Property Management Expense ?

[Kyle M.]

How do we factor in property management expense into cashflow?  Obviously we factor in the percentage each month, but how about the bonus they get when they find a new tenant?

Hypothetically lets say a property management company is taking 8% of monthly rent and a full month's rent when they find a new tenant (quote I got today).  I do not plan on using property management (yet) as this is my first rental.  But I would like to cover all my bases and see if I would still have a profitable rental if I decided to use it.

I believe it depends highly on the neighborhood that we will be renting in.  How does this average out?

For example: The area that I am looking in is not a great area but by no means a ghetto.  $70K property.

Cash flow:

Rent - Mortgage (insurance inc) - tax - maintenance (10%) - vacancy (10%) - property management

$1100 - $320 - $225 - $120 - $120 - ? = +315 (before PM)

[Mike Ritter]

I joined BP about a month ago and from what I have read it seems that a majority of the posts feel PMs are out to get everyone and take their money.  Yes, there are some PMs that are not good but there are good ones out there. 

I am a PM myself and strive to treat any property that I manage as if it were my own.  A PM is there is look after your property while you are working, on vacation, looking for more real estate, etc.  I do charge a mgmt fee, a leasing fee and a renewal fee.  Any other fee that is charged is agreed upon when the client signs up with me to manage the property.  So there are no hidden fees.

These fees are necessary to cover the costs associated with managing the properties.  The PM also needs to earn a living since I am sure no one else here works for free.  If you manage your 1 or 2 units it is pretty easy to do.  Once you start managing in the 100's of properties there are some necessary expenses that a 8% monthly management fee is just not going to cover. 

Many might think that a PM just sits back and waits for the rent to come in so we can get our percentage but that is FAR from what happens.  

Remember a good PM is available in some capacity 24 hours a day 7 days a week to look after your property.  Looking at it another way a PM is making pennies per hour to look after your 50k, 100k, etc investment.  I think that is a pretty good deal.