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Profitability vs. Cash Flow in Property Management

Do you manage multiple properties? Are they all making the profit they ought to? If not, could it be that you’ve overextended yourself? The truth is, when you bite off more than you can chew as a property manager, profit margins can suffer.

The profitability vs. cash flow question is one that many property managers have to tackle at some point in time. The good news is, if you have enough properties to manage that you’re spread thin, it means your business has been growing and you’re probably collecting more cash. But it is important to consider how this affects the profitability of your business.

The Profit vs. Cash Flow Dilemma
When you find that one or many of the properties you manage isn’t turning an adequate profit, you need to ask yourself why. Usually, there’s no single reason. Instead, a series of issues generally explain why a property is bringing in less money. Some of those reasons can include:

  • Maintenance issues
  • Problems with rent collection
  • High number of vacancies
  • High costs for people / employees
  • Don’t have enough time devoted to reporting on and measuring important metrics

Solving the Dilemma: Focus on Technology
If you discover that you’ve got a problem, you can either cut back on the number of properties you manage, or find ways to improve the performance across your business. The biggest cost to profitability in our industry is the number of employees you need to manage your portfolio of properties.

But really, what you need to do is find a way to improve your efficiency. When you cut down on the time, effort and money it takes for your team to manage the portfolio you’ll be able to handle a higher volume of properties with better profitability.   Relying on new and improved software  (like web-based property management software) is one of the most important investments you can make to improve profitability.

We recently spoke with Bill Nye (CEO of Caviness and Cates) and the owner of Bill Nye Training to better understand his view on how property managers can increase profitability.   He really credits his investment in AppFolio’s property management software with helping his team manage more units without investing in additional employees. “We immediately saw a great impact because we could do so much more with our corporate staff.”  His plan is to grow from 1300 units to 2000 units without adding staff to his corporate headquarters – you can see how this will make a dramatic impact on profitability!

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