Is property management worth it? Many real estate investors are torn between the idea of hiring a property management company and personally managing their rental properties due to several reasons, primarily the cost involved. How much does commercial property management cost and why do many property owners think twice before taking the leap? Here are some facts to help you understand the real score.
Property Management: How Much Does It Cost?
Different property management firms may bill their clients differently. Some charge a certain percentage of the rent (which may be anywhere between 4% and 12%, depending on the services included in the contract and other factors), while others charge a flat monthly rate. There are also some property management companies that bill their clients for the services rendered for a particular period.
The significant difference in fee structures can also be attributed to several factors, including the location, size, type, and condition of the rental property, the services included in the contract, and the prevailing property management rates in the area.
In addition to the monthly management fee, property owners may pay additional fees when hiring a property manager. Specifically, you may be required to pay the following:
- Onboarding fee. New clients may be charged with a one-time onboarding or initial setup fee for setting up an account with a property management firm. The number of units or properties in your portfolio usually determines the amount of the onboarding fee, but companies generally charge $500 or less.
- Leasing or new tenant placement fee. Most property management firms normally charge their clients 25% to 75% (or even up to 100%, in some cases) of the first month’s rent to cover the cost of signing new tenants. This amount can be partially or fully refunded if the tenant fails to comply with the terms of the lease or is evicted before completing their one-year term.
- Vacancy fee. While some management firms charge only when there is a tenant on the property, some charge up to one month’s rent for vacant units to fund the cost of marketing the unit to prospective tenants.
- Reserve fund fee. Property managers usually charge a reserve fund fee to allow them to pay for unexpected future repairs or replacement services at a moment’s notice.
- Maintenance fee. Property managers can also charge fees for property maintenance. This can definitely add to the cost, but it guarantees that all emergency issues will be properly addressed by a qualified maintenance crew without any delays. Some companies do charge a markup on top of the actual maintenance and repair costs.
- Eviction fee. Since evictions can be an ugly and time-consuming affair, management companies often charge property owners a few hundred dollars to compensate for their time and effort.
Moreover, some property management firms may also charge for the following:
- Bill payment fees. For a relatively small fee, you can ask your property manager to handle all the bills related to your rental properties.
- Late payment fee. You should pay the property manager all the applicable fees in a timely manner. Otherwise, you may be charged for late payment.
- Early termination fee. Depending on the terms of agreement with your property manager, you may be required to pay a full month of management fees or risk being sued for breach of contract if you choose to prematurely end your contract.
Is Property Management Worth It?
Despite the additional cost, outsourcing the work to a professional and reliable property management company can bring better results in the long run. Isn’t it better to pay for things that help you save time and money while growing your business, than doing things that take you away from what you want to do and the people you love? For most people, the choice is clear.
However, if you are still not convinced, here is a quick overview of what a property manager can do for you to help you decide whether you need one.
- Set the perfect rent. Thanks to their extensive experience and thorough understanding of the market, property managers can set the ideal rent price for your property to attract qualified tenants while ensuring the profitability of the property.
- Prepare vacant units for occupancy. Property managers can reduce vacancies by marketing, maintaining, and renovating the unit, if necessary.
- Screen tenants. Finding qualified renters is a tough job, but you need to do it right, since the success of your business largely depends on it. Ideally, you want tenants who pay on time, take care of the property, don’t cause any problems, and plan to stay for the long term. To do this, you may need to go through a lengthy process that entails running credit and criminal background checks, verifying employment records, and assessing rental history while strictly complying with anti-discrimination laws. Thankfully, an experienced property manager can make things easier for you by finding exactly the kind of tenants you want.
- Prepare and enforce the lease agreement. With their extensive knowledge of landlord-tenant laws, property managers are in the best position to establish lease terms that uphold the property owner’sinterests.
- Handle tenant complaints and issues. Property managers are responsible for all aspects of the day-to-day operation of the business, including resolving issues concerning the unit or property and any possible conflicts between tenants.
- Collect the rent. You might think that rent collection is a fun job, until you encounter difficult tenants who won’t pay on time. By hiring a property manager, you can avoid this problem altogether.
- Maintain the property. Property managers have an established network of reliable contractors and skilled craftsmen who can keep the property in a safe and habitable condition.
- Manage the budget and financial records. Do you enjoy keeping track of business finances? If not (and most people don’t), hiring a property manager can be a wise move, since they will keep an accurate, updated record of all the property’s income and expenses and even provide professional help during the tax season.
Property Management = Value for Money
Hiring a property manager can give good move, but keep in mind that not everyone provides the same level of service and commitment to the job at reasonable prices. At Tenant Planet, Inc., we offer a better service at a better price. We believe that you deserve to get more from your investment, so we don’t charge you for the services you didn’t use.
Traditional management companies typically charge between $200 and $250 per month for properties that command a $2,500 monthly rental, but with Tenant Planet, Inc.’s RentalWatch ongoing property management, you’ll get the same services at $79 per month. That’s a huge difference!
Are you interested to learn more about us and the services we offer? Visit our main website to see what we have to offer. You may also Request a Proposal or email me at parker@tenantplanet.com for your questions or comments.