Property Management Fees

[Shannon Berry]

I am wanting to enter the REI world but will not have time or skills to self manage. Looking for a property manager and think I have found one but wanted to make sure his fees are in line with the norm:

9% of all rent collected.
$100 placement fee when securing a new tenant.
10% markup on all vendor contracted maintenance and repairs

Does these numbers sound like they are in the ballpark for Midwest/Indiana?
 

[Christian Styles]

This seems to be in the ballpark, but I would have a few follow up questions,

 Is this their entire fee structure? 

Typically tenant placement is the first month of rent so 100 bucks seems a little on the low side, what are they doing to advertise your property that they are able to do it for only 100 bucks?

I know we typically charge 5 percent of vendor maintenance and repairs but 10 may be the norm in your area. (I'm in Cleveland, OH) 

I'm happy to look over your PM agreement if you want an extra set of eyes, always seem to find something of value in those! 

Can you tell us a little about the property they would be managing too? That information is helpful when trying to asses fees. 

Also, Congratulations on entering the wonderful world of REI! Happy to have you here!

[Thomas Talbert]

Quote from @Christian Styles:

This seems to be in the ballpark, but I would have a few follow up questions,

 Is this their entire fee structure? 

Typically tenant placement is the first month of rent so 100 bucks seems a little on the low side, what are they doing to advertise your property that they are able to do it for only 100 bucks?

I know we typically charge 5 percent of vendor maintenance and repairs but 10 may be the norm in your area. (I'm in Cleveland, OH) 

I'm happy to look over your PM agreement if you want an extra set of eyes, always seem to find something of value in those! 

Can you tell us a little about the property they would be managing too? That information is helpful when trying to asses fees. 

Also, Congratulations on entering the wonderful world of REI! Happy to have you here!

 Agreed $100 does seem cheap for a placement fee but 10% is the market down in Austin. I would ask what all goes into their placement fee because they may do the bear minimum and the marketing for the property isn't that great of that $100 is true. 

[Adam Bartomeo]

Normally, there are a bunch of hidden fees that you need to look out for when you read the contract. $100 is WAY too low and they will be losing money when finding a tenant.

[Michael Smythe]

@Shannon Berry seems to be a bit light.

$100 Placement Fee? What SPECIFICALLY does the include? Are they going to put on MLS and what will they offer other agent that brings a tenant? What other websites will they place it on?

Lease Renewal Fee?

Eviction Fee?

Inspection Fee?

[Jake Brooks]

Following along with what others have said, the $100 placement fee seems very low. When will they start charging the management fee? I would check to make sure they aren't charging a management fee until rent is collected. Also keep in mind that fees and charges matter, but a long term vacancy will hurt you more in the long run than a company who can better market the property even at a higher fee structure. Make sure you know all the fees going in, is there a steep onboarding fee? Will they charge for inspections, how soon do you have to give notice in the event you want to cancel and what would the buy out look like for the contract? When it comes to properly marketing, screening and maintaining a property the cheapest route isn't always going to be the best route, if you have any questions feel free to reach out! 

[Cody Journell]

Seems pretty in line with what we charge. If you ever need anything in VA let me know!!

[Shannon Berry]

Quote from @Michael Smythe:

@Shannon Berry seems to be a bit light.

$100 Placement Fee? What SPECIFICALLY does the include? Are they going to put on MLS and what will they offer other agent that brings a tenant? What other websites will they place it on?

Lease Renewal Fee?

Eviction Fee?

Inspection Fee?

 Thank you for your replies.  For those of you who are property managers would I be able to get copy of your agreements so i can view different ones to learn what is average?  

[Kyle Wheeler]

Hey Shannon,

The Property Management fee of 9% is in line.

The $100 placement fee seems very low, I would ask what they are doing to market the property? Do they do self showings or will they stick a lockbox on the property and do virtual showings only? Professional pictures/videos? What sites will they post it to?

The maintenance markup is in line also.

I will be happy to read over your pm agreement if you would like!

Good Luck!

[Michael McVety]

Quote from @Shannon Berry:

I am wanting to enter the REI world but will not have time or skills to self manage. Looking for a property manager and think I have found one but wanted to make sure his fees are in line with the norm:

9% of all rent collected.
$100 placement fee when securing a new tenant.
10% markup on all vendor contracted maintenance and repairs

Does these numbers sound like they are in the ballpark for Midwest/Indiana?
 

Hi Shannon.

Property Management fees do change depending on the market and service levels a company provides.  But that is in line.

As mentioned, the cost of finding a new renter for $100 makes zero economic sense.  I worry when I see a company cost (property management or otherwise) that does not "make sense" for the service that is provided.  In this case, they either have to make money elsewhere (hoping you have an old property that needs a lot of repairs) or they are going out of business.  I have seen several management companies in this area try to be "cheap" and they fail.  So please be careful.

The 10% maintenance cost is charged by a number of companies and is fine.

Do they not charge another fee for renewing a lease?

[Theresa Harris]

Seems fine to me. I also agree the placement fee is a bit low.  I'm not in the midwest, but I do not pay a full month's rent.  I do pay a flat fee around $250 plus advertizing costs which to me is reasonable.

[Peter Stewart]

The 9% rate is under the norm for Indianapolis. Most PM's in the area charge 10%. Now, once you get a few under management with them, you might be able to negotiate that down a little. But at least for the first one, 10 is the norm.

I agree with the replies so far that the $100 placement fee is way too low. I typically see 1/2 to a full months rent. 

Like with anything in real estate, you get what you pay for. Be wary of a PM that seems "cheap" with their pricing. A bad PM can cost you a lot of money in the long run, and a good one can save/make you more than you would have saved using the cheaper option.

[Nathan Gesner]

It doesn't matter if these fees are normal, high, or low. What matters is what value are they providing for the fees they charge. You need to know what a good PM looks like, then screen several until you find one that provides the appropriate value for what they charge.

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Try interviewing at least three managers.

1. Ask how many units they manage and how much experience they have. Feel free to inquire about their staff qualifications if it's a larger organization.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, a leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. A tenant complaining online might indicate that the property manager handled them appropriately, so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything possible to expose properties to the broadest possible market? Are their listings detailed with good-quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

[Michel Lautensack]

Quote from @Shannon Berry:

I am wanting to enter the REI world but will not have time or skills to self manage. Looking for a property manager and think I have found one but wanted to make sure his fees are in line with the norm:

9% of all rent collected.
$100 placement fee when securing a new tenant.
10% markup on all vendor contracted maintenance and repairs

Does these numbers sound like they are in the ballpark for Midwest/Indiana?
 

 These amounts are reasonable but depends on what area - for example, in Philadelphia we charge 8% for full-service PM but charge 20% markup on maintenance and a full month for find a tenant - would call a reference or two before you jump in