How much Does Property Management Cost in California? And what are you paying for?
If you’re like most people, you’re probably vaguely aware that the cost varies by property type, region, company, and even services offered within companies, but let’s drill down into the pricing and services landscape to get a little more clarity.
Unluckily, Property Management is an industry notorious for having hidden fees, no advertised prices, case by case price offerings etc. Due to this lack of transparency, I won’t be able to give you the specificity on our competitors that I wish I could. However, I can provide ranges and averages of various costs for the industry in our areas (San Diego and the Bay Area of California). I am also able to provide the specifics for our own company, Tenant Planet, to help inform you of how our fees relate to the greater ecosystem we operate in.
Property Management Industry Standard Fee:
The traditional property management model for a single family home, is termed, “Full Service” and is a combination of leasing and ongoing management. Nearly all property management companies operate within this model and offer similar services for roughly the same price. Those costs are generally: 7-10% of every month’s rent for ongoing management and a moderate leasing fee, usually from $500 to a 1/2 month’s rent or more, when a tenant is initially placed.
At Tenant Planet, we offer our management “a la carte” which means you can have our ongoing management or tenant placement, or both, if you desire. We charge a flat $79 for ongoing management and charge 1 month’s rent for tenant placement, which comes with a 2 year tenant placement guarantee.
For a small to medium sized multi-family building (4-25 units), you can expect a lower management fee. Our flat rate ongoing management decreases per door until about 12 units where it flat lines as low as $39/door in San Diego and $50/door in the Bay Area for a typical well-maintained property.
What that looks like is:
1 unit = $79/mo
2 units = $150/mo
12 units = $600/mo (in the Bay Area) or $390/mo (in San Diego)
It’s worth noting that for property management companies with higher continuing costs i.e. 8%, 9% or 10% ongoing management fees, typically the leasing fee will be on the lower end of the spectrum ($500ish, or possibly even $0). Conversely, those with lower percentage fees tend to charge a higher leasing fee, as we do at Tenant Planet.
It’s important to know that cost is not the only consideration. Property management companies’ customer service levels can vary greatly. If you are getting charged “BMW” pricing but you’re getting “Ford Focus” service, you will likely be frustrated and disappointed, but if it’s “BMW” pricing for a “Ferrari,” the value proposition is in your favor.
As discussed, the two “Umbrella Services” that make up the overall offerings of property management are the leasing and the ongoing management. Let’s look closer at the services to expect and evaluate when analyzing pricing.
Ongoing Management refers to the monthly and continuing services involved in maintaining the property and managing the tenancy. We call ours RentalWatch™ at Tenant Planet. It consists of a handful of granular services:
- Rent Collection
- Maintenance Coordination
- Lease Enforcement
- Accounting and Bookkeeping
It seems basic, but it is important that each one is executed effectively. There are a few things to keep in mind, beyond just the quality and level of the services as well.
Many management companies include their own profit component into maintenance expenses when they arise. This is a question you should ask as you shop around. Sometimes it is only for large projects and it is a clearly specified fee of 2%-10%, and other times, which is really unfortunate, the profit component is non-specified and added “ad hoc.”
As a general rule, if a company is not transparent or their policy is not clear and standardized, I recommend proceeding with caution. For Tenant Planet, we charge no mark-up and generate no profit from maintenance. The vendor’s estimate/invoice is a direct pass through to the client, which is good for YOU.
Most companies also operate on an annual Property Management Agreement Contract. Tenant Planet is the only company I am aware of that does not utilize a long-term contract. We have chosen to avoid it is because we believe the modern market requires consumer flexibility and service provider accountability. We’re proud to honor both.
Some companies are also offering certain “guarantees” or “warranties” such as eviction protection, damage waiver, etc… These are often worth considering and not something Tenant Planet currently offers. We do offer a tenant placement guarantee, but we do not currently warranty or protect against tenant damage, pet damage, or evictions.
These warranties are worthy of exploration as a method for reducing risk, but they should be looked at closely to make sure the cost vs. benefits are clearly understood and that the value received is worth the expense.
