Let's Talk HOA
Let's Talk HOA is a podcast dedicated to providing an inside look at the world of HOA management. Presented by Main Street Management Group, this podcast offers honest answers from experienced HOA management professionals to help HOA boards and homeowners live better and enjoy happier communities.
Let's Talk HOA
The Hidden Truth: What Your Management Company Isn't Telling You
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Is your HOA management fee only telling half the story? In this pilot episode of Let’s Talk HOA, Kelly Hawkins pulls back the curtain on the "hidden" economy of community management.
For 25 years, Kelly has seen the industry shift from a boutique, concierge-style service to a revenue-first corporate machine. Joined by 35-year industry veteran Vicki MacHale, this episode explores the rise of private equity in the HOA space and the secret revenue streams that could be costing your community thousands.
In this episode, we discuss:
- The Private Equity Takeover: Why the "1-800 number" and remote staffing have replaced the managers who actually know your neighborhood.
- Hidden Revenue Streams: A deep dive into "earned credits," bank interest sharing, and insurance commission kickbacks that boards rarely see.
- The Conflict of Interest: How some management companies profit from your community’s late fees and fines, disincentivizing true compliance.
- Vendor "Marketing Fees": The truth behind secret contracts and non-disclosure agreements with service providers.
- How Lawsuits May Shape the Future: What a landmark case means for the future of transparency in the industry.
The Board Member’s Audit Checklist:
Vicky and Kelly share the exact questions every board member should ask their current or prospective management firm, including:
- "Do you profit off the interest in our operating accounts?"
- "Do you receive referral fees from the vendors you recommend to us?"
- "Who actually owns your company—is it a local firm or a private equity group?"
About Our Guest:
Vicki MacHale has over 35 years of experience in the HOA industry, serving as a Portfolio Manager, Senior VP, and Board Member for the California Association of Community Managers. Today, she is a leading voice for transparency and ethics in community management. You can find her work at casaalliance.org.
Connect with Main Street Management Group:
Main Street Management Group is a boutique HOA management company located in Cornelius, NC, serving Lake Norman and the greater Charlotte area. We believe in transparency, local service, and "integrity first."
- Website: mainstreetmanagers.com
- Have a Topic Idea? Use our contact form on the website to submit questions for future episodes!
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Produced by: Main Street Management Group & Charlotte Content Marketing
When comparing management fees, the monthly contract is only one part of the story. From banking arrangements to vendor relations, there are standard industry practices that rarely get discussed in the boardroom, but they impact your neighborhood's bottom line every single day. Today we're providing an insider's look at how the industry truly operates and sharing the questions every board member should be asking to ensure their community is being managed with total transparency. Stick around, you won't want to miss this. Welcome to Let's Talk HOA, the podcast giving you an inside look at the world of community management in Lake Norman and beyond. Presented by Main Street Management Group. We're your source for relatable stories, expert information, and a transparent look at the industry. So if you're ready to get the inside scoop, kick back, grab a coffee, and let's talk HOA. Hi, I'm Kelly Hawkins. I own Main Street Management Group. It's a boutique HOA management company in Cornelius, North Carolina, just outside of Charlotte. This is the pilot episode of our podcast, Let's Talk HOA. We hope to become a resource for boards, homeowners, and maybe even other managers for all things HOA. Personally, I love my job and I believe that most HOAs are run by good people trying to do their best. But there's a few bad actors, and the rise of social media has created a growing sentiment that HOAs are evil, money-hungry police states run by petty dictators named Karen. And I want to dispel that myth. When I see conversations about HOAs on social media, what I've come to realize is that most people really just don't understand what they're supposed to do or how they're supposed to work. So I'd like this podcast to be a place for insider information, best practices for leadership and management, maintenance, compliance, accounting, and communication. So for this pilot episode, we're going to start with all of our cards on the table and talk about the management company. What are the hidden truths every board should know when hiring a management company? So thank you for joining us, and let's talk HOA. For this episode, I've invited Vicki McHale to join me. I started noticing Vicki's posts on LinkedIn. She was saying things out loud that no one had said before. She is spilling the tea about what is going on behind the scenes in the HOA management industry. Hi, Vicki. Thank you for joining us.
