What Do You Charge?
Of course, you want to know what your potential new property manager is going to charge. And that’s a question I usually get asked when I first start talking to a potential new client. However, before you ask what they charge, first find out what they do. No company is alike, and if you base your decision solely on what the monthly management fee is, you might end up quite disappointed in the amount of money you actually end up “saving”.
There are many different ways to manage a property. All property management companies are different – some are more white glove where they include lots of services, and others are more bare bones where they offer just a basic service. You no doubt will have a hard time finding two companies that are exactly alike and one is way cheaper than the other. The beauty of it is that you have plenty of property management companies to choose from, and you can research and see who will be the best fit for what you’re looking for.
Let’s break down a little math. A percentage off a monthly management fee is going to be about $15-20 a month, so that’s like $180-240/year savings. You need to make sure that little amount of savings is going to be worth other service levels that you might be missing out on, such as vacancy rate, using proper vendors, tenant screening, etc.
If we get the rental property rented even 3-5 days faster than a cheaper company, that alone is going to shave off that extra $180/year. And we actually lease our properties much faster than that – our average days on market is over 2x’s – almost 3x’s – faster than the average on the MLS.
Another major thing to consider is what the rental property management company is doing to encourage their tenants to renew. Vacancy is the biggest expense of owning a rental property, so having a high turnover rate will cost you a lot of money. What is their process on renewals? When do they start seeking out a renewal for the tenants? What are they doing to keep the tenants happy to encourage them to renew?
Don’t forget about tenant screening. How does this property management company screen tenants? What is their eviction rate? A bad tenant will end up costing you way more than that little bit you saved in management fees. In the 10+ years that I’ve been managing rental property, I’ve had 3 evictions.
And then of course you’ve got maintenance costs. Is the cheaper property manager providing “in house” maintenance, where they are making a profit on any maintenance at the property? Are they properly vetting their vendors, are all of their vendors insured? Are the vendors doing the job right the first time, so your service calls are limited?
So yes, it’s totally ok to ask about the monthly management fee, and I encourage you to do so. But, don’t let that be your ultimate deciding factor. The cheapest company will not end up costing you the least amount of money.
I hope this video helps provide you with some insight as you research property management companies. I’d love to help answer more of your questions. Call me at 636-707-2000.