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PODCAST: 3 Major Challenges Facing Community Association Management Companies in 2023

In our first episode of the “Middle Market Report” podcast, we covered three pervasive trends happening right now in the community association management industry.  

Let’s set the table with a few figures:  

  • There are more than 357,000 community associations in the U.S. 
  • Roughly 8000 new associations are developed each year 
  • Community associations represent about 40 million housing units, including single family homes, condominiums and co-ops 

Managing communities to protect and increase their value for homeowners and residents has become a $33 billion industry.  

As you’d imagine, companies that manage these associations are facing real challenges in handling that type of growth. We’re talking about everything from staffing to software.  

So, in a conversation with AvidXchange’s Jarrett Tran, someone who saw just about everything in nearly 20 years as a community manager, and Chris Millner, the head of product management for CINC Systems, an all-in-one integrated banking, accounting and association management solution, we gathered their perspective on how community management companies can take advantage of new opportunities and create profitable operations that benefit both their company and the communities they helped build. 

Listen to the full episode now (you can find a complete transcript at the bottom of this post) or dive into the highlights below:

Trend 1: Strained relationships between community associations and management companies caused by inflation

Inflation rates aren’t quite as high as they were in the summer of 2022 when we hit 9.1%. But the goods and services commonly provided by community associations are much more expensive today than this time a year ago. 

We’re talking about landscaping upkeep, building maintenance, pest control and even the salaries for gate security guards. 

And for most boards, raising dues is a last resort. So that means going through their budgets with a fine-tooth comb and inspecting every line item, including their management companies. 

According to Millner, the right technology can help a management company protect some semblance of pricing power when negotiating their contracts with community associations. 

Trend 2: Ongoing talent shortage for management companies

Management companies do quite a lot for associations. Some that’s a lot more obvious than others. And oftentimes, there simply aren’t enough managers available to do the work. 

A couple of notes to back this up:  

  • CINC’s latest state of the industry report said “staffing issues including staff burnout” and “recruitment” were cited as growing concerns for management companies. 
  • In a separate survey sponsored by AvidXchange in partnership with the Community Associations Institute in 2022, “managing operations with a limited staff” was the third most cited challenge mentioned by respondents. It was cited by almost four times as many people this year as in 2021.  

In a recent interview with AvidXchange CEO Michael Prager, Cat Carmichael of Strategy 123 said being a community manager isn’t “known to be super cool.”  

So basically, it’s hard to get these people into the business and it’s hard to keep them there. 

According to Tran, this usually comes down to salary. However, there are additional steps CAMs can take to develop and retain talent: 

Trend 3: Technology’s growing importance in community association management

In AvidXchange’s recent survey of CAI members, “implementing new technologies” was the most cited challenge for CAMs. 

In CINC’s State of the Industry report, the lack of modern technology in the industry was a common theme, as some respondents, particularly association board members pointed out, that their management companies weren’t taking proper advantage of new communication tools that can improve their ability to interact with homeowners. 

The industry is known for being a bit behind when it comes to tech. 

But according to Millner, new dashboards and reports powered by software like CINC’s are empowering both management companies and their communities to run more efficiently: 

Introducing CINC VendorPay powered by AvidXchange

If you’re still relying on obsolete accounting processes, not only are your employees frustrated, but you’re also wasting precious time and money. These outdated processes significantly increase the risk for check fraud. It’s time to make a change.

Fortunately, CINC VendorPay offers the only end-to-end efficiency solution for community association management.

By eliminating check runs and manual processes, you’ll save valuable time and money. Plus, with faster payment options for vendors, you’ll improve your relationships with suppliers and reduce the risk of late fees.

You’ll also reduce the risk of check fraud, giving you and your team peace of mind. CINC VendorPay is fully integrated within CINC, so you won’t have to waste time working in multiple applications.

Let Millner explain further:

For a complete analysis from the “Middle Market Report” podcast, download the episode here and make sure to subscribe to the AvidXchange Podcast Network for monthly discussions centered around the issues impacting middle market industries.

