Diversify property management?

4 Replies

When managing a portfolio in the same geographic area I have heard of 2 strategies.

1. Split properties between 2 property managers to diversify risk of one failing/going out of business, more exit strategies if one isn't performing, compete the 2 firms against each other etc.

Or

2. Concentrate management under one property manager to potentially get better rates, better service, more attention, better economies of scale.

Which strategy is best? Discuss.

If I was going to look at having my properties professionally managed I would absolutely go with option 2.  I think you should definitely leverage your number of properties for potentially a better rate. I wouldn't want to deal with 2 different contacts for my management, different book keeping styles, repair procedures, etc.

To me, I don't see a benefit of splitting them. If you vet your property manager you should have a good idea of how they operate and if they have a chance of failing or going under, and if you have your properties with them and they are doing a poor job that would be a warning sign that they could be going out of business. 

If you did split some of your properties for the "competition" factor, I would imagine this would also be a temporary thing because a clear winner would most likely show up between the two and you would move all of your properties to that one company that is doing a better job, you feel more comfortable with and trust more. 

Mostly I am trying to get my properties to be the highest priority for my manager.  I could see if I had a larger portfolio under their management they would see me as a higher priority.

@Mindy Jensen It sounds like your a fan of strategy 2. I heard on a recent podcast someone said they had 2 PMs and it worked out well. Currently structuring my PM team so figured I would ask.

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