“I’ve been in real estate since 1997 and I’ve been in property management since 2012,” Brady said. “When the pandemic had started, we had grown to about a thousand properties under management with real estate agents as our property managers working as independent contractors.
“It was easy to figure out that any percentage of $0 in rent was $0 for our property managers, so I started looking for something that would be immune from government regulation and COVID, and I settled on association management.”
Unlike property management, where managers are responsible for making decisions about the property for the owners, association managers only help the association boards carry out their decisions and plans for property upkeep. After some research, Brady said he found demand for an association management company.
“Studies show that only 5% of customers are unhappy with their residential property management company, but here in California, 67% of association boards are unhappy with their association management company,” Brady said. “So, we saw that as a big opportunity, especially here in Southern California, where almost 30% of all homeowners are in an HOA.”
With this knowledge in hand, Brady said it was an easy decision to take the business model he’d been using with his property management company and transfer it to association management by setting up Progressive Association Management.
“As an association manager, you aren’t making the decisions like you are with property management, so it is a different skill set, but the same business model applies,” Brady said. “In the past, I had approached real estate brokerages about doing property management joint ventures, and no one would touch it with a 10-foot pole because they are afraid of the risks and all the regulations, so they don’t want their agents doing property management.
“But association management is different because, in California, it is unlicensed and unregulated, so there is no risk on that side.”
Brady is currently testing his model through a firm based in Southern California. He said things are going smoothly and he hopes to partner with real estate brokerages in the state to set up association management joint ventures.
As it currently works, Brady said he will supply the joint venture with associations in need of management, and the real estate brokerage will supply agents who are looking for an additional revenue stream and who are interested in association management.
“Right now, I charge a fee to handle all the back-office stuff such as payables, receivables, financials, collections. … Whatever the net is, we pay the manager 50% of the base management fees, and then the manager gets 10% of it, and the rest is split 50-50 between myself and the real estate company,” Brady said.
Brady sees association management as a way for agents who are just starting out, agents who are struggling to close enough transactions, or agents looking for greater security to have a stable source of income. Additionally, he said it’s a way for brokerages to increase their ever-tightening margins in a way that does not create regulatory concern — like creating a title or mortgage joint venture might.
“There are a lot of agents who love the lifestyle of being an independent contractor, but they don’t have what it takes or are not a big fan of the work it takes to be a really successful real estate agent,” Brady said.
“This is a chance for them to generate a stable income while remaining in the industry and without having to learn something completely new. These agents and real estate companies all know HOAs — they live in them, they farm in them, they transact in them.”
With brokerages facing further downward pressure on their margins and agents concerned about the potential for shrinking commissions in a post-National Association of Realtors’ (NAR) commission lawsuit settlement world, Brady believes it won’t be too long before more brokerages begin to explore different revenue models.
“The industry could do with a little innovation,” Brady said. “Some brokers are very myopic, and they want their agents to focus on one thing and not do anything else, but I think we are seeing more enlightened broker-owners who believe their agents can do other things. And maybe one of them is association management.”
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