirty little industry secret is that a lot of companies are not profitable when it comes to property management. They may feel like they are doing better financially than they actually are because they make money through property sales or other ancillary services, but if you look under the hood at just their property management division you may find that it loses money. Here are the top reasons why property management often fails to turn a profit.


1. Throwing people at problems

Sometimes adding more people to an operation actually makes things more disorganized even though that seems counterintuitive. If the roles on the team are not clearly defined or the right hand doesn’t know what the left hand is doing it can actually create more confusion. Labor is the most expensive input to our businesses, so ensuring that everyone’s role is clearly defined (what processes/procedures they perform, how performance is measured, and where one role ends and another one begins), and that each role maximizes efficiency is key to keeping costs down. You know you are over staffed if your labor costs are > 50% of revenue. 

For more information on how to keep your labor costs down click here.


2. Ineffective Systems 

Efficient systems are the key to peace-of-mind in a property management operation. When the systems are not written down, are ineffective or clunky there is a lot of time wasted playing the telephone and email game. For instance, if you are scared to call a building owner back until you speak with someone at your office instead of looking at the notes in your system you know your operation is suboptimal. The company culture and workflow should allow you to look at the notes on a profile and KNOW the status of a project with that client without having to get the “inside scoop” with a phone call. Ineffective systems mean there is a lot of wasted time which means you are losing money.


3. Purchasing multiple software applications with redundant functionality

Something that is common in the industry is people spending a great deal of money on several different software packages that have overlapping functionality. Typically users of a software only utilize about 10% of the full capabilities of their purchased software applications. The opportunity costs of not using the full automation a software has, and the purchase of redundant functionality really can hurt your bottom line. If you allocate time each week to learning about the functionality of software you currently own and implementing its full capabilities into your processes it could be the most valuable time you could spend on your business! 

Additionally, as counterintuitive as it may seem, having your team use subpar functionality of your existing software instead of purchasing another product can be a cost saving endeavor. Spending time truly quantifying the value of an additional software package before purchasing or renewing it can be incredibly useful as all these software costs really do add up and eat into profitability.


4. Not having clear performance indicators  

How does someone know if they are succeeding or failing at their job and how does their job relate to the bottom line? Having these questions answered helps people keep their goals aligned with the company goals. If no one knows how many houses the company needs to add under management or what maintenance revenue goals need to be to feel successful it is hard to achieve profitability gains.

Every role needs to have leading indicators and lagging indicators and out of scope metrics so that people know where they stand. Managers also need to know when to hold their team accountable if they are not meeting those expectations. Clear performance indicators take the drama out of management and make performance discussions simply about the facts.


5. Scarcity mindset

Living in a mindset of fear and protecting your downside is something that holds a lot of entrepreneurs back. Companies play small and miss out on growth opportunities that could help them be profitable. 

Some common examples of this include not going all-in with developing your internal maintenance department, and instead putting up with subpar contractors that make your life harder or keeping maintenance professionals as independent contractors which contributes to them not putting forth A+ quality work. These maintenance issues can result in arguments with owners and harm your reputation and the satisfaction of clients. Another example is not investing in marketing because you are afraid to grow.

Scarcity mindset holds business leaders back. Success requires some level of risk and taking those risks is what separates the profitable from the unprofitable in the industry. Believe in yourself and go for it. 


Being a profitable business takes focus and discipline. We’re in the fourth quarter, now is the time to dream about what can be possible in 2022. What changes are you going to make so that you can finish strong in 2021 and make 2022 your most profitable year yet?