Tampa, FL · Member since 2015 · 46 posts · 21 votes
Hi,
I just bought my first rental property last month. I live in NY and my property is in FL so the property will be run by a property manager.
I just received the property management agreement and the cost of property management is a little higher then I expected. Could somebody please tell me if the fees of this deal are reasonable.
Property location: Ocala FL
Expected Rent rate: $900
Fee for managing tenant relations: %10 of gross lease value
Fee for managing property: $100 per month.
First months rent goes to property manager. Also, 1st month rent of renewal's goes to property manager.
So then this would mean $190 every month goes to my property manager for a property that rents for $900. Is it normally that high for Ocala FL?
Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
10y
These property management fees are ridiculous.
You should contact Michael Bielon. He does Master Leasing in that area and does not charge any property managment fees. Hi web site is OnTimeRents dot com
or contact DavidTilney dot com for other recommendations in that area. David trains people to do Master Leasing and has been doing it for more than 30 years.
PM fees are another good reason to not buy outside your own market. Those initial fees are just the beginning. If you need an air conditioner repaired or a roof replaced, a PM will tack on 10-20% of the cost of the repair .. just for making the phone call. Beware of additional fees for sending you accounting every month, etc
Someone who does master leasing does not play those games.
Investor · Verona, NJ · Member since 2014 · 1k+ posts · 832 votes
10y
Robert, congratulations on your purchase. you mentioned 4 different fees, is that correct ? 10% management fee is about normal, the $100, is that for property maintenance ? then you also mention first month rents when they sign and on renewal, am i reading that right? that's a lot of money. right now my PM charges 8%, maintenance works out to about $125 and signing fee is $300. I would try to negotiate those terms ( and you can) full months rent seams like quite a bit.
Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
10y
These property management fees are ridiculous.
You should contact Michael Bielon. He does Master Leasing in that area and does not charge any property managment fees. Hi web site is OnTimeRents dot com
or contact DavidTilney dot com for other recommendations in that area. David trains people to do Master Leasing and has been doing it for more than 30 years.
PM fees are another good reason to not buy outside your own market. Those initial fees are just the beginning. If you need an air conditioner repaired or a roof replaced, a PM will tack on 10-20% of the cost of the repair .. just for making the phone call. Beware of additional fees for sending you accounting every month, etc
Someone who does master leasing does not play those games.
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
10y
Nope, that means first moth you pay your property manager $900, each month after you pay $100/mo to the property manager. Make sure you note any "Phone Answering Fees, Repair Oversight Fees, After Hour Fees, Other Arbitrary Fees" it's pretty standard practice everywhere for what I've found to be 'sub-par' property manager.
Tampa, FL · Member since 2015 · 46 posts · 21 votes
10y
Thanks Jackie. Unfortunately I may have to do as you advise and find a different property manager. I've emailed my property manager asking if I am interpreting her fees correctly.
Vancouver, WA · Member since 2016 · 12 posts · 6 votes
10y
we are going to rent our place out and here is what we are finding out.... 8% of what the property brings in... anywhere from $300 up to 1/2 the 1st months rent, this is to get started into the agreement... maintenance fees are for the most part on an hourly rate ranging from $65-90 per hr.... there is a reserve to be held for repairs, in our case between $250-500...
i have 1 company that doesn't take pictures during the walk thru, but instead, has a check list they use.... we have talked to 3 different PMs and they are different in several ways, but they all can do the job.... its a preference as to what i want them to do...
granted i am in vancouver washington, and state to state could be different with the regulations and requirements..... also there are a lot of people on here that have helped me out so far in my ventures, i to am just getting started
this all is just what i have learned to this point
Investor · Evans, GA · Member since 2015 · 190 posts · 103 votes
10y
Ouch. That PM has an interesting fee structure. Does he have a large investor base willing to dole out gold like that?? I'm used to the 1/2 first months rent/10% monthly regime. That PM seems to be single handedly wrecking your cash flow.
