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Transitioning from Management Company to Self-Managed HOA

Started by ScottD3 • 12 replies • 2380 views

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ScottD3 (Texas)
Posts: 8
Posted:
Good Morning Everyone,

has anyone had experience in transitioning from a management company to a self-managed HOA? We have had ongoing issues with every management company contracted over the past 8 years. utilities not being paid, little or no return responses to homeowner inquiries, accounting issues, just to name a few. Self-management has been discussed but I could right a paper on the potential risks involved. Another idea that I have considered is engaging our management company directly to develop a hybrid contract where they continue to provide the services they can guarantee and other items be handled internally. We do much of that now even though the management company is paid to do it. On several occasions we have engaged the mgmt company to address these ongoing issues and receive a lot of face-talk but then recently one of the mgmt company leaders point blank stated that "you get what you pay for" considering we pay about $70k annually for their services (including postage, mailings, etc, etc) for a 1000 home association, I feel the price warrants excellent service, and at a minimum that they deliver on the contractual agreement...

I'm posting this to elicit any educated, objective responses and look forward to hearing your thoughts!

Thanks!

Scott
JohnO6 (Georgia)
Posts: 424
Posted:
Scott -

First of all, if do a search on this forum on "self management" and similar phrases, you'll find many threads that address the issue.

Here are some random thoughts/observations:

One of the prime determinants of advisability is the level of management "intensity" needed. This is usually a combination of the number of homes (1000 is a lot!), and the degree of maintenance responsibility and amenities that the HOA must deal with. A 1000 home community with few amenities and minimal HOA maintenance responsibilities with dues paid annually may actually not be that much different than say a 100 home community with many amenities, private streets, monthly dues, and exterior maintenance responsibilities for individual homes.
The greater the degree of management "intensity" required, the more difficult self management is.

Doing a quick calculation on the figures you provided, seems like your HOA is paying less than $6/"door" per month - not a lot for property management services. That may be the genesis of the PM comments.

A developer acquaintance of mine once told me "I don't know why anyone wants to get into the community association management business - in order to make any money at it, you have to grow your company so big that you can't do it well". Like all generalizations, it's certainly doesn't apply to every management company, but my experience is that there is more than a ring of true tone to it .. .. ..

I think the first thing you need to assess is the money vs. man-hours analysis. I was recently the President of the Board of a 103 home, moderate amenities, but high maintenance responsibility community. We were displeased with our mgmt company and there was talk of self-managing. I did such an analysis and discovered that (a) we could reduce our mgmt costs from ~$18K/yr to less than $4k/yr, but it would require 55 man-hours/month to do so.

The current board is still evaluating that
JohnK3 (Pennsylvania)
Posts: 967
Posted:
Scott,

We made that transition. We have 21 SFDs, 30 acres of Common Areas. We have 84 incoming dues checks, perhaps 30 outgoing to our 4 vendors annually. We have a very homogeneous Membership that raises very few complaints and generally wants to be left alone as long as they ante up every 3 months - which they invariably do. We have a dedicated 3 member BOD. So far, so good. We took a chance and it's worked.

But for a 1,000 Membership? Probably an act of insanity unless you'll be hiring some full-time help. And even then....

If you ask me.

ScottD3 (Texas)
Posts: 8
Posted:
Thanks John06 and JohnK3 for the insightful thoughts experiences. I attempted a search on the forum but it kept locking up. I will try again for sure.

"...in order to make any money at it, you have to grow your company so big that you can't do it well" has been a concern of mine from day one. I simply do not know if this is the case with our mgmt company or if they simply drop the ball. My guess is a little of both occurs. that thought pattern led me to the idea of a hybrid contract that I previously mentioned.

Love the suggestions to conduct a money vs. man-hours analysis. Added it to my to-do list

Insanity?! this is Spaarrtaaa! hehehe I tend to agree with the insanity part...

Thanks again!

