Do We Make Money on Maintenance?

A question we occasionally receive from Landlords interested in our services revolves around maintenance.

Specifically, do we make money on maintenance?

The answer is yes.

We aren’t ashamed of it.

We aren’t going to hide from it.

The reality is that, to provide the level of service WE want to provide and the kind of service our Clients have come to expect, we HAVE to monetize our maintenance activities.

Check out this video to learn more: 

Monetize Maintenance


Bill Mark-Up

We used to charge a simple, 10% mark-up for any bill that we paid on behalf of our Clients. This included utilities bills, any HOA dues and, yes, maintenance.

We did this for years and it seemed to work pretty well, except for one big issue.

Whenever we provided a quote from a contractor to our Owner Client, we always had to add the caveat… “Be sure to add 10%.”

This could be confusing to our Customers.

And, as you might guess, frustrating as well.

After discussing different options over a long period of time, we decided to make a change.

 

Preferred Vendor Discount Program

Beginning September of 2018, we stopped “marking up” maintenance.

Instead, we’ve moved to a Preferred Vendor Discount Program.

We’ve always worked hard to ensure our Vendors provide us the best possible pricing. We realize maintenance is both inevitable and painful, so we only engage Contractors who offer extremely competitive pricing along with excellent service.

Under the Preferred Vendor Program, we have agreed to list these Vendors on our highly trafficked website and provide them with the bulk of the work for their specific trade.

In return, the Vendors agree to discount their invoice by 10%, which we retain to compensate ourselves for coordinating the various activities required to conduct the maintenance.

For example, a Contractor provide s a bid for $500. You approve the bid, the work is conducted, and we pay the contractor $450.

 

Why the Change?

You may say, “Well, you’re simply moving money around and still profiting from maintenance.”

We understand that response.

But, the reality is that we truly feel this provides more clarity to our quoting and billing practices.

When we provide our Client a quote for something, the amount quoted is what they will pay.

It’s simple and easy to administrate.



Do You Use Vendors Outside the Preferred Vendor Network?

Yes, we do.

We understand that some Vendors simply will not reduce their pricing any further. We also realize that there are some specialty Vendors out there who never reduce their pricing in the first place.

So, in that case, we will still use the Vendor but will not take any discount. 

 

Why Do We Monetize Maintenance?

OK, so the million dollar question.

There’s no doubt that some Clients feel that monetizing maintenance creates an inherent conflict of interest.

The more maintenance we generate, the more money we make.

And further, we sometimes hear that all maintenance coordination should be included in the monthly management fee.

We totally understand those concerns.

But, here’s the reality…

  1. We don’t want to dispatch maintenance.  

    We’ve been doing this long enough to know that if our Clients don’t succeed, we won’t succeed. Our #1 Core Value is “Client Focused” and we operate with our Client’s best interest in mind.

    Maintenance costs money, it reduces cash flow and it hurts the overall return, so we’re very careful to only dispatch maintenance when absolutely necessary.

    Do we make mistakes? Of course we do. But, when a mistake is uncovered, we’ll always make it right.

  2. Running a maintenance department is expensive.  

    You may already know this, but maintenance personnel are in demand and they are expensive to employ. But, we do have internal techs on our payroll. In addition, insurance, company vehicles, etc. all add to the overall cost of providing this service.

    To be totally transparent, the management fees we collect each month do not cover the cost of our monthly payroll.

    So, in order to employ the right people to deliver the type of service that both we and our Clients demand, we have to add additional revenue streams to stay in business.

    Maintenance is one of them.

  3. Our clients SAVE money using our Preferred Vendors. 

    In many cases, we are our Vendor’s biggest customer. So the pricing we get, even before the discount, is lower than the average person receives.

    So, by utilizing us as your Property Manager, you will, in most cases, save money on maintenance.

"My Property Manager Doesn't Monetize Maintenance..."

That may very well be the case. But, here are a few key items to consider:

  1. There are many different ways to monetize maintenance.  Some PM’s mark-up, some use the discount program like us, and some form another maintenance company that profits from the maintenance activities.

    There are multiple ways to monetize maintenance and, unfortunately, some PMs never disclose it to their Clients.

  2. You get what you pay for.  If you use a small PM company, one with very low overhead, you may avoid paying any extra for maintenance. But, does the Company invest in systems that greatly benefit you? Do they have the staffing to ensure your property gets turned and leased quickly? Can they handle various Tenant complaints and issues that could lead to a lower renewal rate. 

It All Comes Down to Trust

At the end of the day, it’s critical that you trust your PM. You need to trust them to have transparent systems, to communicate well and to react appropriately whenever issues, like maintenance, arise.

There’s a reason that PM Companies, like ours, continue to grow and continue to stay in business.

We constantly strive to provide great service.

We employ the right people and pay them appropriately.  

We charge our Clients transparently and fairly.

 

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