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From my latest newsletter may be of interest to some of you.
Running costs, soft costs, ongoing charges or just plain another #!*)%^%# bill.
If you own real estate you are going to incur costs.
One unavoidable cost is property management and my observation is that many people get hung up on the % and don’t see the wood for the trees as it were.
I have used a number of companies over years including doing it myself and the ACTUAL cost of management is unrelated to the % fee in fact.
The REAL elephant in the room with managers is how they handle inspections and maintenance.
If a tenant leaves unexpectedly and the manager doesn’t know because they aren’t inspecting the property then it is 99% likely to get trashed. This will typically be uninsurable and can run you tens of thousands.
If a property isn’t being inspected then when the tenant rings wanting a list of things done at the landlords expense the manager typically does the work and charges YOU for damage the tenant did!
Lastly some companies have a habit of “nickel and diming” clients in low margin industries like property management. They take a margin on all service calls, maintenance items and in bad cases they simply invent small items and charge you without actually doing anything.
So here’s a real example of one of my own properties and a friend of mines recent experience.
Rent $1000 a month
Manager A only charged my friend an 8% fee.
On paper he had a cost of $960
But due to the lack of inspections and diligence he got a $500 bill one month, $250 3 months later and then the tenant vacated and it took the manager 2 months to discover the vacant property.
$2000 loss of rent plus more damage but we’ll leave that out for now.
So his $960 ended up at $3710.
Manager B charged me 10% so their expensive fee is $1200.
In addition they charge me $70 every quarter to inspect the property so my minimum cost is $1480.
Both houses were almost identical but my maintenance costs were $500. PLUS they kept the property rented and the tenant paying. So I had 0% vacancy and 0% non collection. At the end of the year my property is also in much better shape as the tenants know they are being visited regularly so take more care.
Total cost $1980 almost HALF of the “cheap” fee.
So if your management is not working for you make sure you ask yourself the right question. Are you saving money or losing it?
And if you’re in Memphis email me, if you need help with getting your management straight!
Running costs, soft costs, ongoing charges or just plain another #!*)%^%# bill.
If you own real estate you are going to incur costs.
One unavoidable cost is property management and my observation is that many people get hung up on the % and don’t see the wood for the trees as it were.
I have used a number of companies over years including doing it myself and the ACTUAL cost of management is unrelated to the % fee in fact.
The REAL elephant in the room with managers is how they handle inspections and maintenance.
If a tenant leaves unexpectedly and the manager doesn’t know because they aren’t inspecting the property then it is 99% likely to get trashed. This will typically be uninsurable and can run you tens of thousands.
If a property isn’t being inspected then when the tenant rings wanting a list of things done at the landlords expense the manager typically does the work and charges YOU for damage the tenant did!
Lastly some companies have a habit of “nickel and diming” clients in low margin industries like property management. They take a margin on all service calls, maintenance items and in bad cases they simply invent small items and charge you without actually doing anything.
So here’s a real example of one of my own properties and a friend of mines recent experience.
Rent $1000 a month
Manager A only charged my friend an 8% fee.
On paper he had a cost of $960
But due to the lack of inspections and diligence he got a $500 bill one month, $250 3 months later and then the tenant vacated and it took the manager 2 months to discover the vacant property.
$2000 loss of rent plus more damage but we’ll leave that out for now.
So his $960 ended up at $3710.
Manager B charged me 10% so their expensive fee is $1200.
In addition they charge me $70 every quarter to inspect the property so my minimum cost is $1480.
Both houses were almost identical but my maintenance costs were $500. PLUS they kept the property rented and the tenant paying. So I had 0% vacancy and 0% non collection. At the end of the year my property is also in much better shape as the tenants know they are being visited regularly so take more care.
Total cost $1980 almost HALF of the “cheap” fee.
So if your management is not working for you make sure you ask yourself the right question. Are you saving money or losing it?
And if you’re in Memphis email me, if you need help with getting your management straight!
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