Scott
TracieS (Colorado)
Posts: 460
Posted:
Posted By JohnO6 on 07/08/2009 9:19 AM
Doing a quick calculation on the figures you provided, seems like your HOA is paying less than $6/"door" per month - not a lot for property management services. That may be the genesis of the PM comments.

This is what I'm paid ($6/door) as the Property Manager for our small association (19 units - townhome style), and let me tell you, it's NOT A LOT!!!! I'm on-site, and we're self-managed. Shoot, it's a pittance really, given all the research I've had to do (which I WOULDN'T have to do if any other BOD members were involved). There's a LOT I can't do, because I simply don't have the time. I work fulltime at a "real" job, and I find that I spend at least 10-15 hours PER WEEK on townhome association business/research/legalities/state statutes/soliciting bids/recommendations/etc... And, honestly, I don't do a lot of covenent violation work. I walk the property with my dogs, and that's about it.

IF you decide to self-manage, and I concur, 1000 homes is a LOT...you need to have a really involved board. I mean, a REALLY, REALLY involved board, perhaps a covenent violation committee, perhaps a grounds committee, perhaps a statutes/compliance committee...
RogerB (Colorado)
Posts: 5,067
Posted:
Scott, I must presume these are single family homes with very limited amenities. Otherwise, self management of 1000 units by the Board and several committees would border on insanity. You could contract with an independent contractor experienced and trustworthy in accounting to handle finances with utilities placed on autopay. Another independent contractor could handle daily contacts; the Board could get educated on how handling covenant violations and delinquent accounts. And there are numerous other items which the Board and Committees could handle until they burn out and another management company is hired. I suggest first trying to write a better management agreement and discussing it in detail with prospective management companies.

Don't presume a bigger management company will do a better job than a smaller company. The larger management companies have high turnover of community managers who have limited experience; and their promptness of resonse often leaves much to be desired. That is why we stay small and limit the number of clients. For example we limit the number of HOAs to five. By contrast I was at a legal seminar where one person said they managed 20, many of which were condos and townhomes.
ScottD3 (Texas)
Posts: 8
Posted:
Quote:
Posted By TracieS on 07/08/2009 10:02 AM
Posted By JohnO6 on 07/08/2009 9:19 AM
Doing a quick calculation on the figures you provided, seems like your HOA is paying less than $6/"door" per month - not a lot for property management services. That may be the genesis of the PM comments.

This is what I'm paid ($6/door) as the Property Manager for our small association (19 units - townhome style), and let me tell you, it's NOT A LOT!!!! I'm on-site, and we're self-managed. Shoot, it's a pittance really, given all the research I've had to do (which I WOULDN'T have to do if any other BOD members were involved). There's a LOT I can't do, because I simply don't have the time. I work fulltime at a "real" job, and I find that I spend at least 10-15 hours PER WEEK on townhome association business/research/legalities/state statutes/soliciting bids/recommendations/etc... And, honestly, I don't do a lot of covenent violation work. I walk the property with my dogs, and that's about it.

IF you decide to self-manage, and I concur, 1000 homes is a LOT...you need to have a really involved board. I mean, a REALLY, REALLY involved board, perhaps a covenent violation committee, perhaps a grounds committee, perhaps a statutes/compliance committee...

Thanks for the thoughts and ideas. Our BOD is very involved (some of us at least) I finish school next month at which time I will be more involved than I am now, but not to the extent I believe we would need to be, under self management. We have numerous committees but direct involvement fluctuates and is not always dependable. I do not fault anyone of course since we are all volunteers... too bad out of 1000 homes we only have about a dozen or so volunteers... hehehe

Looking at it from your perspective it seems a very unappreciated position to be in and one that is almost impossible to reach/exceed customer (HO/BOD) expectations.

