In-House vs. 3rd-Party On-Site Property Managers: Which Is Best for Your CRE?
When it comes to property management – and property management companies – a great debate rages on. Which is better: 3rd party on-site property managers or an in-house property manager? In some sense, it’s a debate as old as the commercial real estate industry itself; a profession that started unofficially in the 19th century. (Consider that it was only a few short decades after Founding Father, elder statesman, and successful businessman Benjamin Franklin passed into history.
No stranger to offering business-related sage advice, Benjamin Franklin was fond of reminding us all that “death and taxes” were the only two certainties in this world. While Franklin knew that death and taxes were guarantees, how those taxes are paid, and who’s managing the properties taxed is anything but certain. Then, as now, there are two schools of thought: third-party on-site property management companies vs. in-house property management (or “self” management).
Our article delves into these two approaches, exploring the twin poles of the debate. While both options offer promise and peril, third-party on-site property managers are increasingly considered the go-to choice. Valued at around $114.9 billion, the U.S. property management industry grows roughly one percent per year and employs nearly one million people divided among about 330,000 property management companies. With numbers and institutional knowledge like that, it’s clear why the trend is shifting at least from the 30,000-foot vantage point.
What is a Third Party On-Site Property Manager?
A third-party property manager is a licensed independent contractor or company appointed by the building owner or manager to provide property management services on behalf of the property. Third party property managers are outsourced and paid as a business entity, not as an employee. In most instances, a third party property manager provides services on-site, which is why we refer to them as third party on-site property managers. On rare occasions, a third party property manager will provide limited services off-site, such as bookkeeping, marketing, coordination, consultation, and tenant background checks.
A third party on site property manager can provide the same services as an in-house property manager, and more. Yet, they can do it more effectively and efficiently while increasing your profit margins.
“An investment in knowledge…”
At ground level, the debate between in-house property management versus third-party on-site property managers may still seem murky, even moot to some. Why outsource property management to another entity that will cost money instead of the DIY approach? The simple answer is that property management is often more challenging than an aspiring in-house property manager realizes. The property manager must invest a lot of time and work to maximize profits and maintain good relationships with long-term tenants. This is where third-party on site property managers shine, as they have the education and experience.
Some of that work includes:
- Property promotion: In-house property management includes promoting your commercial space and identifying ideal tenants who pay on time, do not cause aggravation, and remain in business for decades. Today’s market requires knowledge of marketing and social media. If you’re the landlord of multiple properties, the time necessary to manage this task alone could be enormous.
- Determining rental rates and document prep: Here, too, this can be a time-consuming task. While in-house property managers can download generic documents for free, investors or owners must include the specific properties’ details. Likewise, determining rental rates is partly based on the local market, but other variables should be considered, such as demographics, environmental risks, regional and national economics, and more.
- Maintenance, repairs, and complaints: As the in-house property manager, the buck stops at you. That means being responsible for most big-ticket property maintenance tasks like pipes bursting, appliance repairs, and fielding tenant complaints. While many tenants are courteous, some feel a 3:00 AM call over a trivial matter is appropriate. A 3rd party on site property manager is accustomed to these needs.
- Vacancy reduction: If a tenant leaves unexpectedly or elects not to renew, it is the job of either the third-party on-site property managers or DIY-ers to find a new tenant. Similar to property promotion, unexpected vacancies elicit a greater sense of urgency. Often, it will require rapid action and divert the property owner’s attention away from other responsibilities. Vacancies are more than a financial nuisance; they are an eyesore that can impact an entire block of businesses and lead to lost business if there’s a growing perception that your property is undesirable or located in an undesirable neighborhood.
- Enforcement, check-ins, and peacemaker – As the in-house property manager, you will be responsible for ensuring that the lease terms are upheld. To achieve that, property managers will need to visit their properties sometimes once a quarter. In some instances, this can be costly and logistically challenging. And if you own a commercial property with several tenants, sometimes disputes arise. Ideally, these disputes don’t end up in court. Assuming they don’t, it’s the in-house property manager’s job to calm nerves and quiet aggravation.
“A penny saved is a penny earned.”
Now, to be sure, there are advantages to self-management, too. And, at The Robert Weiler Company, we’d be remiss if we didn’t highlight them accordingly.
