Maximize Property Management Revenue Part 1: The Truth Behind Fee-Maxing

Welcome back to The Property Management Show!

Today kicks off a special three-part discussion on fee-maxing with Todd Ortscheid. In Part One of this important conversation, we will take a look at what responsible fee-maxing looks like, how it can double your revenue, improve your services, and ultimately increase customer lifetime value. When done right, it can also keep residents on your side.

Expect to unpack some juicy math.

Todd Ortscheid: Automation Addict and Fee-Maxing Evangelist

It’s great to welcome Todd back to our podcast. He has worn nearly every hat in the property management industry. He’s a business owner and advocate, an industry consultant, and currently the chapter president of NARPM Atlanta. He’s also the CEO of Revolution Rental Management and co-founder of PM Assist.

A bit of time has passed since Todd was last here, so let’s review who he is and where he comes from:

• Todd has been in property management for about 13 years.
• He started in the industry in 2012 and before that, he was an airline pilot for 14 years.
• Todd’s father was in the property management business, so as he got involved in that business and grew the company, Todd also became more involved in consulting for other property managers.
• He started and later sold a maintenance company.
• He did government affairs work for NARPM.

Todd is still consulting, and he’s also a self-proclaimed automation addict and fee-maxing evangelist.

That’s what we’re interested in talking about today.

The A-Ha Moment for Fee-Maxing 

Todd began thinking about involving ancillary fees in his own property management business at a NARPM Owner/Broker conference in 2014 or 2015, where he heard Marc Cunningham talk about the ancillary fees that were available for property management businesses.

It made sense because that’s exactly how airlines work. They make most of their money not on the plane tickets but on the extras.

Later, he heard Alex Osenenko and Darren Hunter talk about this topic right here on The Property Management Show several years ago.

By 2020, everyone was worried about revenue, so he put together an entire course on fee-maxing and leveraging ancillary services and fees.

It’s been a passion of his for years, and when Lead Simple introduced what was possible with automation, he became really involved in that as well.

Fee-Maxing Can Be Polarizing (But It Shouldn’t Be)

When the topic of fee-maxing comes up, it can be polarizing.

Like just about everything these days, there’s a camp that’s very much for it, and a camp that’s very much against it.

Some property managers hear fee-maxing and they imagine that a property manager or an owner is nickel-and-diming a resident to death. We’ve heard the term junk fees thrown around.

So, what does responsible fee-maxing look like?

The first thing Todd wants to point out is this is not hoarding money or being greedy. Some people get that idea, but all you have to do is gather the math and run the numbers to realize these fees are necessary in order to provide good service.

When Todd and his team first started running numbers for property managers, they found the average property management company had a single digit profit margin. It was 5 or 6 percent. That’s barely skating by, and it caused a lot of companies to struggle financially.

Fee-maxing is not about trying to be greedy. It’s about making your business sustainable.

You shouldn’t be struggling to provide the bare minimum. As a property manager, you’re trying to provide good service to owners and residents. You’re trying to hire and train better staff. You want to invest in better technology and increase your marketing efforts. To do that, you need the revenue that’s created by ancillary fees.

The primary goal of fee-maxing is to improve the service you’re offering.

Investing Ancillary Fees to Improve Property Management

That’s an important distinction. If you can invest more money into your business, you can run not only a more profitable business, but also a more excellent one. You’ll improve the overall experience.

Think about what property management looked like 10 years ago.

How many companies had the technology we have today? There were no resident benefit packages. It was rare to find a 24-hour maintenance hotline. Now, everyone has these things. We’ve been able to radically improve the nature of the services we’re offering in this industry, and Todd says that’s due in part to fee-maxing and ancillary services.

The boost in revenue has led to these services. If everyone providing property management has a 5 percent profit margin, you can’t do anything except collect rent and file evictions. Staffing maintenance services would be impossible.

Fee-maxing is an invitation to move beyond the basics.

Impact on Customer Lifetime Value

In the spirit of unlocking better margins for property managers through fee-maxing, it’s also easier to increase or amplify the customer lifetime value for each client. To attract a new customer, you have to engage in marketing activities. You have to invest resources to get owners to work with you. Meanwhile, you’re trying to make ends meet just to staff your own company.

