My $8000 problem. Do agents really deserve $200+/hr

Investor · Sunnyside, Queens, NY · Member since 2015 · 213 posts · 159 votes

9y

If you have a large enough portfolio, you have leverage to dictate terms. Write up your terms and email it off to the PM's you'd like to work with. Give it a shot and let us know how it goes.

4 Reply

Patrick Anibaldi

Temecula, CA · Member since 2016 · 75 posts · 38 votes

9y

Option #1: Self manage and save the PM fees.

Option#2: Negotiate with your PM. I have lease ups at $100, but I am listing the prop and screening the tenants. The PM just shows the prop and takes the deposit and rent.

I have successfully done both 1 and 2. To your point I find a PM is well worth it for places that rent for less than $800. More than that and I find myself self managing and it being worth my time.

5 Reply

Joe Kim

OP

Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes

9y

Originally posted by @Patrick Anibaldi:

Option #1: Self manage and save the PM fees.

Option#2: Negotiate with your PM. I have lease ups at $100, but I am listing the prop and screening the tenants. The PM just shows the prop and takes the deposit and rent.

I have successfully done both 1 and 2. To your point I find a PM is well worth it for places that rent for less than $800. More than that and I find myself self managing and it being worth my time.

$8000 is the lease up fee for 3 high end properties. If paid someone $1000 per property to just list the property and screen the tenants, it would be a bargain.

For $8000, I expect someone to do backflips and walk a tight rope....but really all I'm getting is listing the property and screening the tenants.

I plan to self manage all three properties. That is why I'm calling this my "$8000 problem"

2 Reply

Patrick Anibaldi

Temecula, CA · Member since 2016 · 75 posts · 38 votes

9y

Trying to understand, help me out. I think you mean you need a PM to do the initial work of getting the vacancy filled and then you will cancel your service agreement with the PM? Is that correct?

If you truly self manage, you dont have an $8000 problem. Do it yourself and you can pocket the cash.

Otherwise you need to negotiate.

If you wont do any of those then stop whining and payup!!! ;)

8 Reply

Haseeb Awan

Investor · Ottawa, Ontario · Member since 2016 · 225 posts · 46 votes

9y

It's about the time and how do you want to scale. Property Management is a full job for many. It's really a free market so if you think they are charging unfair, find another one or start your own firm. I personally would prefer some one to manage the property so I can focus on bigger picture.

9 Reply

Ryan MurdockPro Member

Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes

9y

@Joe Kim Nobody is forcing you to use that PM. Why bother trying to dissect what's involved? If you don't like their rates either renegotiate or find another PM. If other PM's charge similar rates then it sounds like they're only being competitive in that specific market (the ol' supply and demand thing...). If you don't like the rates and you can't find a better "deal", why not just do the job yourself? Likely because they are providing some level of service that you cannot.

Podcast Guest on Show #355

10 Reply

Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

9y

Lease and screen tenants yourself. This will eliminate the biggest hit financially and when done by yourself will end up with better quality tenants. Owners will be far more selective than PMs. This is a simple task that all owners should become proficient at performing. It is the absolute most important responsibility of a landlord and should not be contracted out if you are concerned about cost or results.

If you don't want to do it then you should be content to pay whatever the price.

4 Reply

Chinmay J.

Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes

9y

Originally posted by @Joe Kim:

I have a problem with paying people by percentage rather than pay per hour.

For example, nearly every single property manager charges a percentage of the rent 6% to 10% of the monthly rent for property management fees.

However, if a property rents for $2000/month vs. $1000/month - the property manager makes double! But is it double the work for the property manager? No way. In fact, it may take more work to manage a tenant/home that pays $1000/month versus a tenant that pays $2000/month.

I finally found a property manager who charges a flat fee of $75/month!! So instead of paying $200/month (10% of $2000/month), I saved $125/month.

Now, let's translate that to the lease up fee. It's the EXACT same problem.

If something rents for $1000/month vs. $3000/month - does the agent/property manager do 3X the work to get $3000 for lease up or finding a tenant who is willing to pay $3000/month versus getting paid $1000 (1 months fee) for leasing up a tenant for $1000/month?

It's the same work but the agent/property manager is make 3X the amount of money.

