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Myth #4: Property management businesses don't lose managements to competitors
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Ben White
19 February 2019

One of the most commonly held beliefs in property management is clients are loyal and clients who sell their property invariably use the agency.

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Ailo Myth #4: Property Management businesses don't lose managements to competitors

The belief that property management businesses are strong sources of leads for the sale business is so foundational to the entire business model that it is rarely questioned.
If you ask a business owner if the agency gets most of the sales out of the rent roll, the answer is almost always “yes, we get them all.” Unfortunately, it is almost never true. How do we know that? Well, we have the data to prove it.
When you look at this myth, there are two competing sets of “facts”. The first is what is in the trust accounting system and what the team believes, the second is what actually happened.
We recently looked at 180,000 properties that have left rent rolls that we have data for over the last three years. We first looked at what reasons were given in the trust accounting systems for the losses.
It turned out to be a little more time consuming than we thought. For those 180,000 properties, there are over 18,000 different unique reasons given. We grouped all the “like” reasons together to get a clearer picture.
“What we found was more than half of the responses given for the loss of a management, (55%) was 'no reason' given”
- Ben White, Ailo Co-Founder
The 180,000 properties have a rent roll value of almost $1 billion. Can you imagine any other industry where $1 billion in asset value can go missing in three years and no one is interested in what happened to it? And that’s just the properties we track. The industry number would be closer to $15 billion, or $5 billion per year. That’s a lot of money.
The second biggest reason is the “property is sold” and the “owner moving back in” rounding out the top three.
We decided this needed further investigation. Partnering with a couple of agencies we worked with, we traced their lost managements through PriceFinder to find out what really happened.
It turns out, on average, for every 100 properties that leave a rent roll, 60 of those are sold. However, while property management companies think they get all of those sales, only around 35 are sold through the agency, the other 25 go to competitors.
In dollar terms, of the 180,000 properties we tracked, around 105,000 were sold. Of these, 63,000 were sold through the agency, and 45,000 went to competitors. At an average of $20,000 in sales commission, that’s another $1billion in sales commission going to competitors in our data set alone. Incredible.
Also, despite thinking our clients are loyal, the data shows 20% of lost managements are actually investors moving their management from one agency and giving in to another.
The numbers are staggering. Although it is nice to believe our clients are loyal and our property management businesses are sending the sales leads to the sales team, in reality property management companies are losing billions of dollars each year to competitors. Despite this, as an industry, we don’t seem to care enough to honestly track the data in our systems.
Acknowledging the reality of lost managements and what causes them is key to understanding what we need to do as an industry to increase our service levels.
Billions of dollars are riding on it.
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