LISTEN NOW:

Complete transcript:

Middle Market Report: 3 Major Challenges Facing Community Association Management Companies in 2023

Host:

  • Travis Durkee, Sr. Content Strategy Manager, AvidXchange

Guests:  

  • Jarrett Tran, Sr. Account Executive, AvidXchange 
  • Chris Millner, Head of Product Management, CINC Systems 

00;00;05;06 – 00;00;27;19 

TRAVIS DURKEE 

Welcome to the Middle Market Report podcast. I’m your host and producer, TRAVIS DURKEE, senior Content Strategy Manager at AvidXchange, a leading provider of accounts payable automation, software and payment solutions for middle market businesses and their suppliers. Each month on the Middle Market Report podcast, I’ll sit down with thought leaders from various sectors of the middle market to discuss the trends and innovations impacting their industry. 

Today, in our first episode of the Middle Market Report, I’m covering three pervasive trends happening right now in the community association management industry. 

I’ll set the table with a few figures. 

There are more than 357,000 community associations in the U.S., with roughly 8000 new associations developed each year. Together, they represent about 40 million housing units, including single family homes, condominiums and co-ops.  

Managing communities to protect and increase their value for homeowners and residents has become a $33 billion industry. As you’d imagine, companies that manage these associations are facing real challenges in handling that type of growth. We’re talking about everything from staffing to software. So, in today’s conversation, I’m tapping into AvidXchange’s own JARRETT TRAN, someone who saw just about everything in his 20 plus years as a community manager, and CHRIS MILLNER, the head of product management for CINC Systems, an all-in-one integrated banking, accounting and association management solution. 

I gather their perspective on how community management companies can take advantage of new opportunities and create profitable operations that benefit both their company and the communities they helped build. 

With that said, here’s my conversation with JARRETT TRAN and CHRIS MILLNER. 

 

00;01;51;29  

TRAVIS DURKEE 

First, I want to introduce my AvidXchange teammate JARRETT TRAN, who spent nearly 20 years as a community manager before joining AvidXchange just a few months ago. Jarrett, welcome. 

If you could, tell us a little bit about your background and what you do here at AvidXchange. 

 

JARRETT TRAN 

Thank you. Well, currently I’m doing sales for Avid. I’m selling our AvidStrongroom product. And for those who don’t know, we do payables for association management companies. And prior to joining about four months ago, I spent 18 years in community association management, started as a manager, and then the last almost decade I spent in leadership roles. 

I started as an onsite management division for a large community association management company based out of Texas. Did that for six years. And then before joining Avid, I worked as a regional VP in Charlotte and I was responsible for managing around 101 well, 145 communities through 26 managers. And so, I’ve been around. 

  

TRAVIS DURKEE 

Absolutely. And on the other end of the virtual line, we have CHRIS MILLNER, Head of Product Management for CINC Systems. Chris, thanks so much for joining us. Can you tell us a little bit more about both yourself and CINC? 

  

CHRIS MILLNER 

Well, sure. CINC is as you said, a solution for community management companies. So, we offer both the accounting solution as well as property management tools. We also offer tools that the homeowners board members can use to interact with each other and with the management company. And I’m relatively new to the industry, I’ve only been in it for the past couple of years. 

But I’ve been in software and financial technology industries for going on 20 years. 

  

TRAVIS DURKEE 

I think it makes the most sense to start with the elephant in the room for, well, just about any industry, the economy and more specifically, inflation. Inflation rates aren’t quite as high as they were in the summer of 2022 when we hit 9.1%. But the goods and services commonly provided by community associations are much more expensive today than even this time a year ago. 

I mean, we’re talking about landscaping upkeep, building maintenance, pest control, and even the salaries for gate security guards.  

And for most boards, raising dues is a last resort. So that means going through their budgets with a fine-tooth comb and inspecting every line item, including their management companies. So, I want to start with you, Jared. Since you have such an extensive background as a community manager, what types of conversations are boards having with their management companies right now around pricing and what type of strain is building as a result? 

 

JARRETT TRAN 

Well, the timing you’re asking about this is quite perfect because this time of year, all association management companies are deeply engaged with their boards, trying to get their budgets done. They’re doing annual meetings and they’re trying to get the billing out for next year. And so hopefully they’re done already, but most of them probably aren’t. There will be people, though, that cross over the finish line at the last second and that’s always stressful. 

So, one of the things that I always like to mention when we’re talking about association management company, it’s not a typical business. It’s a business situation where you’re dealing with other people’s money, for example. You’re dealing with business money; you’re dealing with these people that are on boards. 

They look at it like you’re dealing with their personal checkbooks because their homes are near and dear to their hearts, and they tend to be very emotional about them.  