So here is my specific problem. I have several properties that need to be leased up and I"m calculating that it will costs me around $8000 in lease up fees!!

These are higher end properties with fairly high rents.

So here are my calculations

$8000/3 properties = $2600/per property

How long do you think a property manager spends to advertise your property, do background checks, and finally lease it up for you? 10 hours total, 20 hours, 30 hours, 40 hours?

I want to SHOUT out to BP to property managers/agents.

How many HOURS do you think you typically spend in order to find a tenant for a property?

Paperwork = hours

Advertising = hours

Showings = hours

background check = hours

miscellaneous = hours

I had the same exact problem with realtors. I thought they were overpaid for the work they do. So I went ahead and became one. Now, I don't pay anyone else unless that person is on the other side of the table (then. For the same reason I manage my own properties. Like @Amit Kal said, if you have a huge portfolio, you can dictate your own terms.

3 Reply

Mike CumbieBusiness Member

REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes

9y

I paid for some professional painters. They estimated the job would take 3 days with the both of them for $1200. I said go for it. They worked late and were done in 2 days. If we tallied up the hours I suppose they may have owed me some back but I was happy they did a Rockstar job, worked through their mealtimes and cut out early for a long weekend. I was happy as a clam and don't care what they made per hour. If they accomplished what they did in 10 minutes I would have paid it again.

When your mindset is "What is this person making per hour" you tend to find a lot of people that seem to take twice as long to accomplish a job half as good. I pay for a job done right, granted I don't often pay retail, but I don't watch any ones hours either.

43 Reply

Ozzy SmithPro Member

Specialist · Dayton, OH · Member since 2014 · 352 posts · 265 votes

9y

You shouldn't worry about what the other person is making. You should only worry about the task being completed and the money that you make. I would love it if I expected to pay a price for something to be completed in a week and I get a call saying the project is done sooner. That means I have the opportunity to make more than I expected because time = $. Also would you rather pay 10% of $2000 (you keep $1800) or 10% of $1000 (you keep $900)? Quit missing the forest for the trees. If you focus on what the other person is making then you can't focus on how much you are making. It's called cost of business. Sure you can always negotiate a cheaper price but remember they are usually cheaper for a reason. Find then one that allows YOU TO MAKE the most money (that's not always the cheapest) and quit worrying about what the other person is making.

25 Reply

William Walker

Investor · Wilmington, NC · Member since 2016 · 211 posts · 262 votes

9y

Same thing when you go out to eat. The waiter at the kid's restaurant does 10x more work than the waiting at the super fancy restaurant. But the tip is a % of the food and drink, so the fancy restaurant waiter makes a lot more money for less work. Nobody charges a flat fee and then little charges for each thing the waiter does like bring a refill or check to see if your food is ok. It's just the way the industry works.

7 Reply

Carl Schmitt

CT · Member since 2010 · 135 posts · 100 votes

9y

In my opinion, part of a paying on a commission basis is that you're paying for performance. If they can't lease it, they don't get a penny. I've often thought that ongoing management fees should be based on collected rent, not just what the lease states the rent is. Making sure rent is collected is the most crucial part of owning a rental property so if you can't accomplish that, why would I pay you?

If you're strictly paying an hourly rate for time worked, there is very little incentive for them to be efficient with their time. In fact, I think it promotes "feet dragging".

6 Reply

Mike Nelson

Investor · Oak Park, IL · Member since 2014 · 316 posts · 150 votes

9y

Generally like most things the average a property manager is determined by supply and demand. The key, to me is having a property manager who is competent, honest, and hardworking. This is not a given by any means. As far as compensation. I don't mind paying a highly competent property manager the "going rate" . I don't want to overpay, but I don't them to not be adequately compensated. If I am underpaying them, over time they will not be motivated to perform. A fairly paid excellent manager can be money well spent.

2 Reply

Steve Moody

Portland, OR · Member since 2008 · 123 posts · 73 votes

9y

@Joe Kim If you're currently making less than $200/hour you should stop what you're doing and become a PM. It sounds like a great business to be in. That's assuming they're pulling in that much money on a weekly basis at 40 hours per week 50 weeks a year. I'm not sure how many PMs are pulling in $400k/year, but if they are it's a good business.

