When owners compare property management companies, the fee is often the primary—and sometimes only—number they consider. But according to Ron Kutas, CEO of OneWall Communities, an owner-operator that also offers third-party management services, this focus is misplaced. The fee is one of the smallest financial levers in the relationship, and owners should instead examine operational metrics and cost structures that have far greater impact on their bottom line.
Kutas illustrates the disparity with simple math: a 25 basis point reduction on a management fee for a property with a $2 million rent roll saves about $5,000 annually. In contrast, a 200 basis point difference in bad debt at the same property equates to roughly $40,000. “You’re negotiating one of the smallest numbers on the page,” he says. The real drivers of performance are how quickly units are turned and the policy on bad debt. Moreover, a manager who cuts the fee from 3% to 2.5% must recover that margin elsewhere—often through higher billbacks, increased home-office charges, or reduced attention to the property. A fee that appears too low to be profitable usually is not as low as it seems.
The critical line of inquiry, Kutas advises, is chargebacks—the costs billed back to the property on top of the management fee. Owners should ask managers to walk through every billback. A revenue-driven company tends to be vague, while an owner-operator will have a schedule ready, explaining each charge and its purpose. This transparency is a key indicator of how the firm does business.
Reporting quality also reveals a manager's approach. Kutas points to generic parent accounts on the chart of accounts, such as a single “repairs and maintenance” line, as a warning sign. He advocates for detailed breakdowns into categories like paint, electrical, plumbing, and others. “The less detail, the more concerned I’d be,” he says, because thin reporting hides undifferentiated spending. The lack of industry-wide standards for chart-of-accounts structures, bad-debt policies, and expense approval thresholds makes the expense side opaque, which is why the fee—the one clearly visible number—becomes the default bargaining point.
Owners should also ask about the people behind the property. Kutas suggests two key questions: Who is the assigned regional manager, and what is their track record? A regional manager new to the role or unfamiliar with the asset type is a cause for concern. Second, what is the backup plan when a community or service manager is unavailable? Does the firm have a genuine bench or rely on temporary labor? Lack of bench strength is a common reason OneWall declines assignments in certain markets.
Owners often misdiagnose underperformance, blaming the manager when the market is soft, or vice versa. Kutas advises checking public market data and being self-aware about ownership patterns: “If you’re on your third manager in four years, it’s probably not the management company.” He also notes that a manager willing to turn down business is a positive sign—one that values attention and labor over growth at any cost. As owners become more skeptical of headline fees and more attentive to expenses, managers who can answer detailed questions will stand out from those competing on price alone.
