Property Management’s Hidden Expense Problem: How Small Costs Compound to Damage Performance

Most property management firms prioritize revenue collection, but Frank Gervasio, Director of Finance at OneWall Communities, contends this approach creates a dangerous blind spot. A single lost $1,000 monthly lease can cost five times that amount to recover, yet many ownership groups negotiate over minor payroll variances instead of addressing systemic expense issues.

‘Expense management isn’t about just cutting expenses to save dollars on the bottom line,’ Gervasio explained. ‘Sometimes those expenses have a real impact if you’re not spending them. What you want to measure is the efficacy of the dollars.’ This distinction, while simple in theory, is rarely implemented in practice according to Gervasio.

The problem often lies in individually small line items that compound over time across portfolios. Vendor contracts with automatic annual escalators, unflagged auto-renewals, and billing structures that appear reasonable at a single property can balloon across a 20-asset portfolio. ‘Many a mickle makes a muckle,’ Gervasio said, quoting George Washington. ‘The small things add up into bigger things.’ When management companies fail to track contract terms with granularity, or when their accounting systems aren’t designed for such oversight, ownership typically discovers the damage only after it has occurred.

At OneWall Communities, financial oversight begins before management contracts are signed. During due diligence on distressed assets, Gervasio’s team conducts complete unit inspections, catalogs the age of critical systems like HVAC units and roofing, and examines financial records promptly. ‘Every day that deferred maintenance goes unaddressed, it’s compounding,’ Gervasio stated. ‘You need a plan from day one.’

Gervasio attributes this oversight gap to incentive structures within the industry. Fee-based management companies are compensated based on collections, making revenue their natural priority and expense oversight secondary. When these firms allocate overhead costs, they often bury them in broad categories like general administration or marketing, making detailed scrutiny difficult. ‘I’ve seen companies send financials where they don’t write off bad debt, they just move it around on the balance sheet,’ Gervasio noted. ‘I’ve seen chart-of-account structures that were essentially made up. When you take over one of those assets, you’re not just cleaning up operations. You’re reverse-engineering someone else’s financial story.’

OneWall’s third-party management services operate differently. Their property management agreements explicitly itemize every point solution used, with no markup, allowing owners to see exact technology costs and choose adoption. The objective is to build trust through transparency rather than concealing margins within expense lines.

One common pushback OneWall receives concerns payroll expenses. Gervasio addresses this directly: ‘This is a people-centered business. We’re providing housing to families; that’s one of the most important things you can do. The people taking care of those residents are our on-site teams. And if we don’t take care of our teams, they can’t take care of the people we’re housing.’ He argues the financial logic supports this view, as underpaid, overworked property teams lead to vacancies, collection issues, and maintenance backlogs that are far more costly to resolve than a marginally higher payroll. ‘It’s the penny-wise, pound-foolish conversation,’ Gervasio concluded. ‘Cut the payroll, lose the lease, spend five times as much to recover it.’

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