Is this really the reality of property management?

[Skye Anderson]

I recently had my first call to interview a potential property manager for my first long-distance investment property and it left me a bit discouraged to learn of the reality of the costs involved.

• 3-5 weeks to rent a property (1 month's rent lost)
• 1 full months rent to lease it
• 10% of the monthly rent to "manage" it... essentially collect the rent

By my calculations this means that 3 months have to go by before the property owner ever sees any of the rent.

So let's do the math for a 1-year breakdown on a fictional property that rents for $750/m and would bring in $300/m in cash flow before property management.

Costs:

$750 (no rent while vacant)
$750 (cost to lease)
$750 (10% management fee for remaining 10 months)

$2,250

+ $3,600 (Annual Cash Flow Before PM)

- $    750 (Lost Rent While Vacant)

- $1,500 (Paid to Property Manager)      

 $1,350 (Actual Annual Cash Flow)

... and this is only if the Property Manager never does anything except for collect the rent!

Is this really the reality... that the Property Management Company makes more than the property owner?