If your property owners are not happy, they leave your company. Then, you find yourself working extra hard to replenish that income and grow your business.

The simple math says you have to increase the margin so you can increase the lifetime value of each customer. You can’t have a revolving door of churn.

Doubling Your Income with Fee-Maxing

Todd has lots of examples of people who took his fee-maxing course, and the average company that he works with is able to double their revenue.

Think about how revenue has always been measured for property managers: by calculating what you earn per door, per month.

All of your revenue 10 years ago might have added up to $150 or $175 per door, if you were doing well.

Now, thanks to these ancillary services and fees, companies can make in excess of $300 per month on each door. Those who do a really good job can push $500 per month on their higher end properties.

What could you do with an extra $100 per month for each door you manage?

A lot, probably.

This has changed the business. When we see property managers struggling to maintain those good levels of service, it’s usually because they’re stuck making $175 or $200 per door every month. It’s tough to provide an excellent service in that space.

It’s About Options: How to Grow with Extra Revenue

When you don’t have money to reinvest in your property management business, service will suffer.

And so will your business growth.

At Fourandhalf, we market for property managers, and there’s often pushback when we talk about marketing because of the cost. Property managers feel like they cannot afford to spend money on marketing, especially now, when costs are high and the economy is uncertain.

People are scared to part with money. What are they willing to spend on, when fee-maxing strategies are bringing in additional revenue?

Todd says it depends on the client and their goals.

Some clients want to add doors. That makes sense, and in that case, investing in marketing is a no-brainer.

Pay-per-click campaigns can bring in new clients, and here’s an important thing to remember:

Those new doors are bringing in more revenue than what was coming in before.

The return on investment is skyrocketing when any extra money from ancillary services or fee-maxing is invested in marketing. It’s easier to fund those initiatives, and they are definitely worth the resources.

Property managers know their business is missing out if they’re not bringing in more doors. This growth is more valuable now than it was a few years ago.

In addition to marketing, Todd likes to see his clients invest in technology, specifically leasing automation. He wants to see a 24-hour call center and a resident benefits package. Everyone should be doing those things now.

Invest in fee-maxing. Put that money into marketing and services, and you’ll see new business.

Using and Understanding Data

Recently, Peter Lohmann and Jordan Muela came out with PM Trends report that showed what property owners care about when choosing property managers.

Their data shows that property owners don’t prioritize Google or Yelp rankings when choosing a property manager. But, they say reputation is the second most important thing to them when making a choice.

Google reviews may be at the bottom of the list, but we can promise you an owner will notice a 2.5 Google ranking and probably not choose that property manager.

If a property manager is not reaching the bare minimum, which is probably 4 stars, it’s going to be difficult to attract new business. Everyone has a website. Everyone has a Google ranking. Of course reputation is important, and managing that reputation includes attention to website analytics and Google reviews.

Todd loves data and he loves diving into survey results, but he says that it’s important to think about what the person responding to a survey is really meaning with their answer. No, they’re not choosing a property manager based on Google stars, but if they do a bit of research online and that property manager comes back with a 2.5 score, it’s going to be a disqualifier.

Google scores still matter to your SEO, too. Where you fall on those ratings matters because Google cares. It all matters. Don’t read the wrong things into that report. Think strategically.

It’s like employees always saying that they care about being respected and making a difference more than they care about pay.

Yes, those things are important. But they want their money, too. Pay is always going to be important, even if they’re telling a survey that their most pressing priority is the opportunity for growth.

Ready to put these insights into action?  Part 1 pulled back the curtain on fee-maxing and showed why smarter fee structures are the quickest path to stronger margins and happier clients. If you’re serious about turning that new revenue into a steady flow of owner leads, Fourandhalf Marketing Agency has your back—websites, SEO, reputation, content, ads, the works. Start your growth journey at fourandhalf.com.

Up next in Part 2, Todd and I dive into owner churn, customer-lifetime value, and the regulatory headwinds every fee-maxer must navigate. Make sure you never miss an episode:

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Thanks for listening—see you in the next episode!

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