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Property management companies range from gargantuan firms that manage thousands of apartments, shopping malls and commercial complexes to small firms that specialize in vacation rentals with only 10 or so houses. Whether small or large, increasing profits is a goal. If you're considering starting a property management company or improving your own property management business, there are several ways you can do so and turn a profit.
Increase the number of properties, and your revenues will increase. If the operating margins are maintained, each additional property results in an additional percentage falling to profits. For example, if each property generates $10,000 in revenues and has a 35 percent gross margin -- the percentage of expenses related to that property -- then $6,500 of additional profit is generated.
Property management services include such efforts as marketing, maintenance, and renting out or selling the use of the property. Providing additional services results in additional profits as long as your expenses for providing the service are lower than the revenues generated. An apartment complex property management company could offer concierge services to the renters. A vacation home rental company might decide to have personalized meet-and-greet upon check-in.
Broadening the types of properties is an alternative way to increase profits. If your business handles short-term sub-leases for apartments, you could offer that same service for townhouses and condos.
Property management companies generate revenues from the owners of the properties they manage and from the guests, renters or lessees who occupy the properties. Increasing rates to the owners when management contracts are up for renewal increases revenues and therefore profits. Keep in mind that current owners may decide to contract with someone else if the rate increase is too high. The rates generated from the guests or those who pay to occupy the properties also can be increased.
Revenues are generated by the rate or fee for occupying the space times the number of spaces occupied. In the case of an apartment building where each apartment leases for $500 per month and 200 of the 250 apartments are rented, revenues generated are $100,000. If occupancy increases to 225 apartments, revenues are $112,500; that occupancy rate would increase profits by $12,500. However, if you incurred any expenses in getting those units rented, those expenses would be netted from the $12,500.
Decreasing expenses increases profits as long as the cost-cutting doesn't affect revenues. In the short term, it probably won't; in the long term, it may be a different story. Decreasing advertising could result in fewer properties being leased. Decreasing maintenance efforts might result in tenants leaving for other accommodations.
Jensen, Katie. "How Can Property Management Companies Increase Profit?" Small Business - Chron.com, http://smallbusiness.chron.com/can-property-management-companies-increase-profit-50056.html. Accessed 22 April 2019.
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