23% management fee
Hi Everyone,
I recently ventured into real estate investing and purchased my first property a few months ago. As my current property management contract is up for renewal and also my tenants leases is ending by end of this month, I reached out to them for new offers. To my surprise, they provided a quote for a 23% management fee per month rent, which includes a one-year rent guarantee (regardless of whether tenants pay or not) and a maintenance credit of 2.5k per year.
I must admit, I was taken aback by the figure. It seems quite high to me, especially considering I'm still relatively new to this field. I wanted to seek some advice and opinions from this community before making a decision.
Do you think the management fee and the additional services provided justify the cost? Have any of you encountered similar situations in your real estate investing journey? Any insights or experiences you could share would be greatly appreciated.
Thank you in advance for your help.
What are vacancy rates in your market and does the current tenant plan to re-up for another year? I read that rate as paying an extra month and half worth of your annual rent collection to buy income insurance for the year. Seems like expensive insurance to me, and if the tenant is already planning to re-up, then it's definitely not worth the premium.
#3 Managing Your Property Contributor
How much is the rent and what is the $2.5K maintenance credit? If the house attracts the type of tenant who is likely to skip out on rent or cause damages, it could be worth it. I've not heard of anything similar. My PM does do pet insurance and covers damages from pets, but that is part of the regular monthly fee.
How much is the rent? What is the city/state?
#3 Classifieds Contributor
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- Metro Detroit
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#3 Classifieds Contributor
- Real Estate Agent
- Metro Detroit
@Angu Krishna guessing that this PMC is trying to sell you all their "bells & whistles".
They only do that to make more money under the guise of protecting you - pretty much like a store offering additional warranty protection on electronics. Have never seen a consumer expert endorsing these.
What is their fee without these protections?
- Michael Smythe
Based on my research, the vacancy rate at Fort Worth, TX was 9 %. I have asked my PM whether current tenants plan to re-up. Tenants have a 60-day notice period before the lease ends, but the PM has not notified me of that yet.
@Theresa Harris around 1.8 K per month. Any repair or maintenance needed for the home up to 2.5K is free in a year. Beyond that, I need to cover the cost.
@Michael Smythe: The basic plan has an 8% fee.
The 8-10% management fee is normal for PM. depending on how long you lease and the state that you are in would be the biggest factor. My PM have the same thing that comes in 3 different packages, including if the tenant doesn't pay...etc. which is basically them just giving you the money, then they go after the tenant. However, I only rent month to month and in AL if they don't pay give 7-day notice and they are out, and I have all tenant caused damages covered by tenants in my leases. With longer leases it might be worth it. all comes down to your investment style. eats into the cashflow but you are more protected.
also, my situation is different due to mortgage cost. your one properties rent is 2.5 of my properties. my average mortgage is around 650.
23% - 30% is normal for a mid term rental or short term rental. Although, some property managers are charging around 10% for midterm rentals.
Is your lease term 1yr or more? Is your unit being rented as a furnished unit?
If this is a long term unfurnished rental then find another property management company with rates you're ok with. If you find better rates you can ask current PM to match or beat it. If they don't, move on from them.
Also, while "most" PMs charge a fee on "collected rent" there are some that charge a fee whether rent is collected or not. Stick with the ones that charge a fee on collected rent.
Do you have a lot of turnover with your unit? How long has it been rented? If there is a lot of turnover then the guaranteed rent would justify the price.
In chicago north side management fees run 4-5%. In the south and west side 7-10%. Suburbs typically 8%. It depends on grade of property but would never recommend going over 10%.
@Angu Krishna
This a short term rental? I know in OBX the rental rates are insane
- Chris Seveney
