How does Property Management work??

[Zach Shrader]

Hey BP, I was just wondering how property management worked. Say I bought a 4 unit or whatever it may be. Can somebody give me the basics? I see people saying something like 10% of the income on the property? Or maybe a bit more or less. I don't know. Thanks in advance!

[David Faulkner]

Here's how it normally works, you hire a property manager, who then:

1. Charges you a startup/initiation fee to process your initial paperwork.
2. Charges you the first months rent to find a tenant for your property.
3. Charges you 10% of gross rents to manage your property.
4. Charges you a repair markup and/or an under the table kickback every time a contractor goes out to the property to fix something. Any minor thing the tenant asks for, they will send somebody out, charge you and collect another fee. When the shoddy work the contractor performs with bubble gum and duct tape doesn't hold, the same contractor gets sent again to generate another fee. If this doesn't work and there are not enough repairs to keep their fee income up, they will invent repairs to send somebody out for, do nothing, and then charge you.
5. The poor tenants they pick will stop paying rent and trash the place. PM charges you for the eviction. They don't care, because they still get paid anyway, in fact they get paid more this way.
6. PM charges you repair marckups to fix up the trashed property that is now vacant.
7. PM charges you another fee to find a new tenant, thus repeating the cycle.
8. If you get tired of it, PM charges you a cancellation fee.

Isn't real estate investing fun?