very cheap, or even FREE, checking accounts to most consumers. Nobody wants to pay for checking, but banks still need to make a buck somewhere. Ancillary fees make up that revenue. So, charging ancillary fees to our clients and customers is nothing revolutionary. In fact, our industry is late to the game compared to other industries. When it comes to the morality angle, we must look back to the concept that providing a quality product requires quality revenue. Sure, I can provide a bare bones property management product charging my clients nothing but a basic management fee and leasing fee. But is it moral to provide only a bare bones product? I would argue that it’s not, unless you’re advertising yourself clearly as only providing that level of service. Personally, I’ve never seen a property management company that advertises them- selves as the Spirit Airlines of property management. So, if you’re presenting yourself to potential clients and cus- tomers as offering a full-service management solution, but you’re not really able to do so because you don’t have the revenue to cover it, then that is the immoral thing. What does the added revenue of ancillary fees provide? It provides flexibility to enhance your service level. Addi- tional revenue means that you can hire additional staff so that phone calls get answered instead of always going to voicemail. It means that you can bring on the latest in technology to provide the best customer experience. It means that you can provide 24-hour maintenance and leasing hotlines to take care of your client’s house and get it rented as soon as possible. It means you can pay your employees well and offer them benefits packages so that you keep the best of the best people in order to provide your clients and customers with the best experience. The list is endless. Quality service simply takes higher reve- nue than you can provide with nothing but a market rate management fee and leasing fee. There is NOTHING wrong with making a little extra profit if you provide added services. Bring in extra revenue to be the best property management company that you can be. How is that an immoral goal? •
our management software. Was the software lightyears ahead of the old one? Yes, absolutely, and it did add effi- ciencies. But the added efficiencies did not come close to paying for themselves. We simply had to pay more every month in order to provide things like an online owner portal. This was an added cost to our business. This is just one example, of course. Many other things started to stack up over the years. New software and technology that all brings added benefits to both us and our clients and tenants, but also added costs, only a por- tion of which was offset by improved efficiencies. Improved products and services require improved rev- enue. You simply cannot provide an enhanced customer experience without paying for it somehow. New revenue needed to be generated to cover these new costs. Enter ancillary fees. Nobody wants to increase their base property management fees. This is understand- able, and we have seen the same thing in many other industries. I came from the airline industry before I was in property management, and in that business, ancil- lary fees brought us out of massive losses into massive profits. All while base ticket fares barely moved. Another example is the consumer banking industry. Everybody complains about ATM fees, bounced check fees, etc., but this is all making up for the fact that the bank is providing
Todd J. Ortscheid is with GTL Real Estate in Senoia, GA and a member of the National Association of Residential Property Managers ® (NARPM). Members of NARPM ® receive information like this article every month through its news magazine, Residential Resource. To join or learn more, visit NARPM.org/join.
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