So, issues that pop up and community associations they aren’t don’t they tend not to be as simple as you would think that they would be if you just look at everything kind of in a vacuum where everything that’s concerned this absolute most of these things have a lot to do with how people feel versus how things are. 

So, board members find themselves in this space where when it’s budget time, the one thing that they’re concerned with is keeping the dues as low as possible. And one of the problems with that is two things are happening at the same time. One, the value of the dollar is decreasing. And at the same time, the property age continues to increase. 

So that creates a problem. And so, what ends up happening is at the end of the year, when they’re doing their budget, they’re trying to figure out what is it that we can do to make it, you know, to make it so that we don’t have to announce that there’s going to be a dues increase because they’re always they’re always anxious about that. 

You know, how is my neighbor going to act toward me? And that puts pressure on all those line items from professional services, down to staffing, you name it. So, when one of the things that we saw last year, like fuel surcharges for landscaping companies and pool operators, the cost of materials had gone up substantially. 

So, they’re starting to absorb those costs in their budget. So, what ends up happening, in my opinion, is that they start to they start to pretty much start to take it as far as they can. And as a result, they will end up robbing often they will rob from their fees, from their contributions to reserves to help force that budget so that there’s not a dues increase or there’s a minimum dues increase. 

So that puts pressure on management companies also because management companies need to increase the amount that they are that they’re billing. And most of the time, you’ll see when management companies have contracts, they’ll go up automatically each year. Maybe it’s 3%, maybe it’s something that follows the CPI. And so that becomes a discussion that management companies end up having with board members. 

It’s often difficult because boards again, they don’t want to have to pay them. They want to pay as little as possible because they know that they’re going to have to deal with the homeowners. 

  

00;07;59;11 

TRAVIS DURKEE 

So, Chris, with all that in mind, knowing how community management companies are being commoditize, maybe more now than ever before, given our economic reality, what can they do to protect some semblance of pricing power and prove the value they bring to a community association? 

  

CHRIS MILLNER 

Yeah, I mean, that’s something we’re trying to reinforce through technology every day. You know, there’s the value of the technology itself in terms of if I look at what we provide homeowners board tools and how those can improve the experience of living in a managed community or serving on the board. But it goes beyond that. 

It’s also what you get out of the software to kind of show what the management company is doing. So that often takes the form of the reports that are being shared with the board every month. So, those can, if you’re doing them correctly, they can really kind of highlight, okay, we took this many calls from your homeowners. We handled this many work orders. And here’s the details on what they were. 

We’ve got all these different action items that we’re tracking that we completed during the month that were part of our maintenance plan. For instance, here all the inspection activities we’ve done, here’s the financial performance of the business. 

And that reporting is really what I think kind of brings it home for the board in terms of the homeowner. It’s really about are they being engaged to things like a homeowner app or the portal, you know, are you able to put the content on there that’s relevant to them beyond just being able to go on there and, you know, pay your dues and see what your ledger says? 

  

JARRETT TRAN 

What Chris is talking about is actually a very big deal. Traditionally, association management companies have had to face having a client that really has no idea of all the activities that go on every day behind the scenes to make the management of their communities happen. 

So having that data that I think is able to provide is critical in and in making management companies to prove their value to their clients, because without having that data capture captured like they’re doing, they have no idea. 

A lot of people, honestly and in the community association management world, the clients’ homeowners, have visions of people sitting with their feet on the desk waiting for the phone to ring. And that’s not the case at all. 

  

CHRIS MILLNER 

No, definitely not. I mean, we have one summary report that I advise all our clients that I talk to include in their board packets. It’s what I like to call the “What have you done for me lately” report. And it’s it summarizes very succinctly all those different things I was laying out. And so the first thing they can see in their board packet is, “Oh my gosh, you did all these things well.” 

   

JARRETT TRAN 

One of the exercises that I used to encourage my managers and colleagues to go through is when you’re on the portfolio side of association management, really, you’re selling time. And when with that in mind, you need to be conscientious of how much you’re committing to a client. And so, one of the things I would say is take let’s look at a day. 

How much is the contract? Let’s just say the contract is $1,000 a month, and we need to divide that into three parts. So, we need to divide it between the management managers’ time, the administrative component of our responsibilities that are required by the management company or the management company, and then also the accounting function. And so, when you do that and you look at all the things that you’re touching, you know, do you really need to think about how does this make sense that we spend as much time with the client? 

