IF you own rental property and you’ve hired a property manager for “hands-free” management.
You may have some of the same challenges we’ve had.
We wanted to enjoy the fruits of our business, so we hired a property management company to look after the day-to-day affairs of our properties.
Real life experience has taught us, that… Nobody cares about your money as much as you do.
And this is definitely true with property managers.
Why? Because a property manager gets paid to manage your property, including:
• Collecting the rent
• Leasing apartments and houses
• Dealing with tenant requests, etc.
And not only is there an inherent conflict of interest in some of these tasks…
But people usually give their property manager too much leeway in the decision making process that involves their rental income
So I want to share why you must manage your property manager…
Or risk losing rental income every single month.
#1 – Paying For ‘Theory’, Not Performance
Property managers charge a management fee for the day-to-day management of your properties (e.g. dealing with tenant issues, etc).
This fee varies widely from company to company, not only in the amount charged, but in the way in which it is calculated.
Most companies charge anywhere between 5% and 10% of the actual rents collected each month.
So if your property manager collects $10,000 in rent and you pay a 6% fee on actual rents collected, you’ll pay $600 + taxes.
There are some companies, however, that charge based on the potential rents to be collected each month.
Think about that for a minute.
If your property manager tries to collect $10,000 but succeeds in only collecting $8000, and you pay a 6% fee on potential rents collected, you’ll still pay $600 + taxes.
That’s $120 more than if you had used a company that collects based on actual rents.
I don’t recommend using companies that charge based on potential rents. There’s no incentive for a property manager to work harder to collect rent due if they know they are getting paid anyways.
I recommend you pay for performance, not theory.
#2 – Too Much Tenant Turnover
When a tenant leaves your apartment, property managers also charge a leasing fee for renting the unit to a new tenant.
Leasing fees can add up quickly on any property, and can easily turn positive cash flow into negative, especially when combined with some of the extra costs involved with leasing.
Some companies charge a flat rate (such as $300) to lease an apartment, while others charge 50% of one month’s rent.
I recommend a flat fee instead of a percentage, especially in areas where rents are high and a percentage charge would be higher than the typical flat fee.
Keep in mind that the total cost may be different depending on rental rates in your town or city.
What do you think?
Have you ever experienced any of this?
Leave me a comment!