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Is the Growth of Technology Contributing to the Diminishing Profits and Return on Relationships in the PM Industry?

Is the Growth of Technology Contributing to the Diminishing Profits and Return on Relationships in the PM Industry?

First Rate Property Management posted a blog back in October including a summary on theState of the Property Management Industryreport that was published by Buildium and the National Association of Residential Managers.  This report was full of useful information, but we found three things to be the greatest take-aways.  They reported stats reflecting the diminishing profits in our industry; relationships are still the heart of property management; and billions of dollars are being invested in technology to support property management industries.

Before we discuss these three interesting traits, let's review where we started.  In the early 90s it was common for residential property managers to start the business as a side hustle to supplement their income and support the cliental in the real estate business.

These were ma and pa businesses that had low overhead and unless you count the fax and copy machine, they had zero technology. As the 90s went on, we purchased one of the very first Windows based property management software systems.  This was great because not only did it provide property management specific accounting, but the real advantage was that it integrated the relationships of the tenants, properties, property owners, and maintenance together.  This integration streamlined many of the processes.

Diminishing profits:

This new technology comes with a hefty price tag. Most of these systems do integrate all of these individual systems.  For example, a tenant can input a maintenance request on an integrated website and once reviewed by the property manager a single click of a button will notify the owner that work is being done, notify the vendor to complete the work once the system verifies the company has a valid worker's compensation and liability policy on hand, and inform the tenant that help is on its way. When the bill is received, very little input is needed and the system will pay the bill and post to the appropriate ledgers.

This might sound too good to pass up, but the pricing is expensive and there are several “add-ons” not included. The user almost always buys the basic package in addition to all of the add-ons. With a sophisticated system that seems to do it all, there is always, of course, technical support. This support is imperative to the success of this costly technology and that too, often comes at an additional price.  All of these systems are now cloud driven and are prescription fee based.  They can cost up to tens of thousands per year.  Perhaps one of the reasons profits are diminishing.

Locally- specifically within our own company- our profits have diminished.  This year, our profits are down by 46%. Rents have increase and so has our gross income. Some of our increased expenses certainly can be contributed to technology costs, but a majority is increased labor costs.  While the minimum wage has not wavered, the cost to employee quality people has grown to almost double the minimum wage in Idaho. We also provide our employees with health care and Simple IRAs, which also have increased, which in total, account for about 38% of our increased expenses.

Lastly, the third area of expense has been around maintenance.  Yes, either the tenant or the property owner is responsible for maintenance costs.  However, when mistakes are made, we often end up paying and this year happened to be a bad year. We can only hope to learn from these mistakes to minimize these expenses moving forward. This can mean more thorough training, reviewing our processes, and providing the appropriate feedback to our staff.


We know that the global growth of technology has threatened our ability to interact as humans. We also know that trust, credibility, and connection are all aspects of human relationships that impact our business precipitously. These three characteristics are all things that lack in technology. While technology and automation make our processes streamlined, are they really worth the money spent if we are losing our ability to build personal relationships with our clients and tenants?

In our recent focus on customer relations, we have found that a simple human touch can result in a better experience for the tenant, leading to higher tenant retention, resulting in less turnover expenses for our owners. The question remains; is this diminishing profit among property managers related to the diminishing ability to relate and interact with owners in a credible way? The cost of technology rises, companies are seeking ways to minimize human interaction, yet human interaction is what our clients and tenants are seeking.

Perhaps the solution is to find an automated software that balances efficiencies and stimulates human interaction. Is this something PM companies will more likely pay for?

Technology today:

Technological solutions continued to be developed in an effort to support the property management industry. It was slow to start, but has since grown exponentially, adjacent to the growth of global technology in all industries. This growth stimulated the billions of dollars being poured into it.  In most cases, this new technology came about as a single product. Here is a quick list of the more popular tech solutions:    Websites, Marketing, Marketing Syndication, Communication Management, Leasing, Automated Forms with Mail Merge, Online Maintenance, Inspections, Advanced and  Customizable Reporting and Accounting statements, Online Payments, ACH, Work Flow Management, Key Performance Indicators and other Business Metrics, Tenant Screening, Corporate Accounting, Online Tenant Applications, Portals for Owners and Tenants, Showing Coordination, Electronic Signatures, Mobile Applications, Cloud Based systems, VOIP, Contact Management Software, Texting, Ratio Utility Billing System, Virtual Tours, Floor Plan Generation, 3-D Modelling, Virtual Staging, Check Scanning, and Word Processing, and Automated Client Notifications.

As these programs began to roll out, each of these tech solutions were discreet or standalone.  So the PM would pay for each service and none of the systems collaborated for efficiency. Integration was needed to provide a centralized data location. The demand for an all-inclusive property management solution was born.

Written By:

Tony Drost - Chairman & Julie Tollifson - Leasing Manager  First Rate Property Mgmt.;


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