Property Manager Rates

[Sandy Keller]

I would really like to buy my first duplex sometime this year.  (I am still learning and analyzing so nothing in the works at this time)  However, when it comes to property managers, what is the going rate I should expect to spend?  Are the additional fees they charge as well as a percentage of the rent?  Currently my Mom has a manager for  her rentals in the Chattanooga area and his only charge is 10% of the rents.  However, he is getting older and if I would to get my own unit(s) I would be interested in getting a different manager who is not getting old enough to retire in the next 10 years, and who is familiar with and practices "Bigger Pockets Mentality"  I have learned a lot in the Bigger Pockets Managing Rental Properties book.  However, I still want the face of another human between me and my tenants.  :)  How much would that cost me and who do you recommend?

[Brian Levredge]

I own a PM company here in Chattanooga.  Fees are one thing (and I'll get to in a minute) but there are other, more important questions you need to be asking, IMO.  First, what is your goal with the property?  What is your rental philosophy?  On that second one, what I mean is as an owner how will you want to handle maintenance and capex long term?  That matters and can have a big impact on a property's value in the medium and long term.  Regardless of your answer, you want to make sure your PM is aligned with them.  

You'll also want to set expectations and make sure they PM can adhere to them.  How will communications be handled and in what time frame? What are maintenance thresholds, and so on?  This will be partly how you hold them accountable going forward.  

As for fees, 8-10+% is what you should expect to see.  It will vary somewhat based on rent range and location.  Leasing fees of 50% of the first month's rent are quite common, but you'll want to find out about other fees.  Set up fees, Lease renewals, vacancy fees, eviction fees, and so forth are all somewhat common.  Maintenance markups are also a big one.  That can be 15% at the low end and go up from there.  If you buy an older property with a bunch of deferred maintenance and opt not to address it at the outset you'll get eaten alive on maintenance costs. Most small PM companies derive up to 50% of their revenue from maintenance markups.