Property Management

[Shannon Cannon]

Hello! My husband and I have done a couple flips this past year, but just purchased our first rental property. We originally thought we would just rent it out ourselves, but the more we think about it, we might consider property management.  Is there someone you could recommend in the baton rouge area? I've gotten a couple quotes and seems the going rate is 9-10 % with first months payment as one time fee? Does this seem average? We are getting an insurance quote from Foremost presently, but any advice on that would be helpful as well.  And any good books you can recommend to help gain good advice and wisdom with rental properties?  Thanks so much!!

Shannon

[Ricardo R.]

Shannon, yeah that is an average going rate for property management; first months rent, some do half-month's rent plus a 9-10% of your ongoing rent. Property management really, really, really eats into your profits. If you think about it may eat away as much as 50% of your cash flow, you have to consider that they charge 9-10% based on your rent not net. Really if you ask me, the hardest part of managing your property will be moving in a tenant and move out.... everything in between is super easy. You can find all the tool you need here on biggerpockets and even some other sites, however if are going to spend money make your lease a priority. Go on line and find lease examples and write down things  you didn't think of then go find a real estate lawyer and have him/her draft up a lease merging their standard lease (most re lawyers have a standard lease) with your concerns... it may be as much as $500 or so but, remember you're not just paying for the lease you are paying for representation and the solace that the lease is enforceable. Show, application, background, security deposit, first month's rent, lease and you've done 80% of what a property manager can do for you. 

If you truly can not manage it yourself consider instead paying that 10% to a trusted and vetted general contractor. When you hire a property manager those fees of 1st months rent and 9-10% doesn't cover any repairs that need to be done, they will instead take the order from the tenants, task out a contractor and then send you the bill. If you could find and place a tenant yourself, you could instead hire a general contractor (trusted and vetted) by paying him 10%, in this manner you would essentially be paying him for materials only - cutting out the middle man - sure he/she would collect their fee even on the month's that you don't need them but your stipulation would be that when you do need them, they be available 24/7 and make your work order priority (still cheaper and better than a property manager). Another option is to forgo the entire 10% bit.. and hire a general contractor (again trusted and vetted) as needed, place a key lock box on the property (do not give code to tenants), when something needs to be done, call your general contractor which you have set up ahead of time, give them the code to the key box, have them take pictures before and after, have them send you the bill, verify that the tenants are satisfied and done. 

I hope this helps, my favorite is 'Rich dad poor dad' it's more on investing than 'landlordism'. 

Alex