Tampa, FL · Member since 2015 · 46 posts · 21 votes
10y
As far as I know she does not have a large property management business. Her main business is as a real estate agent. When I was buying the place, she told me she did property management too so I went with her once the place was bought. She said 10% at the time so that is what I expected to see in the contract. Then I saw an additional $100 per month managing property fee which bothered me, but I wanted to check here first to see if it is a normal fee. Now that I know that it is not, I'm going to try to get her to lower it. Although I'm also a little annoyed with her now for trying to over charge me and it makes me want to find somebody else.
Real Estate Agent · Sarasota, FL · Member since 2016 · 91 posts · 26 votes
10y
Just me but if I'm paying that kind of money it better be a full-time property management company with multiple properties and references... Not a sales agents side business
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
10y
In my market 7% is about average. And they also must pay 1 months rent for securing new tenants (half goes to the agent that brings the renter on the MLS).
I would not agree to pay a full months rent if the tenant renews the lease, that is crazy. Sure, they have to write up a new lease but that isn't worth $900.
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
10y
If she does not do this full time, then perhaps she really doesn't want to dedicate her time to this, hence the high quote. I would kindly ask her for a referral to a full time property manager.
Tampa, FL · Member since 2015 · 46 posts · 21 votes
10y
Thanks Sarah. I had some choices for property management that I looked at before I bought the property, but I never ended up contacting them because it looked like I would be using her as my property manager.
What would be a fair amount to pay the property manager for when the tenant renews the lease? Would $300 be fair?
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
10y
You are asking the wrong person. I just drafted a new lease for a landlord and the renter free of charge. They have agreed to a MTM arrangement. The renter is going to purchase something (using me as his broker) and the landlord is either going to sell or find a new renter and will continue to use me as his broker also.
It took me about two hours to draft the lease, get it set up on docusign and coordinate between both parties.
When I work with investors I tell them upfront what their options are. Some choose to self manage or use me as a go between, but I make it clear what I am willing to do or not do. I also let them know of a few property manager's and their rates.
Even if I had not picked up the renter as a client, I would have drafted the lease for the landlord free of charge because he has purchased multiple properties using me as his broker. A huge portion of my business is referral or repeat clients.
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
10y
I should also add that the rental property is a high end condo. When I took the listing last year I knew that there would be minimal maintenance or service issues.
I invest out of state and to date have not used a turnkey company.
A couple other things I have learned about PM's. Many want you to sign a contract that has a penalty for early cancelation of the contract. Make darn sure its the right PM. before you sign this one. It cost me $750 dollars to get rid of the PM from he** a couple years ago.
Another thing is who gets any late fees? some keep it for collection efforts, some forward to the LL.
My Pm's both charge 10% a month, one gets $250 for locating a new tenant, the other gets 1/2 of first months rent for the first tenant. after that they have no charge for finding tenants.
I think its as hard or harder to find a Good PM, than it is to find the right property. This is the reason my investments are in the same area. Most of my properties have come from leads generated by not my realtor, but my PM. afterall who knows more about the performance, condition and track record of a property than the PM. who has been managing it the past several years??
I'm buying a duplex in a different city than my usual one. The scariest thing for me is finding the PM. I know the property will work, The Rental market is very strong there, Its all gonna fall to the PM. I've vetted several, but its pretty hard to know for sure. If they don't pan out its on to the next. If they do then I will expanded my area by another city.
One last thing. Don't give up on the PM to quick. You do have some chance to train the PM a bit. Remember you are paying them. If they do something you think is wrong, accepting too low of a credit score, not serving a notice to vacate at the agreed upon time, accepting partial rent without consulting you, etc. etc. you have the opportunity to correct them. After a while they will learn your standards and expectations and maybe things will smooth out. Remember it's their job to keep you posted about everything going on with YOUR rental. If you allow them to keep you uninformed and out of the picture that's your fault not theirs. If they don't do it to your standards its the same as when the tenant is not paying rent. Move on to the next one.