So, one of the things that’s very difficult, especially for a lot of managers, is they don’t really know how to convey this is how much time you’re allotted and make their client feel good about it. Because the management companies are typically selling in a fashion where we’re saying, hey, we can provide you everything all the time. When in fact, they’re actually providing a little bit, a little bit of time. 

So having the data that Chris is talking about is really important and able, in order for them to be able to kind of say, all right, these activities take this much time and this is how much our time is worth. And it helps them to have those conversations in a better way than before. I think in the past, a lot of it’s just been kind of an idea. 

We think that you do this and it takes as much time but having the data that they’re able to provide really helps with that conversation. 

  

00;12;39;15  

TRAVIS DURKEE 

Absolutely. So, what I’m getting from you both is that management companies do quite a lot for associations. Some that’s a lot more obvious than others. So, I want to talk about the people within these management companies. And an overarching trend is that there simply aren’t enough of them to go around. 

A couple of notes to back this up: Chris and CINC’s latest state of the industry report said staffing issues including staff burnout and recruitment were cited as were cited as growing concerns for management companies. 

And in a separate survey sponsored by AvidXchange in partnership with the Community Associations Institute in 2022, managing operations with a limited staff was the third most cited challenge mentioned by respondents. It was cited by almost four times as many people this year as in 2021. 

Now, Jarrett, I don’t want to step on your toes too much here, but I couldn’t help of help but think of a recent conversation we had with another long time PCAM like yourself and a friend about AvidXchange, Cat Carmichael of Strategy 123, who said being a community manager isn’t, quote, known to be super cool. Those are her words, not mine.  

So basically, it’s hard to get these people into the business and it’s hard to keep them there. 

My question for you, Jarrett, as someone who lived in this world and ultimately decided to leave it not too long ago, what can be done here? 

We know these management companies can’t afford to throw money at this problem. So, what are the steps that they can take to make the job more attractive for both entry level community managers and those with a few years of experience already under their belts? 

  

00;14;15;05  

JARRETT TRAN 

Couple of things. The first thing is, I think that that community association management company salespeople, and often it might be the division president or the business owner, they need to be better about setting expectations, being realistic about what is provided for the amount of money and time that has been committed to on all sides. 

I think that it’s very easy to fall into this trap of going behind other means management company and selling on price. 

And it’s the reality. It’s something that that that happens and has to exist, I’m sure. But I think that if you’re able to have a conversation with the prospective client and give them the data, for example, that we were talking about, and say, okay, we need to do these in six items for you in the month and this is how much time it takes. 

And you expect us to run a business well and to be profitable. We need to make this much money. And this is what you can expect from us. And it’s hard to have conversations like that, but I think that if those conversations happen the right way, I think that that will enable the client to look at them and say, okay, well, you know what, we get this. 

This is a business problem to solve. And we want to we want to partner with somebody that is running a business in a way that is sustainable. Then hopefully that will enable the management company to obtain a higher management fee. So that’s the first thing which leads to the next thing, and that’s going to be how much managers are paid. 

Notoriously, portfolio managers really don’t make a lot of money. And it depends on what market you’re in. If there is a situation where the management contract allows for additional billing. There are often ways that portfolio managers can generate additional income for that additional billing if they’re comfortable talking to their client about that billing that’s allowed for in the contract. 

A lot of times they aren’t comfortable talking about that. So that is one of the one of the big things that I think stands out the most. But it’s really it starts with the management fees and the money that’s coming in the door in the management companies ability to pay their managers well.

The other thing that I think that’s important is that there are boundaries that are established. Sometimes I’ve seen managers get burnt out because they have board members that maybe are a little abusive or they’ll have homeowners that are that way.

And there’s a lot of that that exists in the business. I mean, we all know that. We see commercials on television talking about some of the crazy things that go on in homeowners associations.  

So I think that’s important that management companies also establish boundaries with homeowners and also with board members when it comes to their managers and making sure that their managers feel that they are supported and protected in situations that they could be uncomfortable. 

 

00;17;21;21  

TRAVIS DURKEE 

Can you think back to maybe a young community manager that you worked with in a previous life, that that had potential to really make a difference in their role but they just got burnout too quickly with a workload? 

  

JARRETT TRAN 

I feel like there are always people that are burnt out with the workload because you’re having to do so many activities for years. Your associations, and then the next month that you start all over again. 

I have seen a couple of examples of people who are promising young aspiring community managers, one most recently was smart young lady and college graduate. 

