Property managment concern

[Andrew Hughes]

I own  one 4 unit property that I have had for five months and have been managing myself, mainly for the experience and because this property seems easier to manage than most would be. Everything has been going really well with this property.

I am currently closing on my second property. I plan to self manage this for a while as well but I know that as I scale I will need property management. Most companies seem to want 10 percent of the rent, which is fine. They also seem to want the entire first month's rent when they place a tenant. This is the sticking point for me. The goal is to have long term tenants and to me this would give the management company an incentive to turn the units as often as possible.  For people that use managers is this an issue?  I worry that this system makes it more profitable for a management company to do a bad job than a good one. 

[Andrew Johnson]

@Andrew Hughes For me it's not an issue but my experience has taught me that property management fees can be regionalized.  Where I invest it's 10% of collected rents with no leasing or releasing fees.  If I go 30 miles away it's 8%.  Why is it 8%?  Heck if I know, but that's the way it is for that market.  I can't turn my 10% market into an 8% market no matter how much I would want to.  And I certainly don't want to use a PM that's 30 miles away to save 2% of collected rents.

It gets more dynamic as you look across the county for (what in theory are) similar services.  If you look at a PM for a vacation rental in Gulf Shores it's 25%, if you look at it in parts of Myrtle Beach it can be 15%, if you go up to ski properties in Montana it can be 40%.  Some companies are now managing for $75/door which is great if you rent for $2K/month but lousy if you're renting in a warzone for $350/month.  

The tough part is that it's hard to fight what's generally accepted in your region.  If you choose someone solely because they're the cheapest option, you'll regret that more.

Fee structure aside, if you don't trust that your property manager is going to do what's in your best interest of the property you shouldn't choose them.  For what it's worth I don't think PMs want to turn the units over needlessly.  You won't like the leasing fee, you won't like the costs to get it "rent ready" at turnover, they won't like that vacancy costs them money in the collected rents area, they do have to pay (presumably) for advertising, etc.  And, side note, if you think they're doing a horrible job and only finding tenants that churn, you'll take your business elsewhere.  

But the way, you'll probably also look at the statement and second guess how much it costs to change the lots, do some paint touch-up, etc.  The costs structures of a PM paying a handyman are always different than the owner just paying for materials.  The initial shock of seeing labor attached to that bucket of paint won't be fun.  So, again, if you can't trust that your PM is doing what's best for the property (and thereby, what's best for you) it will never work.

So, yeah, not sure if this really helped at all!