SPEAKER_01Hi, Kelly. Thank you so much for the invitation. I'm excited to be here.
SPEAKER_00Yeah, so I've I've been watching your posts on LinkedIn. Tell us a little bit about your background.
SPEAKER_01Well, I've been in the management industry over 35 years. And I started in California, started as a portfolio manager, went to on-site manager, went to executive vice or I'm sorry, senior vice president of what was considered one of the larger companies way back when. Then from there, I also started my own management company. And in addition, I served on the California Association of Community Managers Board of Directors for three elected terms, one term as the secretary. There isn't a lot I haven't experienced at some level within the industry.
SPEAKER_00I would say so. So what prompted you to start your social media posts about the industry?
SPEAKER_01Oh gosh, I have to take you back to around 2004 when all of a sudden banks were coming up to me and trying to get the business of the company I was working for at the time, and they were offering me these earned credits. And at the time, it was basically just credits to help pay for infrastructure or for technology. But quite frankly, I was appalled and I didn't want to hear anything about it. And so I completely shut down the conversation because I did not believe it was good for our industry. And in my own naivete, I figured other people would do the same. So that's the point where I said, you know what? I'm semi-retired, mostly retired. There's a lot of people in the industry trying to do things from within the industry. There's homeowners that are being impacted that are complaining and being looked at as, you know, just being the typical complaining homeowner. But there's nobody in the space like me with 35 years of experience that has the knowledge from all sides of the table. And my own conscious, maybe not my thought processes, but my own conscious would not allow me to stay quiet. And I think what happened was is everybody was growing through consolidation. And then because our industry is very fractured and there's very little accountability unless somebody has the money in their pocket to sue. Even the handful of states that have state regulators, it really doesn't make that big of an impact.
SPEAKER_00Because I think the reason I wanted to do this podcast is because this industry is absolutely completely different from when I started. And I can see that happening. And we're changing. It used to be see if you agree with me. When I first started, it was a lot of smaller family-owned maybe firms. And then now I feel like we're corporations. We're all getting bought out, and private equity is very revenue focused. And now I I'm not, I think that before we were causing ourselves burnout by doing anything and everything we were asked, but now corporations are barely doing anything. There's an online portal and a 1-800 number, and you know, there's all the staff is remote, there's no collaboration. And so I I feel like our space is getting overrun by revenue generators, and we're not servicing our HOAs as much anymore. Now, Main Street is, of course. But I think that has that's what's happening in the industry. Do you agree?
SPEAKER_01Oh, I absolutely agree. I believe there are still some management companies that are working under the old model, but they're having to learn how to fairly do this without burning out their managers and bringing in that income without becoming, I call it, um feeding off of every sector of the industry. And I will go back a little bit because years and years ago, I started pointing out that we were shooting ourselves in the foot as an industry because we had no boundaries. And we really didn't take the pride in the service and the value we brought to our clients. And so as the clients were complaining about our prices rather than stand up, we started looking for ways to build in hidden income. Oh, let's let's really mark up those transfer fees or let's start charging homeowners this way. So we had to look for ways to offset that main management fee because we were really bad about setting up boundaries and drawing a line as an industry. Exactly. And so those kind of backdoor operations kept snowballing.
SPEAKER_00I don't want to say I understand how they got there, but it's hard to justify why you're worth your management fee. It's easier to have a low management fee and then start taking some fees from other places. And so some of the things I've noticed other management companies do that we don't, and I think it's a little bit of a conflict, in my opinion, which is why we don't do it, is like taking half of the late fees. If if I am responsible for your collections, but I get half of your late fees, how am I incentivized at all to clean up your collections? I get paid the worst for the worst collections, right? The more people don't pay, the more I get paid. So that makes no sense to me. Things like that, half of fines. So if people are getting fined and you're not talking to them and trying to get them into compliance, you're making money. To me, that seems like a conflict. And I know some of the stuff you said on LinkedIn, we'll get into that. Is where where else are you seeing these? I know um you mentioned income credits. I actually got offered that not too long ago. I didn't do it, it felt wrong. But to explain to everybody what income credits are.