She did a great job at managing. But, you know, a lot of these communities have late night or have evening meetings. You work all day and then all of a sudden you’ve got a meeting that lasts until, you know, maybe it’s 9:00 at night and then you’ve got the work you have to do for all the other communities she was. 

I think that maybe, this is a Charlotte market, so it could be different somewhere else depending on where someone is … but maybe she was making $50,000 as a portfolio manager in her mid to late twenties. She was she was recently offered a job where in a space where she had no experience making $72,000 as a project manager for fiber insulation for one of the telecom companies. So that it’s not uncommon to see that. 

So, it’s very difficult for community association management companies to keep up with everything else is going on the job market right now. 

I went to get a bagel not too long ago, it was $18 an hour just to be back there serving bagels. And we need the people to serve the bagels because I like the bagels, but, you know, it’s changed. 

It’s made it very difficult to find, to find, and retain, help. 

  

TRAVIS DURKEE 

Now, Chris, unlike Jarrett here you’re not a community association lifer. Like you said, you’re fairly new in the space.  

So give us some fresh perspective here. What have you learned about this industry in the last couple of years? And more specifically, what’s your perspective on the staffing issues plaguing management companies across the country? 

  

CHRIS MILLNER 

Well, you’re right. I’ve only been in the association management industry for four years, but I’ve talked to lots of managers and lots of management company executives during that time. And I’m amazed at how hard the job is. You know, despite all the great things managers do to support vibrant communities, they rarely get the credit, but they always get the complaints when someone is unhappy. So, you know, it’s a tough job. 

So, you know, we’re looking at ways to make it easier with technology. Part of that is giving managers, you know, mobile apps so that, you know, if you’re managing multiple properties when you are on site at a property, you can make the most of that time. You have access to the information you need and do the work quickly and easily, something in the palm of your hand rather than, you know, trying to jot down notes on a pad to go back to your office and finish out the work after you’ve been on property. 

You know, we’re also looking at ways we can automate as many tasks as possible. You know, some of that is kind of the accounting stuff that we do, but a lot of it is what the managers use as well. The whole point of that is to get rid of some of that mundane, busy work which can help with employee morale, but it also allows them to focus on the more value-added activities. 

So, like working with boards and homeowners directly, you know, we do this with automated workflow that, you know, makes it easy to manage violations, manage work orders, invoice approvals, architectural requests, all that kind of thing. So, it’s not like in the old days, you used to be very paper-based and every you had to engage with every document. 

Now a lot of that stuff is just spit out to be printed. If it’s going to be mailed or becomes available on a homeowner portal, if it’s going to be something that’s shown electronically. So that I think is making people’s lives easier and allowing them to focus on, you know, the more important stuff. 

  

00;21;31;24  

TRAVIS DURKEE 

Yeah, exactly. I mean, there’s a lot if you’re going to have a limited staff, you don’t want to hamstring that limited staff by forcing them to, like you said, do that mundane work instead of the more value-added stuff. You know, you want them focused on building a community, right? 

  

CHRIS MILLNER 

I mean, if you can get them out of all the mundane stuff, then they can focus more on engaging in that community, which is better for the business. And frankly, you know, for the for the people who, you know, want to be managers. I mean, I think that’s really what drives them is, you know, interacting with the boards, interacting with the homeowners rather than, you know, writing up violations and managing the, you know, the financials and approving invoices and that sort of thing. 

So, we try to make all that stuff easier so they can focus on the important stuff. 

  

TRAVIS DURKEE 

Earlier I mentioned AvidXchange’s recent survey of CAI members, where staffing challenges was ranked number three in terms of challenges. Well, the top spot belonged to, quote, implementing new technologies. 

In CINC’s State of the Industry report, the lack of modern technology in the industry was a common theme, as some respondents, particularly association board members pointed out, that their management companies weren’t taking proper advantage of new communication tools that can improve their ability to interact with homeowners. 

The industry is known for being a bit behind when it comes to tech. We know this. But Jarrett, are we seeing a shift in willingness to adopt new technology? Or is that reluctance still prevalent? 

  

JARRETT TRAN 

Both. It depends on who you’re talking to. So the first thing that that I’d say, when you talk about people not adopting technology, what I’ve learned with a lot of management companies, that they may have the technology, but they don’t fully use it or they don’t use it as it was intended. So, they’ve got one foot in one world and one foot in the in the new world with their technology. 