The biggest plus comes down to control. While the above list of stressors seems daunting, learning to manage these challenges makes the in-house property manager a better business owner in the long run. Moreover, there will be no one to delegate authority to. If you’re a micromanager by nature, this might be a major plus. Likewise, in-house property management means you’ll likely develop (or have to develop) personal relationships with your tenants. If you’re the type of person that prefers that level of connection in business transactions, then in-house might be right for you.
Perhaps the most significant advantage to self-management comes down to cost. Most commercial property managers will charge a percentage of the monthly rent. Depending on your property’s profit margin, the payment may not be worth it in your calculus. As with other components in the decision-making process, the inability to submit rent complicates this further. Many commercial property managers report increases in payment delinquency (leading to cash flow problems) and complete non-payment.
“Well done is better than well said.”
But leave it to good old Ben Franklin to come to the third-party on-site property managers’ empowered defense. How? By referring to his belief in the investment of knowledge paying the best interest. Yes, an in-house property manager can learn the rules of the road through a trial-by-fire approach. And yes, something positive can be said about that growth style.
Yet it can be wasteful too, along with a high failure rate, not to mention stressful and a potentially massive drain on time and resources that could be put toward other uses. Ask yourself, do you really want to be accountable to a myriad of day-to-day management challenges ranging from serious to trivial, multiplied over numerous properties? In this case, the expression “work on your business, not in your business” couldn’t be more accurate.
This is where the expertise of third-party on-site property management services, like those offered by The Robert Weiler Company, shine.
As a Columbus, Ohio property management company, The Robert Weiler Company caters to its management contracts on a case-by-case basis depending on each owner’s needs. In other words, more management flexibility is built into the property management agreement than many aspiring in-house property managers appreciate.
It’s really up to the property owner how much or little The Robert Weiler Company – or any third-party on-site property manager – is involved. Our fully licensed commercial real estate experts can do any combination of duties from basic maintenance only to full management and accounting, including the following tasks:
- If an owner wants us to answer the phone, we will do that.
- We can send a repair person if a tenant has a maintenance request.
- We can lease up, collect rent, perform maintenance, pay mortgage and property taxes, and send owner revenue, if an owner so chooses.
The benefits are numerous if a property owner opts for a more involved property management process. The process begins with one of the most advanced, user-friendly software systems, AppFolio. The software streamlines and organizes the owner-tenant relationship into a single digital portal where both parties can access personal accounts and documentation whenever they wish.
That’s just for starters. In addition to industry-leading software, the human touch is what matters most. We have on-staff licensed and certified maintenance personnel with 24/7 emergency response. Our professional executive management staff are licensed realtors with over 40 years of experience. We have extensive knowledge of the current market and can help owners gain the most return on investment. (Our current property management portfolio consists of residential and commercial properties and units that range in all sizes but total almost one million square feet.)
We have established relationships with some of the largest Columbus, OH area companies, thanks to our longevity. This allows us to perform any level of maintenance and renovations with quick response time and competitive pricing. Beyond maintenance alone, The Robert Weiler Company’s staff can help create and design renovations and property improvements while composing annual property budgets and recommendations.
Bottom line: we are willing to talk to any owner of any property or size to determine whether your needs align with our business model.
“Time lost is never found again.”
When you factor in the stress and time lost to in-house/self-property management and cash flow challenges, the answer should be clear: third-party on-site property management companies are the optimal choice.
Noted for their extensive experience and connection to the community, a qualified third-party property manager can save you money and reduce aggravation over the long term; that is more than enough to justify the outlay expense. And after working with and learning from a licensed property manager, nothing stops you from going the DIY route at a future juncture. Or, you may want to split the responsibility over multiple properties.
And, when it comes down to managing properties in Columbus, Ohio and the Central Ohio region, there’s only one company with unmatched experience and top-notch professionals. Since 1938, The Robert Weiler Company has developed, improved, and managed commercial real estate. Let us bring you 80+ years of property management knowledge not found anywhere else.
Ben Franklin may have lived more than two centuries ago. But as evidenced by his words of wisdom, they continue to resonate into the present.
Remember the elder sage noted in his autobiography: “Never confuse motion with action.”
Ready to learn more about 3rd party on-site property managers?
Start acting today and let the third-party on-site property managers at The Robert Weiler Company manage your commercial building to first-rate success. Let’s talk about your property by calling 614-221-4286.