Flat fee Property management vs. percentage base Property Management

[Sohrab Khosravi]

Hi,

My name is Sohrab and I am from Houston. I Invest in rental properties and I want to expand my business as a property management company, when I research Houston market for management company I can find out two ways that campaign are marketing:

1- Flat fee per month plus first month full rent (half will be for the tenant agent if exist)

2-percentage of the gross rent amount.

I want to know what people thinking about this, and like to see which way is the better way to go.

Thank you in advance for all of your help.

[Sharon Tzib]

Most managers charge both. The first scenario is in the lease up fee, and the second in the month-to-month management fee. Generally lease ups are first month rent, and month-to-month rates are somewhere in the neighborhood of 8-10% of the gross rents (totally negotiable).

As a former PM myself, as well as a customer of PM for years, I can assure you that if a PM's goals are rapid turnover just to obtain the lease up fee, then they will either not be in business very long (due to poor referrals), or they will be shooting themselves in the foot with the inability to collect their monthly fee, since they will be placing tenants who stop paying at some point during the lease term.

As a landlord, have protection clauses for yourself, such as no lease up fee if tenant moves during lease term. And since you want to become a PM, then make it a priority to find the best tenants possible for your clients, and you will soon have a lot of repeat and referral business. 

Also, I'm sure you know in order to conduct PM services for clients, you need a real estate license in Texas. Good luck!