Low Fee Property Management Business Yabonza Goes Into Liquidation

We've been writing for years about the somewhat hidden downsides of selecting a low-fee or online only property management business  - see "Flat Fee Property Management - What's The Hidden Danger?" from 2019 and "Should I Use An Online Property Management Service Instead of Hiring A Property Manager?" from 2017.

Now it has been confirmed that low-fee property management business Yabonza has gone into liquidation. 

​What Is Yabonza?

​For those not familiar with Yabonza (though you are likely familiar with similar businesses), Yabonza was founded in 2017 by former Macquarie Group managers Simon Kinsey and Mark Trowell. It was founded in an effort to offer an evolution from more traditional property management services. 

What made them different? Well, with an average 3.2 star Google Review rating as at the time of being permanently closed, it certainly wasn't their high quality of service to investors. 

Primarily, the differentiator for Yabonza was its low fee model, charging a management fee of just 3.9% (compared with more than 7.0% incl GST on average in NSW).

​Why Did Yabonza Fail?

​As we wrote about in our September 2019 article (Flat Fee Property Management - What's The Hidden Danger?), some of the downsides of engaging a low fee property management business such as Yabonza include:

• Low fee charging service providers don't generally offer the same depth of skill, experience, and long term commitment to your property. Their unique service proposition is not customer service excellence, outstanding industry experience, negotiation strength, or ability to analyse the market. Their unique service proposition is that they are cheap.
  
• Low cost means low profit margin to the business. This in turn means that in order to remain profitable long term, client volumes must be significantly higher for a low cost provider than in a traditional real estate agency. 
  
• In turn, employees of these low-cost providers are likely to even more overworked and stressed than their industry counterparts (who research shows are generally stretched thin as is). 
  
• The result for the landlord is they are likely to be working with staff who are unable to dedicate the required time to appropriately care for their property, tenant, and to be proactive instead of reactive to their needs. 

Yes, but did any of the above relate specifically to Yabonza? Probably. According to this article:

• Yabonza had been reported as a ‘rapid growth’ startup across its lifetime, growing its team to 20 staff before dwindling that figure back down to three staff members in recent months.
  
• There are estimations that Yabonza owes creditors $2.5 million.

​In Summary

​Property management companies that prioritise excellent customer service also avoid overloading their property managers.

A simple way to avoid such overload and to remain customer focused is to grow at a steady and sustainable pace, rather than chasing volume with cheap service, just to keep the "head above water".