Tampa, FL · Member since 2015 · 46 posts · 21 votes
10y
Thanks Ralph. As I'm just starting out I'm not sure at this point on whether or not I have a good property manager. Up until today she seemed good.
She responded to my email about the cost saying she may have messed up on the contract and that it should have been only 10% per month. So if I can now get her to lower the cost of finding a tenant and yearly renewals, I'll probably stick with her for now and see how it goes for a year.
The contract listed blank for the early termination fee, so I assume that means their is no early termination fee.
Investor · Dallas, TX · Member since 2015 · 446 posts · 197 votes
10y
I purchased some property last year that was tenant occupied and being managed by a large company. The actual manager who interacted with the tenants left shortly before my purchase to start her own company. I was thrilled since I am too small for the large company to have as a client and this would provide continuity for the tenants!
I asked for a proposal and received something like yours. I never responded because it was so ludicrous, especially the full month rent for a renewal! I could never work with that person because they abused my trust from day zero.
As to your person, do you trust her? I don't believe the initial agreement was a mistake. Did she make any mistakes with the purchase contract? Contracts are her profession! She would have happily double charged you if you signed off on it. With that trust broken, will you trust her when you get a large repair estimate?
Run, don't walk! Trust is paramount in these relationships. The PM will be your eyes and ears.
Investor · Verona, NJ · Member since 2014 · 1k+ posts · 832 votes
10y
Robert, she said she messed up on the contract ? find a new PM. she obviously doesn't know what she is doing. she should just be honest and say she will negotiate the contract, seems to me she is just trying to get as much as she can and hoping no one catches the charges. i would be very careful with that one if you decide to go with her. have someone look over the contract for you, fellow investor or lawyer friend if you have one. if you want, hover over my picture and send me a message with a copy of the contract and i will look at it, white out names and addresses if you want, be happy to look at it for you.
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
10y
Always do your research and review multiple management companies in the area. They are not all built the same. It seems like it should be easy on the surface, but there are a lot of moving parts in management and each company operates differently. It is worth asking the right questions to multiple companies.
I just bought my first rental property last month. I live in NY and my property is in FL so the property will be run by a property manager.
I just received the property management agreement and the cost of property management is a little higher then I expected. Could somebody please tell me if the fees of this deal are reasonable.
Property location: Ocala FL
Expected Rent rate: $900
Fee for managing tenant relations: %10 of gross lease value
Fee for managing property: $100 per month.
First months rent goes to property manager. Also, 1st month rent of renewal's goes to property manager.
So then this would mean $190 every month goes to my property manager for a property that rents for $900. Is it normally that high for Ocala FL?
Thanks
That is on the high side. Almost 20% for a $900 property is steep.
10% of rents, 1 months rent as the leasing fee and a smaller fee for lease renewals is what is commonplace in my market.
Them hitting you with the 10% & the $100 is excessive as well as the full months rent for the renewal. A renewal is much less work than leasing to a new tenant and should be charged accordingly.
Tampa, FL · Member since 2015 · 46 posts · 21 votes
10y
We agreed to the following modified terms:
10% of monthly rent, which would be $90 assuming it rents for $900. 1/2 of first months rent for finding tenant, which would be $450 assuming it rents for $900. $150 for the yearly renewal of an existing tenant
She told me I can modify the contract to these terms, initial, and send it back.
She mentioned the following regarding the lower 1st month rent:
"The rental is listed on the mls, so another agent may bring us a tenant and then I split the $450 with them. So they would only get $225 which is a little low so some realtors may pass up your rental so show one's that give a higher commission. If we don't get a lot of interest in the first couple of weeks, we can always raise it to entice more realtors to show it. "
I'm posting a copy of the contract. Maybe there is something else I missed while reviewing this. I blanked out the names/addresses.