36 Units: Property Management Incentive

[Kyle Gatesy]

I will closing on my first multifamily property in a few weeks and we are narrowing down our property management options. My preferred candidate met us at a 9% price point and I'm comfortable with that. However, I am looking for ways to structure an agreement with my property management to incentive them to 1) do a great job of maintaining the property and 2) max out the rent potential. Does anyone have some wisdom on how to do that? What kind of terms could be used to incentivize my property managers?

Thanks,

Kyle G

[Scott M.]

Probably not by doing what you just did.  'Hey PM, I want to incentivize you to do a great job for me.  How about we pay you less then your other clients.  But don't worry, I will try and find ways to incentivize you so you might make as much from me as you already do with your exsisting clients.

This is your first deal.  You real estate career may be defined by the next few years. And you are looking for deals.  Hey, I want  you to manage and be responsible for the biggest asset I own but I am not going to pay you your full price, but be sure to look after my asset for me.

I get it, they agreed to it, but my feedback would be to pay them their going rate.  Incentive is something above and beyond.  You are not even paying them their baseline.  How would you like it if the company you for said to you hey we are going to lower your pay by 10% but don't worry, we are going to find ways to incentivize you to earn your way back to what we were paying you before. 

General contractor, plumber, electrician, handyman, property manager and so on.  I have found over the 21 years I have been doing this the best incentive is to be a good a good client.