FUNDAMENTALS
ASSOCIATIONS
Association Management: AProfitable Growth Strategy
HOW RESIDENTIAL MANAGERS CAN FIND ANOTHER REVENUE SOURCE
by Scott Brady
hen I was only in residential sales, I was told to steer clear
lar reasons I had heard before. The profit margins were too thin, addi - tional litigation too real, and owner antipathy toward management quite palpable. I also ignored this advice, and now we provide association management to 2,500 owners. Here is what I have learned: association management is not for everyone, but it is a profitable growth strategy for many. In my market area, many associations have been neglected. The typical Community Manager manages between 10 and 20 associations and 1,500 to 2,000 owners. It is physically impossible for them to attend the meetings, conduct the monthly inspections, and respond to that many owners efficiently. Customer service suffers, and the boards of these associations
also tire of the endless nickel and diming of management companies, as well as the constant rotating of Community Managers since burn- out in this industry is rampant. The reason to entertain associa - tion management is clear: it is an - other revenue source for your com - pany. You make money from the base management fee, escrow (demand & transfer) fees, late and lien fees, as well as additional services provided to the community. One of the more important income generators, if allowed in your state, is the Earnings Credit Rate (ECR). This is the credit the bank provides to you to pay for bills associated with management, and since the typical larger associa - tion carries reserves balances in the amount of $500,000 to $1 million,
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of residential property management because it consisted of the three t’s: toilets, tenants, and troubles. The profit margins were too thin, litiga - tion too real, and tenant antipathy towards managers quite palpable. I ignored that conventional wisdom, and with the help of fellow NARPM members, I grew my business from 0 to 1,000 doors in less than seven years. Like many other companies, homeowner association board members reached out to us and asked if we provided association management services. When I asked other residential managers about this, every owner told me to avoid association management for simi -
32 | think realty magazine :: december 2020
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