SPEAKER_01Well, in a traditional model to earn credits, I have a company, and my company is very successful. And so banks want my deposits. So they come in and they say, Well, Vicki, if you bank at my bank with your money, we will on the back end, we will give you base points. And these base points a lot of times help pay for technology or infrastructure, or they offset them. And the bank can do that. It's my money, and um, it's a relationship that I choose. Now, what has happened in HOA management is it started off somewhat like that, but then somewhere along the line, people figured out that this was a hidden revenue stream, and so it became cash payments. Now, in the case of an hoa, I'm not depositing, it's my company, but the money I'm depositing are from all of my clients. So it's not my money, but yet my client is sitting there earning interest and has no decision-making authority whatsoever as to where I deposit their money. In some cases, they can then take their reserve funds and put them other places, but that's becoming more and more difficult to do under this new management model. So now my clients earning two and a half, three percent on their deposits, but on the back end, I'm making those five base points. I'm literally making more money off of their money than they're making. And I'm making it off of the total cumulative balance of those deposits. And those owners know absolutely nothing about this.
SPEAKER_00That was my problem with it too. Was the way it was presented to me was you have an operating and reserve account, and traditionally, boards understand that only the reserve account makes interest. But if you'll move all of your HOA accounts to our bank, the HOA will continue to make interest on the reserve accounts, but the management company will be paid interest on the operating accounts. And I mean, I couldn't swallow that. I don't think that's right. That's not my money. And if you can offer me a higher interest rate, I'd much rather I'll bank with you because I can provide this a better interest rate than other management companies. And so now I actually help them invest in other um CDs and banks and to get a higher rate. But I don't see where the management company would ever be incentivized to help them find a higher rate, if because that all the money that leaves that bank where they're making interest, you know, is a loss for the management company. Again, that just feels like a conflict of interest.
SPEAKER_01You said in the past five years, you've noticed the entrance of private equity. And I wanted to address that because what I saw is from 2004 through 2020, these companies were learning how to extract. I mean, they're they're sharing insurance commissions, which again, a conflict of interest, because it no longer becomes finding the best product at the best price for my client. It becomes which one of these policies am I going to present that gives me the biggest commission share or some actually write in their own fees on top of that?
SPEAKER_00I did see that. I did see an email this week that was two management company executives. Like, here's another way that you can make revenue. Because when an insurance agent sells policies, they make a commission from the carrier. Well, they should share that with you. Or you should install your own insurance agent, and then you'll make all of the profit from whichever carrier is chosen. But my problem with that is that if I had an in-house agent, uh, I'm so small, at best I could probably get one or two carriers that could offer you know policies to my clients. Whereas if I use an agent as I'm supposed to, you know, they can go find 15, 20 carriers that they can propose. Let's let's talk about that with other vendors because I've also seen um where a management company formed a letterhead called ABC Maintenance Company. And all that was was the same vendors they would have hired to do the work for them for the HOA. They get them to do the work, they mark it up, and they put it on ABC maintenance companies invoice letterhead. And all they've done is for every vendor invoice, they've marked it up a percentage, 10, 20, 30 percent.
SPEAKER_01Well, I I have not seen that one yet, but I I'd like to say I was surprised. What I've seen more of is if a company doesn't have its own in-house maintenance, or even if they do, but their clients still want a bidding process, they there are now secret contracts that are written. And I've actually published one, I have many of them from different companies, but there is a relationship there where a vendor in exchange for being placed in front of this company's clients, they agree to give a 10% marketing fee off of every contract that they get. So basically, some might call it a consulting or a marketing fee, some might call it a kickback. Um but then this is also tied to a non-disclosure agreement. And in this non-disclosure agreement, it basically says you don't tell anybody about this, but in your contract, you put this sentence, and it's again supposed to be that CYA type of, well, we disclosed it right here, but you've really disclosed nothing. So now I have in-house maintenance, but the board wants to see three proposals, so I go out to two other vendors who I'm in collusion with, and I provide three bids to the board. First of all, I have the option of seeing the other bids to lower mine so mine looks better. But even if I don't get it, I'm guaranteed 10% profitability off of that vendor. And that 10% is most likely written right into that contract. And had the board have gone out and had a clean bidding process, they would see that of the three bids, all of them are going to be lower than what the management company is proposing to me. But the board has no way of doing that. And even if they did a forensic audit or or you know, were looking through their financials with the fine-tooth comb, you can't find it because it's behind a secret contract and a non-disclosure agreement. Right.