The Tenant Placement service, installing a qualified tenant, can vary widely in cost and often is dependent upon the cost of the ongoing management, AND the level of service provided. At Tenant Planet, we call this service TenantMatch™ and we charge one month’s rent. We really earn it to get in the best tenant out there as quickly as possible.
Let’s dig deeper into Tenant Placement services:
- Property Preparation (getting the property rent-ready)
- Some firms offer this as a secondary service at an additional cost (and may include the maintenance mark-up we discussed earlier).
- Some offer this service as included, like we do.
- And others simply leave it to the owner to prepare the property for rent.
- Marketing of the Property.
- Some management companies take iphone photos and post only on craigslist.
- Most use medium-to-high quality photos and post on a dozen or so websites.
- Other companies, like us, pay a lot of attention to quality marketing, use a syndication platform, and get high quality marketing to hundreds of websites.
- In our Silicon Valley organization, we use a 3d Virtual Tour, Digital Floorplan, Drone Photography and Video, a Video Walk-through and Professional Photography. In San Diego, we currently utilize Professional Quality Photography (and will roll out the rest of the services in 2019). We market it out to +450 websites and also do a targeted, paid Fa.56555cebook campaign.
- Inquiry response
- Your property manager needs to respond timely to anyone who reaches out and demonstrates interest in the home; that contact should be a high priority.
- All management companies generally operate in a 9-5 capacity and show the home during normal business hours.
- Some companies are converting to “remote showings,” giving potential tenants access to a special lock box with a 1-time code and allowing them to view the home on their own, unsupervised.
- This method scares me a bit—
- When someone is unsupervised in your home, you really don’t know what they are doing there, and unfortunately, that leaves you vulnerable.
- We once had a group of tenants look at one of our rentals and purposely leave a window unlocked to come back later to steal the appliances. Thankfully, we had an agent present to notice and lock the window, or it would have been a big problem.
- We are the only company that I know of that has 24/7 availability for showings.
- Because our agents are licensed commissioned realtors, if they need to show the property on weekends, mornings, or nights, they do.
- Tenant Screening
- Most companies run credit and background checks and verify income, but some take a lax approach to verification, which can lead to messy and expensive problems later. Make sure your property manager is thorough in this regard.
- All companies should also be check references and speak to employers too.
- We require a minimum 640 credit score, though the client has the option to adjust that. Most companies’ require something in the range of 620-680.
- Also, it is generally standard that managers require no evictions, convictions, bankruptcies, or accounts in collections, but you will want to verify that as well.
- Lease Preparation
- About 90% of companies use the CAR (California Association of Realtors) Lease, which is a really great “off-the-shelf” option.
- We have our own lease, drafted by our attorney, which is about 50% longer than the CAR lease and about as landlord friendly as a lease can be. This is a recent development for our team, as we’ve used the CAR lease on over 1000 leases and never had a problem, but we have decided to take it a step further.
- We take the legal side of the business more seriously than most. We also have a general council for our clients benefit at no extra cost.
- Asking your property manager to review the lease with you, either before hiring them or before they place a tenant, is a good idea.
- Though it will be the property manager who is signing the lease on your behalf (based on your agency relationship with them provided in the Property Management Agreement you’ll execute), ultimately, you are responsible for adhering to your side of the contract and, if you were to part ways with that manager, you would also be responsible for enforcing the tenant obligations as well.
I will offer up one final piece of advice. When you are selecting a property manager – costs, services and service level, procedures…etc all matter, but I highly suggest you also use your “gut” to help make the decision. Select the company you are comfortable with, who you trust.
Property Management is not an easy business, there are a lot of variables, with high-risk situations, and potentially serious outcomes.
While the typical day to day course of business with a company is important, think long and hard about who you would want to deal with in the event of an emergency or catastrophe— although they are rare, and it hopefully won’t happen to you, if it should, you want a first rate company you can trust and count on to work with, because when things do go wrong, they can go very wrong. Tenant Planet is your best friend in that scenario. We’ll be there for you.
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