Thanks again!
ScottD3 (Texas)
Posts: 8
Posted:
Quote:
Posted By RogerB on 07/08/2009 10:26 AM
Scott, I must presume these are single family homes with very limited amenities. Otherwise, self management of 1000 units by the Board and several committees would border on insanity. You could contract with an independent contractor experienced and trustworthy in accounting to handle finances with utilities placed on autopay. Another independent contractor could handle daily contacts; the Board could get educated on how handling covenant violations and delinquent accounts. And there are numerous other items which the Board and Committees could handle until they burn out and another management company is hired. I suggest first trying to write a better management agreement and discussing it in detail with prospective management companies.

Don't presume a bigger management company will do a better job than a smaller company. The larger management companies have high turnover of community managers who have limited experience; and their promptness of resonse often leaves much to be desired. That is why we stay small and limit the number of clients. For example we limit the number of HOAs to five. By contrast I was at a legal seminar where one person said they managed 20, many of which were condos and townhomes.

your presumptions are correct, single-family homes with a clubhouse, pool/splashpark, and maintenance of common areas such as the park, grounds around the two ponds, etc. We contract out several tasks already and that is my direction with a hybrid contract with the management company. Burn-out is certainly an issue considering the lack of engaged homeowners and current volunteer numbers.

Thanks for the thoughts and ideas!

Scott
TracieS (Colorado)
Posts: 460
Posted:
Quote:
Posted By ScottD3 on 07/08/2009 11:15 AM
Posted By RogerB on 07/08/2009 10:26 AM
Scott, I must presume these are single family homes with very limited amenities.

Your presumptions are correct, single-family homes with a clubhouse, pool/splashpark, and maintenance of common areas such as the park, grounds around the two ponds, etc. We contract out several tasks already and that is my direction with a hybrid contract with the management company. Burn-out is certainly an issue considering the lack of engaged homeowners and current volunteer numbers.

Thanks for the thoughts and ideas!

Scott

Wow, I would NOT say you have very limited amenities. I have very limited amenities! No pool, no park, no ponds, no clubhouse, no splashpark, no nothing really. We're in town, in an established neighborhood (my townhomes are 25 years old), so we don't have to handle our own utilities/streets/etc either.

I'm really close to burnout myself, but there's no one to replace me. If I want to stay in my townhome, and keep the property values up, I have to keep going even if I burn out. Do you want to be in my situation (and I only have 19 units!!!!)? Search my posts and see what I have to deal with... I WISH we could afford professional management!!!!!
HadarG (California)
Posts: 10
Posted:
Scott:

I have a company that does all the accounting for self-managed HOAs. It is for small HOAs like yourself who cannot afford management companies but whose members do not have time to do the financial management: accounting, bill pay, check deposit, monthly financial reports, budgets. We can also assist with administrative items - like letter writing etc, and online file management. We charge much less than management companies! All reports are published online for owners to see. We are in the process of building great online tools as well. Check us out www.GELLERBRIDGE.com

Feel free to call and discuss!

We love helping self-managed HOAs make order out of the chaos.

thanks!
Hadar
310-435-4419
HadarG (California)
Posts: 10
Posted:
JohnK3

I have a company that does all the accounting for self-managed HOAs. It is for small HOAs like yourself who cannot afford management companies but whose members do not have time to do the financial management: accounting, bill pay, check deposit, monthly financial reports, budgets. We can also assist with administrative items - like letter writing etc, and online file management. We charge much less than management companies! All reports are published online for owners to see. We are in the process of building great online tools as well. Check us out www.GELLERBRIDGE.com

Feel free to call and discuss!

We love helping self-managed HOAs make order out of the chaos.

thanks!
Hadar
310-435-4419
GlenL (Ohio)
Posts: 5,491
Posted:
But Hadar how can anyone trust you or the company you are shilling for, when you resurrect four year old posts in order to SPAM the group? If you can't follow the simple posting rules, why should anyone trust you with their business? How is anyone supposed to trust that this is not some type of a scam to get access to the HOA bank accounts or members personal information so you can perpetrate any number of crimes? If you don't act honorably one place, why expect you to behave honorably elsewhere?
Studies show that 5 out of 4 people have problems with fractions
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Hadar

You are really starting to piss me off.

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