Revenue streams for a property management company

25 Replies

I need assistance putting together a list of secondary revenue streams for a property management company. So far I have

  • PM fee (% of rent or flat fee)
  • Lease ups
  • Maintenance (upcharge)
  • Vendor rebate program on items such as appliances
  • Pet fee (not sure if this goes to the owner or PM)
  • Lawn care (upcharge)
  • Cleaning
  • Renters Insurance (commission?)
  • Appliance and furniture rental (commission?)

My target market is single family homes in desirable subdivisions so adding things such coin laundry, bill boards, etc. would be off the table. Thanks

Help investors locate properties that meet their criteria, both MLS and off market deals. Do the analysis, rent comps etc and present opportunities to people looking to buy.

You will also have older investors looking to unload their portfolio. Market these bulk sales to get them the best/ quickest return.

I always thought PM would be a tough business to make money in unless you managed a bunch of properties. 6-10% of rent before taxes is tough. I work with a couple and there is a maintenance fee they charge, its built into my price and they subtract that when I get paid. Most owners don't like paying the fee. I think a good way would be to have an in house makeready crew for minor repairs, painting, lawn maintenance, cleaning and pay them whatever is fair market for your area and you charge more for their services. Like an apartment complex does. Paying somebody $10-$15/hr to clean, mow and paint and charge out their services for double.

Hi Bryan,

Once in a while the owner will offer to pay for this service on a monthly basis. We have scorpion and other pest issues here. Most of the time, tenants contract with a 3rd party.

Originally posted by @Bryan H. :

"You will also have older investors looking to unload their portfolio. Market these bulk sales to get them the best/ quickest return."


If you are the property manager, YOU are in the driver's seat TO PURCHASE when a property owner is looking to divest. The owner will telegraph to you, far in advance, when he/she is ramping up to dump the property. Big ticket deferred maintenance requests will be made, more inquiries about exterior appearance will be brought to your attention, and there will be greater interest in monthly vacancy reports than normal.

Additionally, you will know more about the condition, strengths/weaknesses and performance of that complex than anyone else, probably including the owner. Especially if the owner inherited the complex.

A property manager can make a good living managing other people's property, but should be able to make a fortune by cherry picking from those same properties when they become available for purchase...

DL




@DL Martin glad to hear that. It was a key assumption when I decided to go from landlord to PM. The networking and market insight have to be incredible.

I hope when you brokers are doubling the prices charged to owners that you are disclosing to the owner the fact that you are getting compensated. These kickbacks, upcharges, labor services, etc., that yield gains to the manager seem to be paid for directly by owners.

@Chris Martin I'm a believer in full transparency. I think it's foolish to up charge owners for things you should be doing anyway. I don't see a problem with providing ancillary services, with proper disclosure, that are priced competitively or add value in a different way.

@Phillip Dwyer

In California all property managers have to be real estate brokers. Therefore alot of property management are also agents who sell houses.

Where we are there is a huge military and correctional officer presence. Since the valley is in the middle of no where many/most people rent when they first get out there. A lot of these agencies make a business of helping these people find house when they are ready to buy. Than when they move, they rent these people's housing out.

Therefore they have build "baskets" out of the real estate field.

Personally if I started a property management agency I would also sell real estate.

*This would allow you to appeal to investors since you already had a huge network put together for the upkeep of the houses. This would allow you to help investors by being able to offer "turn key" properties with the extra expense.

* You would be able to get more market presense by speaking to both tenants and renters.

* I read on here once that a landlord allowed tenants to break their lease if they used him as a realtor. I would offer this clause. I would not charge landlords for a placement fee if this happens.

@Chris Martin
"I hope when you brokers are doubling the prices charged to owners that you are disclosing to the owner the fact that you are getting compensated. These kickbacks, upcharges, labor services, etc., that yield gains to the manager seem to be paid for directly by owners."
>

A property management fee is essentially an agreement to collect the rent, pay the utility bills and then forward the remaining rent to the owner. Fielding any tenant calls/complaints during the month is customarily also included, but ANY action beyond that initial tenant phone call will be charged to the owner.

Any repair bill will include a "middleman" (PM) charge, and it should be accounted for on the following month's reconciliation statement. And therein lives the difference between a "good" property management company and the rest.

The trick for the PM company is to know the pain tolerance of each owner and to determine that "perfect" fee to charge on every repair...A fee large enough to make the owner say "ouch!" but not so large as to make the owner say "HOLY $#*) !!!!"