SPEAKER_00I I have I don't I I have heard that. I don't have any experience with it, and I don't know that anybody would dare offer it to me. But um so basically, if you have a very big landscaper, you you have a contract with them that every contract they bring to you, you're either gonna get a referral fee or some percentage of the contract on the back end. And there's no way anybody would know that was happening.
SPEAKER_01No, because the there's no paper trail to it other than that that private hidden contract. So yeah, it's you know, these boards, and and we talk about well, the cost of living is going up and insurance is going up, and all of this is going up, which it absolutely is, but there's also these hidden fees that are driving up the operations of these boards, and they have no way of knowing it.
SPEAKER_00One of the things you said about you don't the vendors, um, you don't realize that you're getting bids all from the same company. I I'm starting to notice that about management companies too, because there's these huge parent private equity companies, and they're buying up the firms in a city and they're not changing their names. So you go out to get a management bid, and you've gotten three bids, and what you don't know is they all have the same parent company. So you've literally gotten three bids from the same place.
SPEAKER_01Yeah, and that's all always kind of been an issue, especially with uh one of the large, the largest management company is I would go into bidding process and it would be me and three other companies, and I'd I'd ask them, like, who are you bidding with? And they'd they'd tell me, and I'd say, Well, you realize that that's all the same company, and they'd say, Oh, no, no, no, these are all independent companies. And I'd say, No, no, no, they're not independent companies. I bet if you look, you've got a high, a mid, and a low bid, correct? Well, yeah, okay. And so then I would educate them. And um, and now there's so many hidden companies that um most of us don't even know who owns what. And it's it's absolutely scary the the level of covertness that they will go to in order to capture this business. Because, you know, 2020, 2021 is when the private equity started coming in because our industry's so fractured, there's there's no regulation across states, everybody works differently, and that's exactly what private equity loves. Right.
SPEAKER_00So we're sort of inflation proof, right? You have to you almost have to have a management company, and then there's just so many ways you can charge management level fees, like you said, letters, fines, late fees, and then there's all the revenue sharing that you can do with banks and vendors, and then now they've figured out that they don't even have to change their name when they buy all the different companies. So you're right. Yeah, I think it's fracturing us a little bit, and hopefully the pendulum swings back the other way. And we I don't want us to go all the way back to when I started 20-something years ago where we had no boundaries and we were burning ourselves out doing anything and everything. I think we do have to say, I do your accounting, I'm your admin, I do your violation drives, I communicate with the homeowners, I provide a website. Like there has to be a boundary, but it should be based on your service level and and your fees should be this is a service I provide, and not here's the base, and then we'll go up from there.
SPEAKER_01Yeah, because well, the the system we're dealing in now is you know, we were a cottage industry that exploded, and we were not equipped to handle it. A lot of us, uh a lot of people who started were just like you said, mom and pop that kind of grew until they hit the glass ceiling and they didn't even know that they had hit the glass ceiling. And because of that, we as an industry created a lot of issues.
SPEAKER_00So I want to just run through what do you think the core. Questions are you not at what the board should ask, but I I think we have to say you need to ask, we need a list of every way you make money, besides this management fee. I need to I need to understand or who owns this company, and then who owns that company? Who owns that company? Um, I think we have to ask them I don't know how they're wording it in the contracts, but I don't even know how you get to the income credits question. I think you can ask it right now. I don't, I don't think it's I don't I don't have a problem if the bank helps pay for the software. Because they have to use that, and you have to use that. You're both using it to make the whole system work. I do have a problem if they're just giving you basically interest off their money.
SPEAKER_01I think the questions because I have more numbers starting to call me more and more and ask me what questions they should be asking. And I'll be quite honest. The first thing I tell them is I say stay away from any national company, any public company, any company is attached to any way shape of private company. Start looking at your your smaller independent company. If we want to be what you have everybody where they can follow you. I just have a link right now, and I do have a website alliance.org.org.
SPEAKER_00Thank you. I really appreciate you joining me today. I don't have a lot of information, but if you're a board member, I hope we give you some insight. You're hiring a management company.