What should I charge for Property Management?

[John Sigs]

This is privately arranged property management.  I am not a property management company.  A friend has offered to pay me to manage a house he owns in the Greater Hartford area.  I have not see the house yet.  Here are the details thus far:

There are 4 bedrooms.  He thinks they can rent each room out for $800 for a total of $3200/month

He has offered 10% for me to manage the renting of the rooms to the tenants and to take care of the lawn and snow.

This initially sounds low to me.  From my research here on BP, the average is 10% plus one month's rent ($800) every time I would have to find a tenant (does this mean he would pay me $3200 to find the initial tenants?)

Also, most property managers dont actually do the lawn and snow, correct?  They coordinate with subcontractors to take care of the lawn and snow, right?

Just trying to figure out what I should be negotiating for.  Thanks in advance!

John

[Nathan Gesner]

Quote from @John Sigs:

A professional charges 10% plus a month's rent for the leasing fee. With that comes knowledge of the law, experience, skilled screening and selection, established policies and procedures that prevent problems or nip them in the bud, professional marketing, and so much more. You have no experience, no training, no special skills.

Why should your friend pay you the same amount he would pay a professional? Why would you think you are worth the same as a professional? 

I think your friend should hire a pro. If you manage it and screw something up, you'll cost him a lot of money and you'll lose the friendship.

[Kyle Wheeler]

Quote from @John Sigs:

This is privately arranged property management.  I am not a property management company.  A friend has offered to pay me to manage a house he owns in the Greater Hartford area.  I have not see the house yet.  Here are the details thus far:

There are 4 bedrooms.  He thinks they can rent each room out for $800 for a total of $3200/month

He has offered 10% for me to manage the renting of the rooms to the tenants and to take care of the lawn and snow.

This initially sounds low to me.  From my research here on BP, the average is 10% plus one month's rent ($800) every time I would have to find a tenant (does this mean he would pay me $3200 to find the initial tenants?)

Also, most property managers dont actually do the lawn and snow, correct?  They coordinate with subcontractors to take care of the lawn and snow, right?

Just trying to figure out what I should be negotiating for.  Thanks in advance!

John

Hey John,

A couple of things here - Do you have rental Property/have you ever managed property before?

If no to either I would be very upfront with him - letting him know that you are not a professional, etc.

Average monthly management fees for LTR are 8-10% with a 50-100% lease-up fee per unit. 

Does your friend want to rent out the rooms long-term? 12 months +? What he wants to do here is more of a co-living situation where you are renting out all of the rooms inside the property. This strategy requires a lot more work. 4 individual leases, home rules, and common area rules. Is he furnishing the home? You need to set policies and procedures around all of this.

If I was managing this strategy I would charge 12-15%.

You are correct regarding lawn and snow. Typically PM company will not "include" this. This is something you would contract and charge the owner. You could do this yourself and also bill the owner for this if you would like.

I would say it really depends on if you have property or have managed rental property before. If you have not then going from never doing this to managing a more management-intensive strategy like co-living may not be a good idea. I have been in Property Management for over 6 years now and I am very familiar with the co-living strategy, if you have any questions feel free to reach out!

Thanks, Kyle

[Chris Rich]

Quote from @John Sigs:

This is privately arranged property management.  I am not a property management company.  A friend has offered to pay me to manage a house he owns in the Greater Hartford area.  I have not see the house yet.  Here are the details thus far:

There are 4 bedrooms.  He thinks they can rent each room out for $800 for a total of $3200/month

He has offered 10% for me to manage the renting of the rooms to the tenants and to take care of the lawn and snow.

This initially sounds low to me.  From my research here on BP, the average is 10% plus one month's rent ($800) every time I would have to find a tenant (does this mean he would pay me $3200 to find the initial tenants?)

Also, most property managers dont actually do the lawn and snow, correct?  They coordinate with subcontractors to take care of the lawn and snow, right?

Just trying to figure out what I should be negotiating for.  Thanks in advance!

John

As others have stated, depending on market management fees run 8-12% a month, plus a leasing fee o 40-100%.  Lawncare is either handled by the tenants or a vendor at the owner's expense.

.... BUT I think you are playing with fire.

My primary job function is outside sales building relationships with realtors.  Some realtors will lease the property for their clients and out of my hundreds of agent partners only 2 do even close to as good of a job as a PM company, and both have been doing it for 15+ years.  But almost every realtor who does provides a level of service much lower than a PM because they do not:

- Properly document the condition of the property before tenants move in, which hurts the owner on the back end when there are damages.
- Market the property as well as a PM company, which increases vacancy periods and costs the owner money.
- Properly / thoroughly screen the tenants, which increases the likelihood of a bad tenant and damages

Now, it can be done, but if you aren't even sure of what the industry costs are for PM services, I highly doubt you are currently skilled enough in the area to risk doing it. I would be very careful if you move forward and do it because anything that goes wrong is going to fall back on you and if you do not have a management agreement in place you could be opening yourself up to lawsuit if you fail to deliver on the expected services.   

[Drew Sygit]

@John Sigs  a couple things to add to what's already been posted:

1) Appears you need to be properly licensed to manage properties you don't own:
https://www.allpropertymanagement.com/resources/property-man...

2) Renting-by-Room has so many headaches, 10% of the rents is a pretty low amount. Usually it's 15-25%.