First Property and Property Management Fees

[Tristan Colborg]

Hey BP community! I just closed on my first property and I am in the process of getting things set up for property management. I met with a couple of different companies, and feel like I know who I am going to go with. Their property management fees seem reasonable, but I have no experience to compare them. Below is an outline of what they charge, what do you guys think is this pretty typical?

[Nathan Gesner]

Originally posted by @Tristan Colborg:

@Caleb Heimsoth @Peter Tverdov @Nathan Gesner @Kenny Dahill

So I have reached out to two additional PM companies and waiting on one more. Here is what I found:

• Property Management Fees all are at 10%
• Eviction Charges range from $400-$550 
• Lease Renewal Fees range from $99-$250
• Utility Pricing(Turn On Appointments) range from $75-$100
• Service Call Charge $75 - $95

I know it is only a sample size now of 3 companies total, but after reading everyone saying I am going to be nickel and dimed to unprofitability little worried. 

Do I just go with some mom and pop PM company?

Self manage at a distance and try and pay my agent to show the property?

Cheaper doesn't always mean you make more money!

Eviction cost up to $550. More importantly, how often do they evict? I want someone that understands the process well, always wins, but rarely has to use it. I've been in court dozens of times and never lost once. Almost all of those are tenants that were placed by the owner and then I was hired to fix their mistake. The last tenant I placed and also evicted was in 2014. My point is, how much I charge for an eviction is less important than how often I evict, how often I win the eviction, and who I'm evicting. Another agent may charge less or evict less often but they are always evicting tenants they've placed.

Leasing fees are common but there are other questions to ask. After placing a tenant, how long do they generally stay? If the PM has high turnover, you'll pay the leasing fee every year. If tenants like the company and the rental, you may only pay a leasing fee every 3+ years. You also need to know what happens if a tenant breaks their lease early. You shouldn't have to pay the leasing fee more than once a year so if the tenant leaves early, the PM should either place someone for free or make the departing tenant pay their leasing fee. 

Lease renewals should include a mandatory rent increase of 2% - 4% which will cover the lease renewal fee and it's well worth it because you are avoiding a vacancy and keeping up with market rates.

It sounds like utilities require someone to be present to start service. If that's the case, you'll have to pay your PM or hire someone else to handle it for you. That makes this fee a non-issue.

You'll have to explain the service charge because I don't understand. Is the PM charging you $75 on top of the $75 charged by the plumber?

 I've crunched the numbers for my owners and they will typically pay 10% - 11% of their annual income for my services. In exchange, they get tenants that are well screened and managed. They have an almost non-existent risk of eviction. When tenants break the lease, my owners are not charged a leasing fee and my policies almost always put more money in their pocket! I keep rentals at peak market rates, fill them quickly, and keep happy tenants. Fewer than 1% of my tenants leave owing more than their deposit will cover. I know the law and protect owners from lawsuits. I have professional policies and procedures in place to act quickly and decisively when something goes wrong. I have strong relationships with contractors that ensure the job is done quickly, correctly, and at a fair price. The list goes on.

I manage 350 units and over half of them were previously self-managed. They all came to me in some form of distress after dealing with one bad tenant after another, renting below market, and losing tens of thousands in rental income, damages, or cleaning. About 80% of them make more money after hiring me then they ever did managing on their own. I protect their property, their income, their time, and their sanity.

You can save some money by self-management but you'll still have to hire someone to fulfill certain tasks and it may end up costing you far more due to the mistakes you make.