For owners hiring a property manager, the fee is often the primary comparison point, but industry experts argue it is the wrong number to focus on. Ron Kutas, CEO of OneWall Communities, an owner-operator that also provides third-party management services, explains that the fee is one of the smallest financial levers in the relationship, while other operational factors drive significantly larger outcomes.
Kutas illustrates the disparity with simple arithmetic: a 25 basis point reduction in the management fee on a property with a $2 million rent roll saves only about $5,000 annually. In contrast, a 200 basis point difference in bad debt at the same property equals roughly $40,000. “You’re negotiating one of the smallest numbers on the page,” he says. The questions that truly matter are how quickly a manager turns units and what the bad-debt policy looks like.
Furthermore, a manager willing to drop from 3 percent to 2.5 percent must recover that half point elsewhere, often through higher billbacks, more home-office personnel charged to the property, or reduced attention to the asset. A fee that seems too low to be profitable often masks additional costs.
Kutas advises owners to scrutinize chargebacks—costs billed back to the property beyond the management fee. He suggests asking managers to walk through every billback. Revenue-driven companies tend to be vague, while owner-operators have a detailed schedule ready, explaining each charge’s purpose.
Reporting quality also reveals red flags before signing. Generic parent accounts on the chart of accounts, such as a single “repairs and maintenance” line instead of breakdowns into paint, electrical, and plumbing, signal potential issues. “The less detail, the more concerned I’d be,” Kutas warns, as thin reporting hides undifferentiated spending.
The industry’s lack of standardized practices exacerbates the problem. Chart-of-account structures vary, as do bad-debt policies and expense approval thresholds. This fragmentation makes the expense side opaque, pushing owners to default to negotiating the one visible number—the fee.
People considerations are equally important. Kutas recommends asking about the assigned regional manager’s experience and tenure, as well as backup plans when staff take leave. A genuine bench of talent is crucial; Kutas notes that lack of bench strength is a common reason OneWall declines assignments.
Owners also often misattribute underperformance to management when the market is soft. Kutas advises checking performance against public data and recognizing patterns: “If you’re on your third manager in four years, it’s probably not the management company.”
Finally, Kutas values managers who are willing to turn down business. “We sell attention and labor,” he says. Firms that stretch themselves thin to win every contract are less able to serve any single client well. As owners become more discerning, those who can answer detailed questions about operations will stand out from those competing solely on price.
