Would you hire a Property Management company that charge a fee for vacant units. Is this common practice or should this be negotiated?
It depends on what other management agencies in the area charge. If they all charge a fee then I guess you go with it. But, all things are negotiable. However, it depends on how many properties you have & how many managers are available & how hungry a manager is for business.
Thanks for the input!
What would you be paying them for? Babysit an empty unit?
Use your common sense. Just because everyone else is jumping off a bridge doesn't mean you should (or so my mother always said).
In other words, I couldn't care less what is common or standard. I don't have to be as gullible as the rest of the people out there.
Why on earth would I pay someone to "manage" an empty unit? Unless you're leaving something out, my answer is "no."
You probably mean the fee the managment company charges to find a suitable tenant for your empty unit? Some charge one month's rent.
What are the other fees like? What is normal for the area? If they are getting a fee to manage the vacant property what "service" are you getting in return. What incrimination do they have to rent out your unit if they are being reward for a vacant unit.
I am a huge believer in looking at everything through "clear" eyes. I have long ago learned to "never" say "neveR" because I have eaten my words often. The key is to evaluate the situation, the competition and the markets. Every market is very different and they usually evolve for specific reasons.
If it works in the best interest of protecting your property go for it. Just remember that no one cares for your property more than you do!
A few of the companies I've called seem to be doing the same thing. With that being said I guess it's normal for the area. I'm still doing my due diligence. I'm from Dallas and will be investing in Central Texas (multi-family). The only thing I think about is if most of the companies are charging that flat fee ($30-40) and I find a company that doesn't, then that company probably not manage my properties properly since they're not getting paid that extra fee. As you stated no one cares for your property more than you do!
I suggest you look for a private agreement with a person to manage your property for a flat fee, where they only get paid a percentage of rent coming in. Look for a realtor who wants some extra money on the side. Someone who doesn't get paid even if there is no rent coming in, or for find you "yet another" tenant, or for evicting the tenant they find you, or for using their maintenance people while they get kickbacks.
It's unfortunately "normal" for property managers to rip off owners. So, look for your own deal where you won't get ripped off.
For instance, as an experienced PM (retired) I'd feel quite confident about agreeing to just getting paid a percentage of rent only. That is because I know I could put good tenants in your unit, and my "work" would be minimal.
Unfortunately, though, most PMs make most of their money from problems that they not only create, but profit from.
So, be smart, is my advice. Don't accept the "norm." Put an ad on Craigslist for a realtor willing to manage your property for a percentage of income only. Give them a higher than normal percentage. You'll still come out ahead, because there is no such thing as a PM who "only" charges you that monthly percentage. So if the normal percentage is 10$, offer to pay 15 or 20 percent - but only for rent that is coming in. And offer a bonus if there are no problems that cost you money, and another if they renew.
Otherwise, your profit will blow out the window and straight into the PM's pocket.
Thanks for the awesome advice. That's definitely thinking outside the box. I'd never would have thought of the craigslist idea...thanks again.
I've thought about this, buying investment propery out of my state. I have dcieded that I would only do in the states, and areas where I have "feet on the ground". I thought my first option would be to be if any of my relatives would do the Property managment for me for a PM fee. I would be the distant secondary co-property manager and they would be my eyes on the fround. They would send the handi men over and do the visual inspections, giving me a heads up on everything. What with instant text messaging and cell phone cameras I do think that would work for me. If I did hire a PM I would ask them to document every visit with a text to me and a report and also useing their cell camera's for me.
I've thought about this, buying investment propery out of my state. I have dcieded that I would only do in the states, and areas where I have "feet on the ground". I thought my first option would be to be if any of my relatives would do the Property managment for me for a PM fee. I would be the distant secondary co-property manager and they would be my eyes on the ground. They would dispatch the handi men over and do the visual inspections, giving me a heads up on everything. What with instant text messaging and cell phone cameras I do think that would work for me. If I did hire a PM I would ask them to document every visit with a text to me and a report, also useing their cell camera's for me.
I was about to close on a SFH in Georgia a couple of years ago but once the title search was ran they kept trying to buy time. I took it as a sign to get out of the deal, also I had no friends or family there, the market just looked really good. Now I will only invest in my state where as you said you can have "feet on ground". As far as outsourcing PM to family, I don't think it's a good idea for me. Although family members have hinted around at being able to oversee property for me if need be, I think hiring family is a bad idea. I don't want to ruin relationships because of money/business. I just think family will get complacent at some point or another. Have you hired family before?
Well you might be right about not wanting to involve family members although Property Managing seems such light weight work. We have 5 duplexes and 9 units where something can go wrong and it seems like a such a small amount of time that we have to devote to each unit that it's hard to see where it would be a burder to manage one place. But as I say you just might be right and I haven't tried it yet so I do not speak from experience. I do know, that I personally would be more nervouse with a PM then I would be with a family member.
I was just over at a duplex I own and self manage where the tenant had a toilet running problem that was in the half bath. They turned off the water there was no rush. I got there and it was the rubber seal that had deteriated, so it was a little bit of work. They said to me "You are very good at taking care of everything" and on our way out I saw another tenant and said to him "I will be replacing your sink" and he said 'i know, you do everything right" Now these are 2 duplexes that I bought fully occuppied so I have been doing the needed renovations peice meal, because of money issues, and while the tenants are in the apartment while the tenants stayed in place. They all seem to know that I take care of any issue and seem very content. That is the way I would want a PM to operate.