But I’m sure, Chris, you probably can agree. You probably have people using your platform that use maybe a third of the features. So, there’s that. So, a lot of it just has to do with the people that are involved. And, you know, I also I also can kind of point to the leadership in that organization and say if the leadership isn’t giving all the users the full picture and the why, I think it’s very hard for them, for the users to adopt it fully and use it the way it’s intended to be used. 

And I think that that happens a lot. I’d say that the reluctance for association management companies to adopt new technology comes from those attachments. It’s either fear of change in general, and everyone knows that, you know, how that is. But also, I think that people are afraid that there are people that are very important in the organization whose jobs will no longer exist. 

Now doing sales for AvidXchange, I’ll a conversation with management company owners and operators and I say, look, I’m not telling you to get rid of your AP person because they really probably do need them to still exist in a certain sense. 

But what I do have a conversation about is if you’ve got AP person, all they do is AP right now. They more than likely know all of the operations, the procedures that that happen in your organization for the most part, back-office wise. So, in my experience, I never had enough hands in the back office to do all the things that needed to be done on a monthly basis. 

It could be something as simple as getting the financial reports out every time. And I say something as simple, well, that’s not necessarily all that simple. A person that’s in AP, for example, they may be ideal for working on the financials every month for these associations.  

So, what I like to have the conversation about is how can we repurpose the person that’s doing that work, that monotonous, painful, opening the envelope kind of work? 

How can we find the highest and best use for that person? Because they’re already a part of your organization. They know how to use a system. They know your operations. And so those are the conversations that that I like to have now in my current role, just because those are the ones that help us get over that reluctance and adopt a technology. 

  

TRAVIS DURKEE 

Chris I can’t help at this point but to bring up one of CINC’s newest features, CINC VendorPay powered by AvidXchange, and ask about the value that this brings to your product and what a full-service payment automation solution means for a management company. 

  

CHRIS MILLNER 

Yeah, yeah, sure. VendorPay is great. I mean, we’ve had a strong partnership with AvidXchange to integrate with Strongroom for a long time. But, you know, we were finding that while it worked great for many customers, many more didn’t want to work in a separate software application from CINC, which is where they manage all their accounting. So, you know, we worked with Avid to create the VendorPay solution, which allows our customers to remain in CINC following all the same AP processes that they’ve always followed, while also taking advantage of its app payment capabilities. 

So, you know, the great value there is the customer gets rid of managing those check runs that I talked about earlier. So that’s saving staff time and reducing costs. But by the way, I, I usually when I talk about it, I also don’t talk about like eliminating people. I mean, I think in most cases implementing this for your average management company, you may not be able to eliminate a person any way, but just keeping them focused on those more value-added activities, you know, there’s something else that person can be doing rather than stuffing envelopes. 

And of course, you’re also reducing all the costs of the envelopes and the check stock and the postage and all that by using the service. But some of the other piece of value, it reduces the risk of check fraud by having Avid convert a lot of those paper checks into safer electronic transactions by leveraging its, you know, extensive vendor network. 

And then they offer they get to offer their vendor a choice of payment methods rather than, you know, just paying by check. So, you know, the vendor really benefits from this, too, because they get to be paid the way they want to be paid. It’s really a win win all around. 

But, you know, there are other things that we do as well that are really aimed at those more tech savvy board members. So, you know, we found that our homeowner, a board app that we launched a few years ago, it’s been a game changer for driving more homeowner engagement, for creating better communications and transparency. It’s the kind of thing that those more tech savvy board members are not just looking for but really expecting from anybody that they’re going to be working with. 

And we found the management companies like it because they get to put their brand on it. So, you know, this has become a very sticky tool for them that helps them retain those customers and position themselves as a technology leader in their markets. 

  

TRAVIS DURKEE 

Yeah, no doubt. 

  

JARRETT TRAN 

One thing that it’s been kind of interesting. Now we are seeing younger board members start to join, if they participate in anything, going on the association and there’s either one extreme or the other. But we started to see that a lot of these guys work for companies like, for example, here in Charlotte, all the banks that are here. 

So, they work for the banks, for example, and they have all this technology they use. They expect management companies to have that as well. And so, and they expect to see tools like the portal that that Chris is talking about and it to be widely used or properly used. A lot of times I’ve seen management companies that they have the tools, they just don’t use it. 

