5 Reasons Why Property Management Companies Fail

  • March 3, 2020
  • admin@ohi


Despite being a huge industry, property management is highly fragmented, with major property management firms having only a handful of employees. Initially, getting into the business might be easy, but keeping up and achieving success in the property management industry is a big challenge. Not many property management companies survive in the long run. As we look closely, we can find visible patterns in the most successful property management companies that are prevalent in nearly every failing property management company.

Following are the top 5 problems with property management companies that often sink businesses.

1. Quick Expansion

There’s one vital thing that top property management companies avoid and that is quick expansion. Many property management companies do not know their market and potential. They try to expand quickly by charging lower than their competition. They also add too many units to their portfolio without realizing whether they have the potential or the crew to handle the added features or not. Instead of quick expansion, the right decision would be to expand gradually with trustworthy and flexible employees. Without an adequate workforce, quick expansion hurts the reputation of a firm that provides a lot of features, all of which are either rudimentary in form or misleading in nature.

2. Properties are Far Apart

Property Management firms have to search for properties and investors, and often agree to manage properties that are spaced far apart. With a limited workforce, managing properties that are far apart from each other is a challenge. It is not possible to manage one property in one part of the town, another property at the other end of the town, and a few more properties in different neighboring towns. Furthermore, every property is based on a different demographic community and hence, needs different management strategies.

3. Delay in Basic Operations

Suppose you haven’t collected rent for a few months, and when you finally arrive, you find out that the tenant and the room keys are absent, leaving you in a state of shock. Property management firms often do not have a proper system in place. Hence, they can’t complete basic operations like collecting rent, responding to service requests, leasing properties, and tracking ongoing repairs and maintenance. As a result, they often try to play catch-up and fail miserably.

4. Fear of Technology

Property Management firms fear technology so much that they hardly ever use it. Modern technology can solve most problems. For example, a simple 3D video could give a tour of the property, or a reservation system could prevent people from canceling at the last moment. Technology allows you to do a rough market survey of the locality and provide a snapshot of the properties that are selling well, what they offer, and how much-neighboring properties are charging for the same services.

5. Overspending on Maintenance and Repairs

Property managers often fail to balance their expenditures. While one needs to look at earnings, expenditures play a crucial role in the savings and profitability of a company. Property management firms often do not know the neighborhood well. Either they make a huge one-off payment to the contractor or sign a contract to follow up on numerous property maintenance and repairs.

6. Charging Less

One of the main challenges in property management companies is that the property management services offer low management fees, promising to charge 4-8% compared to their competitors’ 8-12%. However, this approach is not regarded as sustainable and viable.

Property management companies rely on these fees to run their operations and provide high-quality services. If fees are too low, the company won’t be able to afford the staff and resources needed to meet the demands of its clients. This can result in declining management quality and eventually cost the company business in the long run.

To avoid this trap, it’s important to have a clear understanding of your operating budget and staff capacity. Evaluate how much you need to charge to cover your expenses and still make a profit, and determine if you have the capacity to add new units to your portfolio without sacrificing service quality. If not, determine how much you need to raise your management fee to add the capacity and maintain a high standard of service for new and existing clients.


Property management is a big industry. However, property management companies fail to capitalize on the renters due to a myriad of problems. They do little market research, are afraid of technology, are thinly spread out, try to expand quickly, overspend on repairs, and delay basic operations. Most property management firms aren’t able to keep up with the competition. Eliminating these problems is an absolute necessity if you want to thrive in the industry.


OHI is a fifteen-year-old real estate services company working with 50+ commercial and residential real estate developers, funds and property management companies across USA. Our deep expertise in real estate accounting, financial analysis, lease administration and asset management has helped clients cut associated costs by 40-50%. We currently provide these services to a portfolio of 50000 units across clients.

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