and it looks like a built-in misalignment between property management software, and property management.
Property managers hunt for scale, as do all other businesses with a growth mindset. It’s clear, however, that scale can come in different ways and how you choose to go about scaling has a different impact on the business itself. Certainly, we can fill more units, but in the end, property management is primarily a fee-based business. Meaning, property managers make a percentage of the revenue generated by a property, ranging anywhere between roughly six, in some market situations, and at times, 11% of the total gross revenues generated across all aspects of operations. It can be a decent business. Although there is of course, some revenue correlation to the number of units you manage, it can vary greatly depending on where you’re located. As we all know, the best scale anyone can ever hope for is to increase the value of the customers, members, or partners of your existing network, as opposed to spending time landing new ones.
Enter: The Elephant in the Room:
To run these complex and increasingly dynamic property portfolios, we use property management software (PMS). This software supports operations across literally everything we do, or at least it should. This means whether it’s marketing a listing, finding and nurturing leads, processing online payments, scheduling maintenance, finalizing reporting, accounting, and more. Property managers and operators are relatively beholden to the system they use. So, you would expect that the incentives and business models of each party, both property management companies and the software companies building the PMS, would be lock-in-step right?
Actually, no. Things are not as they seem.
While property managers focus on building revenue generating businesses by way of property operations, the PMS companies created a model decades ago that only focused on the number of units their clients had in their portfolio. This means that regardless of the amount of revenue being generated, region you’re in, vacancies or lease ups you have, plus, the economic challenges that have transpired during the pandemic, the PMS sets their fees purely based off of static, uncreative, and limiting metrics; per-door, unit count.
The Problem.
As the market becomes increasingly dynamic, new demands push PMS companies to acquire and attempt to adapt to these new challenges. Their solution is to add more and more fees on a per-unit basis with each new feature or service deployed across their client base. Not only does this further a gap of already misaligned incentives, it exacerbates another growing issue. These new demands, such as text messaging, ancillary service bookings, travel, and the countless questions that pop up along the way, though incredibly valuable, aren’t used universally. So, the unit increase in price across an entire portfolio is even harder when identifying a return on the costs for its implementation. The result is that as a property manager seeks to grow, they’re constantly forced to make counter-intuitive decisions, such as, “Do I add the helpful new feature that will cost me more per-unit, or do I focus on adding more units?” This is a question no business should have to ask themselves.
A Different Solution.
With a bolt-on set of services that act as a primary system for all record keeping that property managers do, should the PMS be focused on the same incentives that their clients are focused on? Shouldn’t we rethink the business model all together? The PMS could act more like a partner, serving as a fintech company incentivized by the number or volume of transactions it supports for the property management client. Right?
Not only do we think that’s right, but we’re putting our money, effort, industry knowledge and time into making it happen. No more per-unit SaaS fees simply because we can charge for them.
Client success is our success too. And because of this philosophy, we’re saving the industry countless millions, and winning consumer hearts with unlocked value, service, and loyalty like never before.
This is a new era of leasing where property manager, service provider, and renter-consumer support each other across a virtuous rental network. It’s a whole new life on leasing.
