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Open or Closed Management?
The Boise area seems to favor 4 plex complexes. In many ways, it makes sense. These complexes can offer amenities similar to apartment complexes, but because they are 4 plexes on their own parcels surrounded by common area, they make for an easy sale to individual investors, as there are more buyers at that smaller price point. As a result, an association is necessary to manage the common area and dues are collected to fund it. Typically, the HOA is managed by a company that specializes in HOA management and the individual 4 plexes are managed by managers that specialize in residential property management. My title, Open or Closed Management, refers to the management of each individual 4 plex. Open management allows each individual owner to choose their own property manager. Closed management is where a single management company is selected to manage all buildings. Which is better? Below I have outlined some of the pros and cons of closed management.
Control. With a single manager, the owners', as a whole, have better control. For example, you can set rents, screening criteria, pet policies, and many other factors to ensure high quality tenants and strong market rents. Also, with a single manager, management fees are typically lower, as well as advertising costs.
Control. That's right, for the same reason control can be beneficial, it can also be very detrimental. Typically, the decision makers are the board of directors for the HOA. These positions change and sometimes a strong-willed board member takes control and selection of management and the setting of policies may not necessarily be what’s best for all owners. Additionally, management companies change. Perhaps the current company is absolutely the best, but what happens when they sell the management business or there is a change in a key person.
I've seen the extreme of both open and closed management. I've seen rent wars where a rogue manager in an open management complex undercuts rents, which drives rents down throughout. Even worse, is when you have a very unprofessional manager in an open management complex that does no screening and rents to anyone who shows up with a good story and maybe some cash in hand. On the other hand, I've seen ill-informed or strong-willed board members ruin the complex with their poor decisions. As well as great management companies that had some kind of change and no longer are providing the service necessary.
So which is best? Well, all though my examples above are true, they are extreme. I think if you own or are buying into a 4 plex community, you or your well trusted agent should very much be involved in the workings of the HOA. Are their communications transparent, or secret? Do they consult with the members, or do they make unilateral decisions?