Hi BP community!
I have an excellent relationship and experience with my PM in the Mississippi market and they do fill the properties very quickly and with great tenants. My PM does not charge first month's rent as a fee when turning over the property, advertising and placing a new good tenants. They also do not charge any additional fees other than the 10% fee.
I am having trouble finding an PM in Indy that operates the same way, although I have only interviewed a handful of PM's so far. Is this 1st month rent fee standard for the Indy market, are there other options?
Can you recommend a very good PM who does not charge such a fee when placing a new tenant. I am willing to pay a fee, but the first month's rent, really hurts my cash flow.
I can try and explain but want to be careful in making generalizations. Different markets do seem to have certain practices that might be different than others. Property management is a business that has many different business models. Having been in the industry for over 20 years, there is no one magic model. The existence of a tenant placement fee does allow for the leasing end of the business to work in lower dollar rent markets. The fee can be set many different ways and the one you mentioned is by no means built into the market.
I do not understand though how a full service management firm can exist without offering compensation to leasing agents. Most of these funds pay for those services. I can assure you the ability to market a property for lease, or pay any leasing agent, does not exist in the average management fee side of the model.
Feel free to pm me if you would like to consider another option in Indy.
I think you would be hard-pressed to find any market where the first month's rent isn't typical.
If the property is listed on MLS, the PM has to pay half the fee to the broker who brought the tenant. If the property isn't listed on MLS, then that means the PM has to do all the showings himself. That potentially could be a lot of trips to show the property until a tenant is found.
Now I have cut deals on higher-end homes where I might take 75% and then pay 50% to the other broker. And on apartment buildings, I'll do a deal where I charge a fee of $200 plus 50% of the first month's rent, which I pay the other broker.
My guy in Indy does 50% but that’s because I bring a lot of business. No charging first month is not fair for the pm.
My PM is very good and charges half of first month. He gives best rates and is very professional.
He manages mine and my clients properties.
You can PM me for, details.
We're heavy in C-class properties in Indy, as the ROI is significantly better than other property classes. We previously worked with a PM that did not charge us, and found that it cost us (and our investors) significantly MORE money in the long run than working with a PM that does charge. The one that did not charge did nothing. They took MONTHS to lease up properties. They didn't pay attention to anything. The properties did not get maintained.
In C-class, it is important to find the right tenants, and to manage them correctly. The PM we use now earns their keep. They get the units rented quickly, with the right tenants, and they use an online portal for complete transparency. They even give us a 300 day rental guarantee...they are that confident in their placements.
We're a TK company, and interviewed nearly every PM in Indy, and have not found anyone that can beat the level of service that we're getting now.
Overall, we're looking beyond just lease-up fees, and considering overall PERFORMANCE. That's going to bring the best returns in the long run.
Go to www.narpm.org and search their directory in the upper-right. There are some really good property managers there.
One thing people have got to get in their head: cheaper does not mean better! The PM that costs the most may be the one that puts the most money in your pocket. It sounds counter-intuitive but it's true that you get what you pay for.
I would seriously consider interviewing multiple managers. Compare their fees. Ask them to show you the numbers of a comparable property over a 3- or 5-year period to see what fees are incurred and how it impacts your income.
I am one of those property managers that charges 1st months' rent.. We used to do a different model and barely charged anything on the front end. I lost a lot of money on that. Let me show you a few of the expenses that go into placement.
Advertising - We put your listing on all the major websites. We update the listing 2-3 times a week on Facebook, and 2 times a week on craigslist.
I have my people answering the phones for prospective tenants from 9am to 10pm 7 days a week. This means more people get their questions answered and we schedule more showings than the average PM.
We shoot high quality photos and high quality videos.
We follow up with perspective tenants 2-3 times to get them to apply for your rental or give us good feedback.
We pay a coordinating broker fee.
We give you weekly status reports of what is happening with your property. This shows how many calls we received, how many showings we had, feedback, etc.
We complete pre-rent reports. I send my guys out to make sure your property is ready to rent. Happy tenants mean they stay longer.
We work very hard to get you GOOD solid tenants. Background, credit, and eviction checks. We know how to figure out if their previous property manager/landlord is their cousin Ricky-Bobby.
Our lease is 24 pages long. We work very hard to make the tenants as responsible as possible.
We save you a ton of money on turns and rehabs. I have the contractors and plans in place to make sure you are saving a lot of money.
I am not only a property manager, I am also an investor as well. I created all these systems for my own properties, and you are benefiting from my ongoing knowledge and updates. I am not stagnant or declining in my investing either. You get the benefits of my learning and on-going investing.
You can see this is a lot of stuff for me to pay for, especially on a property that only rents for $500~ a month.
There's a reason my tenants stay on average 4+ years in a single family home. That's even in the low income stuff. There's a reason I have a 1% eviction rate on the tenants I place. There's a reason 98% of our tenants are paying their rent on time.
Every week, I get 1-3 calls from people who have been taken advantage of by property managers. They pay too much for the property, they pay too much in rehab, and they get poop tenants.. Then the tenants trash the house, and the vicious cycle starts all over again.
I am not trying to sell you, I am just showing what goes into a good property manager.
I am glad your guy in Mississippi is awesome to you! Keep him happy! You are VERY lucky to have him...
I had bullet points and numbers on each of those items in my list.. Dum ole BP doesn't support their own software on the front end.
Most property managers do not want to deal with Low Income properties. If they do, they do a poor job at best. There is a lot more involved in the low end stuff, but if the PM has the systems in place and the knowledge they can be a good investment.
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