PM fee for new tenant lease?

Question

I'm just curious if it is industry standard for PM companies to charge 100% of first months rent for new tenant leases?

Bill B. · Answer

My PM charges a $300 commission that’s given to the realtor or agent that brings the tenant. That’s my entire cost for a new tenant. It may be a personality disorder. But while I love paying that, I hate paying $150 renewal fee at the end of leases. (Mostly because I see it’s a 1/2 page form emailed to tenant saying do you want to renew for this length at this cost and it seems steep for that much work.)

A month’s rent for a new tenant seems VERY high. That means you’re really paying 15.66% of gross rents to the PM instead of 8%. Seems like a difference worth shopping around for.

Theresa Harris · Answer

Some do, some don't.  Mine charges a flat rate which I think is more appropriate.  I don't understand the 1 month rent fee. For higher end properties, the PM is overcharging and for lower end properties, it is likely more work.

Drew Sygit · Answer

@Bill Brandt we've found that no one likes a take it or leave it approach when it comes to a rent increase.

Back in 2004-2006 when anyone with a pulse could get a mortgage, we were scraping the bottom of the barrel for tenants and kissing their behinds so they would renew.

Nathan Gesner · Answer

There's no "industry standard." What works in Atlanta may not work in Jacksonville. What works in Texas may not work in California or Wyoming. Even within a large metro live Atlanta you will find a wide variety of fees charged and the way property managers operate.

Read the management agreement and know what you are signing up for.

Remember: cheaper doesn't mean you'll make more money.Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

Nate Sanow · Answer

Some will do 1/2 first month or a flat fee.

Bob Stevens · Answer

Yes,  some negotiate if you have multiple properties

Bill B. · Answer

@Peter Tverdov

To show how ignorant you are on at least one level…

Underline the part of my post where I said I hadn’t had a vacancy in 25 years…

If you’re going to call people stupid try not to be stupid while doing it.

Welcome to the new BP. Where helping people has become just name calling.

Peter Tverdov · Answer

This is ignorant on so many levels. If you have had no vacancy in 25 years I have a pretty good idea of what your place looks like and the "market rents" you think you're getting.

Bill B. · Answer

@Drew Sygit it must be a market dependent thing (agents wanting half a month’s rent) or landlords are just being taken advantage of. In almost 25 years my longest vacancy was 2 weeks, the average is probably the weekend of the week after the vacanc. There’s just no reason to pay an agent more than the $300 in Las Vegas. At least for SFR. Online advertising does most of the heavy lifting these days.

As far a your renewal concerns. 1) as you say AUTOMATED, zero extra work

2) is done every 6 months anyway, no extra works

3) my guys must be very good because when I ask I get an emailed answer within 10 minutes (in Vegas almost all of our properties are similar in each neighborhood)

4 )there are no negotiations, it’s a here’s the price deal

5) again, there are no negotiations, it’s a here’s the price deal

6) it’s a signature on the bottom of the half page form

7) again, it’s a tenant’s signature on the bottom of a half page form.

I’ll give you there might be 15-30 minutes of work if they don’t have systems in place to handle it. But then charge me $50 or $100 (you know $100-$200/hr for the person making $20/hr) after all, they’re negotiating for their own raise as well since they get a percent of the rent.

Ps. If you read my post, I did admit it was probably a personality disorder on my part as it’s only half the new tenant fee. But that’s mostly because I think finding new tenants is 10x harder than a renewal. If you’ve read my other posts, I only say how good they are and how I would never want their job.

Drew Sygit · Answer

@Terry Landon it is negotiable, but depends on local market. What's most important is what are Realtors from other brokers expecting to get paid for bringing a tenant to the PMC?

@Bob Stevens & @Bill Brandt See above about Realtors from other broker offices. If they are expecting 50% of one month of rent, and you won't allow your PMC to off that amount, then you better hope your PMC can fill your vacancy through just their own marketing efforts.

Bill, you also seem to have either an average PMC or don't understand what goes into a renewal. Here's our process:

1) Renewal emails automatically sent to tenant 90 & 70 days prior to lease end

2) Annual Video Evaluation to confirm tenant taking care of property and owner wants to renew

3) Marketing Dept does rental comparison analysis to determine market rent, sent to owner & tenant via standard email scripts

4) Assuming Annual Evaluation acceptable to owner, proceed with renewal negotiations

5) Negotiate highest increase possible with tenant, inform owner

6) Confirm all parties agree to new rent amount

7) New lease executed

So Bill, not seeing how this isn't worth the $150 Renewal Fee you're being charged?

PM fee for new tenant lease?

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