When property owners compare third-party management companies, the conversation often begins and ends with the management fee. It is the most quoted figure, easy to compare, and feels like the lever owners can control. But according to operators who have sat on both sides of the table, the fee is close to the least important number in the decision.
Ron Kutas, Chief Executive Officer of OneWall Communities, an owner-operator that also provides third-party management services, argues that fixating on the fee steers owners away from where the real money moves. He puts the mismatch in plain arithmetic: a 25 basis point cut on the management fee for a property with a $2 million rent roll saves an owner about $5,000 a year. A 200 basis point difference in bad debt at that same property is roughly $40,000. "You're negotiating one of the smallest numbers on the page," he says. The questions that actually move the outcome, in his view, are how quickly a manager turns units and what its bad-debt policy looks like.
He goes further on the fee itself. A manager willing to drop from 3 percent to 2.5 percent has to recover that half point somewhere. Often, he says, it returns as higher billbacks, more home-office personnel charged to the property, or simply less attention paid to the asset. A fee that looks too low to be profitable usually is not as low as it appears.
The line Kutas says owners should press on is chargebacks—the costs a management company bills back to the property on top of the fee. He frames it as a test: ask a manager to walk through every billback beyond the management fee. A revenue-driven company tends to be vague. An owner-operator, he says, has a schedule ready to send and can explain why each charge exists and what it covers.
The reporting itself carries tells before an owner ever signs. Kutas points to generic parent accounts on the chart of accounts as a warning sign: a single "repairs and maintenance" line rather than a breakdown into paint, electrical, plumbing, and the rest. "The less detail, the more concerned I'd be," he says. Thin reporting, in his experience, is where undifferentiated spending hides. Part of why owners struggle here, he notes, is that the industry has no shared standard. Chart-of-account structures differ from firm to firm, as do bad-debt policies and the thresholds at which an expense needs approval, anywhere from $500 to $1,000 to a set percentage over budget. That fragmentation has left the expense side opaque, which is exactly why the fee, the one clearly visible number, becomes the default thing to haggle over.
Two of the questions Kutas tells owners to ask are about people, not price. First: who is the regional manager assigned to the property, what is their record, and how long have they been with the firm? A regional just starting out, or with no experience in that asset type, is a reason for caution. Second: what backup exists when a community manager goes on leave or a service manager is out for two weeks? An owner should know whether the firm has a genuine bench or leans on temporary labor to fill gaps. Kutas says lack of bench strength in a given market is one of the most common reasons OneWall itself declines an assignment.
Owners also misdiagnose underperformance, blaming a manager for what is really a soft market, or the reverse. Kutas's test is data paired with self-awareness. Market performance can be checked against publicly available figures. And an ownership pattern tells its own story: "If you're on your third manager in four years, it's probably not the management company." That willingness to name the owner's role points to a signal Kutas thinks owners undervalue: a manager prepared to turn business down. "We sell attention and labor," he says. A firm that stretches itself thin to win every contract is, by his logic, less able to do right by any single one.
As owners grow more skeptical of headline fees and more attentive to the expense side, the managers who can answer the harder questions in detail are likely to separate themselves from those who compete on price alone. For those considering third-party management, OneWall Communities offers institutional-level services combining operational excellence with a community-first approach. More information can be found at onewallcommunities.com.