:)

Can you say gouge? Your statements summarize why many investors don't use PM companies.

You are clearly a manager I would never use. If you are charging for "...ANY action beyond that initial tenant phone call..." then you aren't managing the property the way I or any investor would want... or the way the property management contracts I've signed specifically say are "agent responsibilities". Absolutely CLASSIC! Your job, as you see it, is to inflict pain and to "know the pain tolerance of each owner" so they say "ouch!" Why would any investor ever use you? Your goals are completely counter to the Owner's. I would say "customer's", but you clearly are not treating them as a customer.

My property management company only charged % of monthly rent. Our philosophy we share with our owners is "we only make money when you're making money."

Bryan David are you starting a new property management company in your market? If so, I have something I'd like to discuss with you. I tried a direct message but it had your contact info hidden. Could you message me?

Marking up a product or service is part of doing business. The basic act of marking a product or service up is not gouging. Excessively marking up the service or product is gouging. Hiding or being allusive about how your business operates is unethical, maybe illegal depending on the laws in your area.

There is nothing wrong with a business capitalizing on relationships the business has built. For instance, if I manage 200 doors my go to plumber better give me a professional discount. This discount can be partially passed on to the owner but not the entire discount. This is where my upcharge would come from. This creates a win-win for everyone.

A fee on additional services should be clearly spelled out in the owner/PM contract. The owner would have the option to use his/her own people. I would never charge an owner more than the market rate. I would not markup a service or product that's already at market rate.

I do not believe all services should be included in the management fee simply because some properties require more time and resources to manage than others. You know, 20% take up 80% of your time. Why should someone with a maintenance free property pay higher management fees to cover the guy requiring three or four maintenance calls a month.

Now clearly there are PMs out there screwing people everyday, just like in every other business and profession on the planet. If you're not upfront and transparent with an owner, then he will leave and tell a friend who will tell a friend and your reputation and business will suffer.

This thread was not intended to be a "how to screw over an owner" thread. I am interested in hearing how professional property managers create revenue beyond their standard fee.

Great feedback from all and very much appreciated.

@Kyle C. PM sent

Markup is not a far out concept. It is actually a feature in top property management software. It's called "Work Order Markup" and can be setup to be applied automagically.

@Bryan David

Have you had any success in converting your tenants as buyer leads. I took in two 700+ credit score tenants in two my SFR rentals last year. The bad news is that they won't stay with you after the one year lease is up, but the good news is that they are never a day late on their rent payments and they also want me to help them find them a home to purchase within the same school district?

Perhaps i should continue to take in 700+ credit score tenants for a high turnover tenant to buyer lead generation.

@James Park I have not but it was mentioned earlier in the thread and sounds like a great opportunity. Essential to this would be having a good relationship with the tenant throughout the term. The downside would be protecting your owner from vacancy loss and getting hit with lease up charges. If I knew in advance the tenant was only going to be there a year I would get the owner to approve the one year tenancy.

Originally posted by @Bryan David :
Marking up a product or service is part of doing business. The basic act of marking a product or service up is not gouging. Excessively marking up the service or product is gouging. Hiding or being allusive about how your business operates is unethical, maybe illegal depending on the laws in your area.

There is nothing wrong with a business capitalizing on relationships the business has built. For instance, if I manage 200 doors my go to plumber better give me a professional discount. This discount can be partially passed on to the owner but not the entire discount. This is where my upcharge would come from. This creates a win-win for everyone.

A fee on additional services should be clearly spelled out in the owner/PM contract. The owner would have the option to use his/her own people. I would never charge an owner more than the market rate. I would not markup a service or product that's already at market rate.

Agree with the second paragraph, and it should be detailed as to what is and is not included, but really, management includes any and all aspects required to promote, maintain and maximize the profit for your client/principal in your agency relationship.

The first paragraph is clearly not acting in the best interest of your client/principal or employer, the reason an owner hires a manager includes their knowledge, expertise and ability to maximize profits for the owner. This is basic agency law, a PM is not selling ties or lawnmowers. If you want to make more, raise your management fees and market your higher fee as including everything you do to maximize profits for your principal. After all, you are an agent of the owner, not an independent store owner. Or, if there is a lack of data to base additional services on, charge a fee and an hourly rate for unforeseen duties.

And, you might double check on up-charging on services that require a license, like a plumber or electrician if you aren't one, that's what general contractors do, I can tell you I've dealt with PMs and they lost, PM activities is not a general contractor relationship, especially when your area may require a license to conduct sub-contracting work. :)

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