When we’re talking about the costs of hiring a property manager, discussing it in terms of dollars is a misnomer. The real question is: what is the cost of NOT hiring the BEST property manager for your multi-hundred thousand dollar investment. From persistent vacancies thru poor marketing, bad tenant screening, delinquencies, evictions, damages, the list goes on and on. There are services, risks, and results that don’t translate into a monthly cost. In fact, you can put yourself at risk when you hire a discount manager instead of finding someone who does property management right. The cost is not what you pay, but what you can lose when you hire a bad property manager. In most cases, the difference between a discount manager and a top end property management professional may be as little as $20 per month – and since property management fees are tax deductible, it is worth the extra money to hire the best.
What You Can Expect from Your Property Manager
When you hire a good property manager, your professional will help you improve your cash flow to levels well above what you would earn by managing the home yourself or using a discount property manager. A good property manager will help you with better marketing, better rents, less turnover, fewer vacancies, better tenants, on time rental payments, better maintenance, and discounts on volume pricing for that maintenance. You’ll find your cash flow exceeds what you would receive without your manager. Since property management fees are tax deductible, you’ll find your best cash flow situation can be realized. While a good property manager may charge higher fees, you’ll get more cash flow with their experience and your results will be better outcomes.
Leasing Fees and Management Fees
So how much does it cost? Well, 33rd Company charges a leasing fee that’s equal to one month’s rent. That fee covers the tenant placement, including screenings, showings, the management of move in documentation, and everything it takes to get a tenant in place. Then, there is a monthly management fee which is typically small percentage of one month’s rent. You’ll find that it includes all the day to day maintenance support, tenant relations, obtaining and receiving rent payments, accounting, following up on delinquencies and doing all the other things property managers do to support an active tenant. Some managers will offer their services for much less, but the service won’t be sufficient to promote and protect your greatest investment.
Property Management as Asset Protection
In fact, single family home rentals can represent a multi-hundred-thousand-dollar asset. You might have $30,000 $40,000 in your 401K, but if you have a rental property, it could represent a $200,000 or $300,000 asset in your portfolio. So ask yourself: what do I pay in brokerage fees just to manage my retirement accounts and what should I be paying to manage this larger investment where the risk of loss is substantially higher? You could have bad tenants, an eviction risk, and thousands of dollars in damages during tenant turnover. Persistent vacancy can exceed the damages caused by tenants if you have no income or cash flow. You have to worry about crime or theft during or after a tenancy. For example, copper pipe theft is a danger.
You need an advocate. A good manager will protect your interests and keep you from being a victim of poor advice or poor advocacy. It might cost you more than what you’d pay using a discount manager, but better management brings better results.
If you have any questions about how property management costs can be measured against property management services, please contact us at 33rd Company Kansas City.