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In-house vs. Outsourced Property Management

[fa icon="calendar"] 03.07.2017 / by Keni Flowers

 

Commercial property management has seen more and more outsourcing in recent years. But is this really the way to go? While there are certainly a number of advantages to outsourcing, there are just as many disadvantages. Property owners need to carefully evaluate their situation and look at the pros and cons of each solution before making a commitment.

Here are a few things to consider when looking at in-house vs. outsourced property management:

Competency

At some point, all landlords need to ask themselves if property management is a core competency of their business and decide whether or not they want that extra responsibility. Having an in-house staff often means a greater expense and more time spent managing your staff. This is time and money that could be spent on other projects that could potentially produce more revenue for your business.

On the other hand, some landlords find that having an in-house staff provides quicker response times and better service at a lower cost. Others find that outsourcing leads to a decrease in service quality that can be harmful to the credibility of their facility. In these cases, you might decide that property management should be a core competency and keep it in-house.

However, some property owners will argue that the obstacles presented by outsourcing (cost, quality, response time) can be overcome by partnering with the right property management company. It really boils down to how much time, money and energy you want to spend on property management.

Quality

Improved service is the number one way to increase tenant retention in your building. This makes service quality a primary factor to consider when deciding whether or not to outsource.

An outsourced contractor can provide flexibility in staffing levels that would be difficult to manage with an in-house staff. They can also provide you with expert level knowledge that might be difficult to cultivate in-house. Developing in-house competencies can also be redundant if these skills are not needed on a permanent basis.

However, keeping an in-house staff does come with its own benefits. In-house employees are generally more loyal to a facility and will accumulate much more knowledge of your business model over several years of service. Outsourced property management, on the other hand, often sees a higher employee turnover rate, which means that any specific knowledge the employee has about your property will be lost if/when they leave.

Cost

Of course, the number one consideration when debating in-house vs. outsourced property management is the cost. Consider the Pareto Principle, which states that 80 percent of the work is done by 20 percent of that staff. This is a significant amount of employee downtime to consider. As stated above, outsourcing allows for greater flexibility in staffing levels, which could translate into lower labor costs and a lower investment risk.

On the other hand, keeping your property management in-house gives you the ability to account for fixed assets and maintain tighter control of your budget. Fixed assets mean you don’t have to use your judgement when it comes to volume or inflation costs. They also come with limited variable costs so it is easier to stick to a budget.

Weighing the Options

Outsourced and in-house property management both have a multitude of variables that can impact their level of effectiveness in different situations. Property owners need to weigh their options carefully to find the solution that works best for them. Remember that the lowest cost solution may not actually be the lowest cost solution.

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Topics: Property Management

Keni Flowers

Written by Keni Flowers

Keni Flowers-Baird is the Senior Property Manager for Demetree Real Estate Services. She joined the company in December of 2016 with more than 13 years of experience in managing residential, retail, office and mixed-use assets.