Turnkey Company Fees

18 Replies

Greetings BP!

What kind of fees should one expect to pay a PM company? Are fees like these common for most PMs?

- Account Setup Fee

- Leasing Placement Fee

- Renewal of Lease Fee

- Bill Collection & Payment on my behalf Fee

- Site Visit Fee

I could potentially work with a turnkey company that not only provides properties but also provides the PM service. It just seems as if the monthly 10% of using the service could increase significantly if i take into account all of these fees. There are some I left out too so there’s more.

Any advice?

TL;DR; No they should not be charging all of those fees.

I'm starting my own turnkey provider company.
From my own research, there a ton of different turnkey provider all with different business models.

The top quality turnkey provider, from a investor's point of view, would not charge you miscellaneous fees.
I guess it also really depends on the market you are in.

In my opinion the 10% should include everything in it already.
I am going for a flat fee per unit rather than a percent, it is not like it takes a ton more work to rent a unit right outside of downtown area. If the unit is really nice it should rent as easily.

I'm in general against the percentage approach.

I have one property for sale right now, I'm based out of Halifax, NS, Canada.

I haven't switched to doing this full time just yet, and I'm not registered as an actual company yet, which is why I'm saying that I'm still setting it up.

But the way I see it, a turnkey provider should make the whole experience straight forward and worry-free.
It includes a simple monthly fee for PM and warranty on the work done on the property, since you are paying a premium on the property when it is through a turnkey provider.

@Terence Hyacinth I'm actually in Halifax itself.
The current property is in Fairview, just outside the peninsula.
I also have two more on the go right as you get into the peninsula on Bayers Road.
If you would like more details, send me a private message.

Considering I'm not fully established with a reputation yet, I'm selling them at a lower price they I would usually sell them.

@Alejandro Hayden Hi! I suppose fee structures are different across the country, but where I invest in Indianapolis, it’s typical to pay lease up fees, a renewal fee, and 10% PM fee. The extra charge for leading up and renewal is because the lease up agents are sometimes contract employees and this is how they get paid. The 10% management fee goes to the PM company each month to oversee your property. Those other fees you listed must be something maybe a national company charges? I haven’t seen those fees with any of the PMs I’ve worked with in Indy.

Originally posted by @Andrey Kulakevich :

TL;DR; No they should not be charging all of those fees.

I'm starting my own turnkey provider company.
From my own research, there a ton of different turnkey provider all with different business models.

The top quality turnkey provider, from a investor's point of view, would not charge you miscellaneous fees.
I guess it also really depends on the market you are in.

In my opinion the 10% should include everything in it already.
I am going for a flat fee per unit rather than a percent, it is not like it takes a ton more work to rent a unit right outside of downtown area. If the unit is really nice it should rent as easily.

I'm in general against the percentage approach.

 Unfortunately that ain't gonna work. A business needs to be profitable to keep the doors open my man. Don't try to reinvent the wheel, your business plan doesn't cut the mustard.... However you wanna phrase it, you wouldn't be able to maintain profitability running a property management business with nothing more than a 10% monthly PM fee. Most people are oblivious to this but Property Management has the thinnest profit margins in the real estate space. 

I have to agree with James.  A property management company would have to be desperate and hurting to accept a low fee that does not make them profitable.  And worse times would likely be in the future.  Or they will knickle and dime you on other fees.

@James Wise and @Ryan Moeller If the business was simply just property management then, sure it would make sense to charge 10%, cause you want a decent profit.

At the same time, it really depends on the neighborhood and property to determine how much work will be involved.

Beyond the initial process of finding a tenant, which if screened well should be there for a while and not cause any issues. Property management takes barely of your time. My involvement with a property I own consists of a text message once a month with a minor issues. Which I just transfer to my handyman and that is about it.

I single person could manage over 50 units easily those days.
Again it depends on the neighborhood and state of the house.

@Alejandro Hayden That is a difficult question to answer without knowing the laws on the books for the state.  However Lease up fee, management fee(Monthly ) and maybe a project management(Rehab fee).  Seems like this company will nickel and dime you man.  All the best to you.

Originally posted by @Andrey Kulakevich :

@James Wise and @Ryan Moeller If the business was simply just property management then, sure it would make sense to charge 10%, cause you want a decent profit.

At the same time, it really depends on the neighborhood and property to determine how much work will be involved.

Beyond the initial process of finding a tenant, which if screened well should be there for a while and not cause any issues. Property management takes barely of your time. My involvement with a property I own consists of a text message once a month with a minor issues. Which I just transfer to my handyman and that is about it.

I single person could manage over 50 units easily those days.
Again it depends on the neighborhood and state of the house.

 Lol well this isn't really a my opinion vs your opinion kinda debate. I am telling you as a fact it would be an unprofitable business model. This has been proven time after time nation wide. 

As for your thoughts on what's actually involved I think you're a bit too green on all that as well. Running a 3rd party management company is much more labor intensive than the management of your own propeties. You are doubling your transaction side exposure, adding far stricter license law regulations, stricter accounting regulations, billing & bidding approval processes & much much more.

By all means give it a go but the age old phrase you don't know what you don't know looks like it's going to bite you in the butt here.

@Alejandro Hayden Management fee's will vary by company but are commonly 10% monthly with a 1 month tenant placement fee. There should be no placement fee on the first tenant with a turn key property. I'd be happy to talk to you in more detail if you'd like.

Originally posted by @Alejandro Hayden :

@James Wise wow thanks for all of the insight. You made a lot of really good points that I definitely was not aware of.

 Anytime 👊

@James Wise @Ryan Moeller @Nicole Hoss I completely agree with you with respect to the fees the property management company has in place to be profitable, but wondering what your thoughts are on who should pay those initial startup costs when a first time tenant moves into a newly purchased turnkey property. Assuming the property management company is third party and not in-house with the turnkey provider, should the turnkey company pay the initial tenant placement fee because they are providing the end product? Or should the customer that purchased the property pay the initial tenant placement fee? 

Originally posted by @Stuart Grazier :

@James Wise @Ryan Moeller @Nicole Hoss I completely agree with you with respect to the fees the property management company has in place to be profitable, but wondering what your thoughts are on who should pay those initial startup costs when a first time tenant moves into a newly purchased turnkey property. Assuming the property management company is third party and not in-house with the turnkey provider, should the turnkey company pay the initial tenant placement fee because they are providing the end product? Or should the customer that purchased the property pay the initial tenant placement fee? 

 Whomever owns the property at the time the tenant is placed is who would need to pay the property manager the leasing fee.

Great question.  If the turnkey company puts in a tenant before sale they will of course pay any initial tenant placement fees.  I work with a lot of out of state and foreign buyers and they prefer different management companies so I sell vacant in most cases.  So the buyer ends up paying those fees.