And then a lot of it might be that they don’t know how to use or they don’t have the right people that are responsible for rolling those things out. But I think it’s really important, particularly based on which market you’re in there might be a market that, you know, where technology is really, really important. But I think it’s kind of become common everywhere. 

  

00;29;52;19  

CHRIS MILLNER 

Yeah, that’s a really good point. I mean, there is so much capability in these types of solutions and, but it really does take some thought as to how do I want to use those in a particular association. And we mentioned before that there are probably some that only use 20% of functionality. I mean, that’s absolutely right. I mean, we’ve got a whole modules that they never even expose in the application, sometimes for good reason. 

You know, if you don’t have any amenities that need to be reserved, you really need to use a reservations module. But a lot of times they just because they don’t have the time to go and set something up. And so, we always try to focus on how can we help sort of streamline that to make sure they know how to use it and they know how to use it and get the most bang for their buck out of it. 

  

TRAVIS DURKEE 

Absolutely. So, we talked about staffing. We talked about tech. We talked about inflation and margins. Chris, either one of you, is there another storyline impacting your industry that you’re keen to really keep an eye on moving through 2023? 

  

CHRIS MILLNER 

You know, Jarrett, you mentioned something earlier about rating reserves in a time of inflation. You know, that and that kind of stuck in my head because that’s a particularly dangerous thing to do any time, but particularly, you know, in this time of inflation, because, you know, we saw what happened with Surfside condo collapse tragedy. There’s so much more focus on reserve funds now. 

And so, you know, the idea that inflation is kind of, you know, building upon that tragedy and making it even worse because it’s causing people to do exactly what they shouldn’t be doing after that tragedy. It’s kind of a double whammy for these associations. They’re realizing that they were probably underfunded for a while, and they need to fix that. 

Yet they’re in a situation with inflation where it’s that much harder to do. And I mean, I think good technology tools can help people by getting them at that point in time view of what’s going on. So, they’re not making any missteps in their planning better. It can help you do that reserve study that maybe you haven’t done in three or four years that you really need to renew. 

I think that’s going to be a key thing going on in the industry. I think it has already started this past year. It’s going to continue to be a key focus in the coming years. 

  

JARRETT TRAN 

I think you’re right. But I’d also, you know, probably have qualified that with it depends on where you live. Right, because there are certain states that have differences. I lived in California and Florida, so they are pretty stringent when it comes to the frequency of reserve studies and all that. However, there’s still plenty of bad decisions that are made with regard to the budgets. 

And I think that the messaging to homeowners that needs to go out each time when it’s time to do budget is do the budget is like, look, here’s how much this is every year. This is what inflation looks like.  

And by the way, I’ve actually done this with a property out in the Bay Area. I went back to 1983 and looked at all of their increases between 1983 and 2016. And I plotted this all out on a spreadsheet, and when I applied the inflation rate for each year in 2016, they were effectively paying 3% less than they were paying in 1983 because they probably prided themselves on not increasing the dues all this time.  

And so, when all along they really were just kind of robbing from their future and, and when I put that information from the board members, not the board members of the community members, I think there was just a lot of silence. 

I think that people were wowed because no one had put the data in front of them. I think that that means management companies, managers, board members, they need to start putting the data in front of homeowners about inflation and, you know, the aging of their property and in a concise, digestible way so that they can have a conversation that’s based on fact and not emotion, so that they’re actually making the right the right decisions for the community versus, oh, I don’t want my dues to go up with nothing behind that. 

I think that that really is the takeaway here. That’s very important. 

  

00;34;20;14 

TRAVIS DURKEE 

I think that’s a good place to wrap this up. Jarrett, Chris, thank you so much for your time and for being a part of the Middle Market Report podcast. 

  

JARRETT TRAN 

Thanks. Thank you, guys. 

  

TRAVIS DURKEE 

Thank you for listening to the Middle Market Report podcast presented by AvidXchange. If you like what you heard, make sure to leave a five-star review and subscribe to the channel. 

While you wait for next month’s episode, head over to AvidXchange.com and read our latest research report covering the top three trends impacting the community association management industry. A direct link is included in the show notes, along with links to AvidXchange’s LinkedIn and Instagram pages.  

One more shameless plug. If this conversation has piqued your interest in AP automation from AvidXchange, there’s an additional link to request a demo of our solutions.  

Thanks again for listening to this episode of the Middle Market Report podcast. See you again next month. 

 

 

 

 

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