3 Reply

Rolanda Eldridge

Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes

9y

It's all negotiable. Although, I get estimates for all jobs/repairs, it takes time. I manage my own rentals, but if I turn over to PM, I want the Best!

1 Reply

Joe Kim

OP

Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes

9y

wow. great comments.

I don't have a PM. I don't need or want a PM to manage my properties.

I just need an agent or PM to lease up my 3 properties. I calculated that it would cost $8000 to pay the agent to lease up 3 properties based on standard fees of 1st months rent as their fee.

I don't want to do the work ALL myself. But at the same time, is there a way to lease up 3 properties at a lower cost $3000 ($1000 per property) and save a good chunk of money?

I can see how hourly rate can back fire but certainly would be cheaper.

Lastly, what about offering up $1000 finder fee to find a tenant? Let multiple PMs or agents work for me.

But like most, I think everyone has a hard time thinking outside the box with this problem. That's what I'm looking to do. Do it differently from everyone else.

Anyone got ideas?

0 Reply

Patrick Connell

REALTOR® · Bastrop, TX · Member since 2013 · 324 posts · 191 votes

9y

Joe Kim to answer some of your questions, yes, you will spend more money marketing and finding tenants for a high-end lease than a lower-end one. And you didn't find someone who's willing to charge you by the hour, you found someone who's willing to do a flat fee listing/lease. Which it totally different and historically lacking in service. When I have clients who demand to pay by the hour, I will work with them and charge them an hourly rate. They ALWAYS pay more than they would have if they just did my standard fee; but they signed the agreement as they requested and so they pay the amount due. They also pay a retainer up front. I actually prefer hourly rate clients because I make money no matter what and I know, in the back of my mind, it'll end up costing more; it's a little more record keeping but not much. Clients are always advised of this upfront, and they're always surprised when it turns out to be true.

0 Reply

Joe Kim

OP

Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes

9y

Originally posted by @Steve Moody:

@Joe Kim If you're currently making less than $200/hour you should stop what you're doing and become a PM. It sounds like a great business to be in. That's assuming they're pulling in that much money on a weekly basis at 40 hours per week 50 weeks a year. I'm not sure how many PMs are pulling in $400k/year, but if they are it's a good business.

fortunately I make more than $200/hr.

But I'm talking about how much a PM makes if they charge $3000 to find a tenant. Most PM are making $1000 for lease up of a $1000/month rent.

They are certainly not doing 3X the work to rent a $3000/month property.

That's my point. I am not trying to say all or most PMs make $200/hr or 400K/yr.

0 Reply

Joe Kim

OP

Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes

9y

Originally posted by @Patrick Connell:

Joe Kim to answer some of your questions, yes, you will spend more money marketing and finding tenants for a high-end lease than a lower-end one.

Really? Name 3 reasons why you will spend more money marketing and finding tenants for high-end lease than a lower-end one.

If you are saying it costs 3X more to rent a $3000/month versus $1000/month rental, I would like to know.

thanks

0 Reply

Jeff B.

Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes

9y

You are paying for RESULTS, not time. When a PM is effective, screens well and performs to your satisfaction - - smile and write the check! Count yourself fortunate to have this 'problem'.

2 Reply

Patrick Connell

REALTOR® · Bastrop, TX · Member since 2013 · 324 posts · 191 votes

9y

Originally posted by @Joe Kim:

Originally posted by @Patrick Connell:

Joe Kim to answer some of your questions, yes, you will spend more money marketing and finding tenants for a high-end lease than a lower-end one.

Really? Name 3 reasons why you will spend more money marketing and finding tenants for high-end lease than a lower-end one.

If you are saying it costs 3X more to rent a $3000/month versus $1000/month rental, I would like to know.

thanks

Professional pictures, additional marketing to higher-end clientele, most higher-end tenants use agents which means there is a compensation on the other side of the transaction that has to be paid, and higher-end tenants usually have attorneys on hand that they like to use to review contract and such, which means more of my time dealing with the attorney and explaining to them the in's and out's of our leases (because they often don't understand).

