5 Reasons Why Property Management Companies Fail

5 Reasons Why Property Management Companies Fail

Property Management is a massive (but highly fragmented) 77 billion-dollar sector. Since 2012, the sector has seen approximately 5% growth.

But many property management companies fold in their early years- and how many of them were just on the edge of thriving?

A variety of things can go wrong within the realm of Property Management, but these are our top 5 reasons why companies actually fail. The requirements of entering this sector are low, but the success rates are even lower. Property Management is highly dynamic, and possesses a consume-or-be-consumed factor- making it a tough animal to control, indeed.

1. They Expand Too Quickly

Successful bids! New Contracts! Profit! With all this excitement, it’s difficult to keep growth at a methodical rate. Knowing your company’s capacity- from a scale-able perspective -is a necessity in order to maintain the portfolio you have now.

Consider training and hiring new employees before scaling so your company is ramped up and ready for more doors and more responsibility. Early investment in quality people- not only with good work ethics, but flexibility and adaptability -can help get you past those make-or-break moments as you grow.

In an economy driven by data, it’s crucial to be able to take advantage of the analysis and application of that data- especially your own. Plan on streamlining your business with software that boosts your overall productivity while simultaneously collapsing the workload of communication & operations into something manageable- your future self (and your bottom line) will thank you.

2. They Develop Poor Online Reputation

With universal access to limitless information, the power is with the consumer -in this instance, the future resident. Today’s consumers want to be “in the know” while making purchases, and online reviews and ratings are their first impression of your company. From there, they migrate to your social media pages, and then to your website.

With online reviews you have nearly everything to lose- but much more to gain, if you do it right. There’ll be dozens of companies with similar ratings. Those with lower ratings are already disqualified, while the ones at the top jockey for market share. According to an article in Forbes, when one negative article surfaces on the first page of results, you risk losing 22% of your business. When there are two, the risk doubles, and so on. It‘s like the old word-of-mouth adage says: “Have a good experience, and you’ll tell 3 people; have a bad one and you’ll tell 7.”

3. They’re Spread Too Thin

From an operations standpoint, being too stretched out can come in many ways.

One of the worst is exceeding capacity. When business is booming and you find yourself with significantly more doors than you did 6 months ago, do you have enough people to manage those doors? Enough infrastructure? Nothing hinders nor stagnates your company’s growth quite like hitting a ceiling where everyone’s overburdened.

Another is having properties too distant from one another. This makes finding service vendors more difficult and more expensive. Most commonly, your marketing strategy has to adapt to a whole host of new setbacks as your territory grows- not to mention the increase in marketing costs. In addition, your property managers and technicians will be putting more miles on the road and less time getting things done in the office.

But since problems like these aren’t easily solved (in fact, they’re a reality even if you’re engaging in smart & aggressive growth), it makes sense to have systems, strategies, business infrastructure, and processes in place before you hit the make-or-break growth stages.

4. They’re Afraid of Technology

You know the pain of the maintenance carousel. Calling, messaging, following-up- it all takes time and effort. Plus, you have three showings a day, rent checks to process, and leases to sign! As the saying goes, there are only so many hours in the day; therefore, new technology that lets you integrate and automate as much as possible is, again, crucial.

Some property management companies, and even contractors, are slow to adopt excellent tools that could save them tons of time & money, simply because they’re averse to technology. But in terms of King Bottom Line, why pass up anything that boosts your overall capacity and productivity- especially if it does so while reducing turnaround time and headaches?

5. They Overpay for Maintenance

Maintenance is a dynamic expense that’s hard to budget for. It’s near-impossible to predict when things will break, and getting those things fixed is even more of a hassle. And while there are many ways to go about finding and paying for vendors, it’s managing them in relation to maintenance that’s the real problem.

When you constantly have to deal with invoice markup, slogging through the endless swamp of vendor choices, and the minutiae of contract details, it’s hard to make sure the actual work is going smoothly. It’s important to know your priorities and pick the techniques that best fit those priorities.


At the end of the day, this all adds up to your biggest indicator of success- or of failure: resident satisfaction. Streamlining and strengthening every component nested within the concern of resident satisfaction is what, ultimately, will determine that success.