One of the biggest benefits of hiring an effective condo management company is the potential savings that otherwise would not occur if the association were self-managed or with an under performing condo management company.
And since those benefits are not always so obvious, I would like to take a few moments and describe exactly how an association could potentially save money.
1. Rebidding contract services. An effective management company would use their leverage and renegotiate garage removal agreements for example and drive those costs down. I’ve seen examples of our client associations saving over 50% on their monthly waste removal expenses. In one example, our firm helped a 20 unit building save almost $400 a month in waste removal. SAVINGS: $4,800/year
2. Insurance coverage. This is one of the biggest expenses for condo associations. It is imperative to rebid the insurance policy annually. In one example, our firm saved a 50 unit building $4,000 a year off of their insurance policy. SAVINGS: $4,000/year
3. Life/Safety services. This is another area of potential savings. In one particular example, our firm consolidated vendors and negotiated an annual service agreement that saved a 20 unit association $1,300 off their alarm monitoring service, fire extinguisher annual certification, and annual sprinkler tests. SAVINGS: $1,300/year
4. Plumbing expenses. This is an area where an association can easily overspend especially if the building is an older association with the original pipes that have never been replaced. In one scenario, the association would simply continue to make repairs to broken pipes rather than spending the money to make a complete upgrade to the plumbing infrastructure. The other area of potential savings is understanding the cost benefit of working with union versus non-union plumbing companies. The is a significant cost difference between those 2 scenarios. This past winter, our company saved a 50 unit condo association over $10,000 by working with a small business non-union plumber to make repairs to over a dozen broken pipes that happened due to the Polar Vortex. SAVINGS: $10,000
5. Capital projects. This is a single biggest area of potential savings or potential overspending. If nothing else, boards should pay the closest attention around how a condo management company handles a project from start to finish before hiring them. Capital project overspending takes place when there is little to no competitive bidding. Overspending also takes place by having overqualified vendors bid on projects. For example, lets say a 50 unit building needs large scale tuckpointing repairs completed on the order of $150,000. In this scenario, it is very conceivable that the association could overspend $25,000 to $50,000 for this type of large scale project if the project is not correctly managed. In 2012, our firm took on a masonry restoration project for a 20 unit building and through our bidding process, we were able to negotiate a $25,000 cost savings for the client compared to what they would have paid otherwise. SAVINGS: $25,000.
Summary
Now if you add up all the above savings, you get $45,100. This is not a typical scenario but if you have an under performing condo management company or your association is self managed, it is not inconceivable to overspend in some or all of the above scenarios. The question for the association and board of directors is whether or not it is a risk worth taking.
About the Author:
Salvatore J. Sciacca aka “Condoboss” is one of the nation’s leading experts in the community property management industry and is also recognized for his blogs and insight on personal and organizational transformation. He is also the President and Founder of Chicago Property Services, Chicago’s #1 community property management company specializing in management and operations of condos/townhomes/HOA’s of 100 units and under. Salvatore is also the founder of managmycommunity.com (MMC), which is a state-of-the-art online support portal for community associations.
With over 20 years of industry experience, Salvatore is recognized for his extensive knowledge of capital planning, preventative maintenance, cost-saving measures and community building techniques. He holds industry stature as a Certified Manager of Community Associations (CMCA), the designation of Association Management Specialist (AMS) and is fully licensed as a manager (License #: 261.001386) through the State of IL.
Salvatore’s contact information is:
312-455-0107 x102
ssciacca@chicagopropertyservices.com
www.chicagopropertyservices.com