Lower-end properties have a plethora of applicants waiting to get in, post in on MLS, Facebook, and Craigslist and tenants will line up out the door from pics you took with your iPhone. They also often times come unrepresented, which means no commission on the other side.

Anything else?

6 Reply

Jorge Zea

Boca Raton, FL · Member since 2016 · 145 posts · 67 votes

9y

@Joe Kim: If all you need is finding a tenant (you can do the background screening yourself if you will self manage). use a reputable, state licensed Flat Fee listing company and offer something for a tenant's agent. It will get you onto the MLS (95 effective). You should be able to get one for $99. Check my profile.

1 Reply

Gunnar Sevart

Lender · Falls Church, VA · Member since 2016 · 41 posts · 22 votes

9y

@Joe Kim I do not mean to offend you in any way, but rather open you up to a new way of thinking. As a real estate investor you have a lot of the control. I do not know the PM's situation nor yours, but your time is extremely valuable as is his. With that said you have to ability to acquire more rental properties and feed the system you have created with your PM. Your "empire" can be much larger than his and you have the choice of who maintains it. The only capability he has is to maintain the system. While 6%-10% may (and possibly is) a lot for a single property, spread that over more rental properties and watch as this will benefit you both over the long run. Use future business as a negotiation tactic to lower your costs per unit. If you bring more volume, then he can lower his prices per unit.

Like @Ryan Murdock said, you can always look for someone else to learn the system already put in place and begin to phase your current PM out. Usually this could be a newer, more energetic PM who in return for all the business will provide lower rates. Always be talking and vetting new prospective vendors for your properties. I say if you feel they are making to much per property, then purchase more, give them more work and receive the rewards of all the more rental properties you have. Best of luck!

0 Reply

Ryan MurdockPro Member

Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes

9y

@Joe Kim

Do you set your rent prices according to how much time you spent acquiring the building? If you get a great deal on a property do you pass those savings along to your tenants? No. You price them to get as much money as you can in your market. If you fail to remain competitive your customers will go elsewhere. You have the same choice with your PM.

With that said, I will routinely scale my leasing fees back for higher priced units. The "off-the-shelf" quoted price may be a full month's rent but if someone approached me with a group of higher end units that needed to be filled there's almost always room to reduce the fee. Very often I'll do it for 50-75% instead of 100%. Like you, I do consider the time involved and will adjust rates accordingly because I know if I don't my competitors will.

Have you actually tried personally negotiating with any of these PM's or are you basing this all off their standard pricing?

Podcast Guest on Show #355

7 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

9y

The guy that's getting paid always thinks his time is worth $1,000/hr. That same guy thinks the guy he's paying is worth $10/hr. Most business is done somewhere in between.

I'm not in the habit of defending PMs because I think a lot of them suck. That said, it's a free market. If you think someone should place a tenant in your expensive place for a flat fee, you should offer that up. If no one takes it, maybe you've discovered a market niche and can start your own business. Outside of that, yes, there may be rationale for charging more for the $3,000 place. Let me tell you a couple of stories.

When I was in high school I worked pumping gas. The guys that pulled up in BMWs would have you check the oil, coolant, PS fluid, brake fluid, air in the tires, clean the windshield, then sneer at you as they paid their $10 gas charge. The guys in a beat-up Pinto would ask if you could check the oil, then give you a buck or two tip for the job.

When I was in college I worked as a plumber. You know which jobs sucked the worst? The ones in the mega-mansions. The owners were always stuck-up ******** who complained about everything and tried to argue the bill, and went 6 ways from sideways to get things tossed in for free, and treated you like you had leprosy. The guys who were barely getting by in a mobile home would offer you a cold drink or give you a couple dollars tip for having to grunge around in their ugly crawl space.

If I had a PM company, I would charge you that same percentage regardless of what the rent was. If I had to take a wild guess, based on your complaint about the pricing structure, I would hazard that the extra percentage I'd make from trying to rent your $3,000 properties would be the payment for my aggravation. But that's just a guess - you might be the nicest guy in the world. Most people I know, in business, pay the price, exploit the market, or do it themselves, rather than worry about why the sky isn't green instead of blue.

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My $8000 problem. Do agents really deserve $200+/hr

My $8000 problem. Do agents really deserve $200+/hr

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