I think it's a terrible idea to hire a family member to manage your property. Actually, in many places, they would be performing real estate services without a license, so you would actually be asking your family member to break the law. Also, a good PM doesn't just make sure all the toilets are working, they keep owners out of trouble with the law by knowing landlord/tenant regulations, etc. You should look for someone with experience who has managed rental properties for years and has seen it all. You want a pro at tenant placement who has a rock solid contract. You don't want a Realtor who has never done PM to find you a tenant. Although they are probably legally qualified to of the job, they know nothing about tenant screening or how to write a lease.
It would be like someone hiring me to rewire their house. I might be able to string a bunch of wires around and twist stuff together, but it would be a bad idea to plug anything in there.
No its not like asking you to rewire a house and it is not brain surgery.
@Raylor G. Definetly do not pay a management co. for an empty unit. Their interests and yours are aligned when they are paid a percentage of gross rents and not when they are paid when a unit is empty. You will be ripped off if they and your interests are not the same. I would keep looking for a management co. that is paid by gross rents. I have used 3 rd party management cos. for 10 yrs and would not accept that arrangement.
Thanks for the legal aspect. Didn't think about the tenant placement and such...
Thanks for the input. I will continue shopping around but it just seem like most companies in the area are charging the fee. I agree with what you said though 100%.
@Barbara G. No, it's definitely not brain surgery, but there is training and licensure involved, so it is a lot like asking me to perform the job of an electrician with no training.
@Dawn BrenengenI said I was interested in CO-PM managing. I wrote:
"I would be the distant secondary co-property manager and they would be my eyes on the ground. They would dispatch the handi men over and do the visual inspections, giving me a heads up on everything. What with instant text messaging ----------"
I would be very uneasy giving up control of my property. I would always remain a hands on owner. What kind of Licenses are you even talking about?
"they keep owners out of trouble with the law by knowing landlord/tenant regulations, etc. You should look for someone with experience who has managed rental properties for years and has seen it all. You want a pro at tenant placement"
Owners keep themselves out of trouble with their properties, this is a legal business we are not selling drugs. We also have experience. No one knows more about my property then I know.
I also don't feel comfortable with a PM having a vested interest in placing a tenant for a one month fee. If I have to pay 10% of my rent roll or approx $2,000 to $4,000 a year to a PM and another $1,000 a year for the PM to get a tenant and another $2,000 for Maintance and another $2,000 for a vacancy contigency then who am I working for here?
You say "You want a "Pro at tenant placement" No what I want first is my Money
@Barbara G. Actually, you first said - "I thought my first option would be to be if any of my relatives would do the Property managment for me for a PM fee."
PM by definition is a real estate activity, and in most states you need a license to do it. Maybe you do have plenty of experience, and can handle all of your properties yourself. I think long distance management can totally be done with a few key people in place locally. However, hiring a real estate agent for tenant placement, like Sue previously mentioned, is a bad idea. They don't know what they are looking for. Screening tenants is a skill that gets honed over time. I'm assuming the RE agent has no experience in PM when I say this. Obviously, if the agent also happens to be an expert tenant placer, then by all means, use that resource. Hiring a family member is even worse because they would be breaking the law in many states.
Remember, to get your money regularly, a lot of things have to fall into place. You home needs to be maintained, repairs need to be handled quickly, good tenants must be chosen, and rent must be collected. If any of those things are mishandled, the money starts going out the door quickly. An ounce of prevention is worth a pound of cure.
Also, rules and regulations vary GREATLY by state, so what flys in NY may be totally against the law in NC. You have to be very familiar with each state's laws in which you invest. I've been managing properties in NC for more than 12 years, and I still occasionally learn something new about NC laws, and it doesn't help that the laws also get revised regularly. You even have to know the ins and outs of the particular City, not just the state. In Raleigh, you can't have more than four unrelated people living in a home together. You also must register your property as a rental with the City. Five minutes over in Cary, that's not a thing.
Long story short, if you don't find any value in paying for PM, then of course, don't hire one. What concerns me is when people misinform other people or give just plain bad advice, and now those newbie folks run off and get themselves in trouble. Hiring someone for a job in which they have zero experience is simply not a good idea.
Dawn I did not reaize that this is your job. You are a PM. I'm sure you are good at what you do. Not all PM's are good and one must carefully hire them and some of us would carefully monitor them. Manage the Managers is what some investors do. I don't see owning properties out of State and hireing a PM for a small Property, as being viable for me. If I had a large complex out of state obviousely I would hire a PM for a negotiated price. I still would have to be involved. Right now I want all my investments close and would be uncomfortable out of state with spending so much money on vacancies, on PM fees, spending extra money on filling vacancies, spending extra money on commission for hiring repair vendors. That's too much leakage for me to be happy with.
Good luck to you in your bussiness
I live in Raleigh/Durham area and I remember when the city of Raleigh passed that law requiring rentals to be registered. Someone who isn't a hands on PM or doesn't follow the news in this particular area wouldn't have known it. I own properties and only use PM to manage them. It help me focus on things that I think bring more value (like trying to find capital, good deals, ... etc).
@Henri Meli Some people like to be hands on, some don't, and both ways of doing it are totally ok. When my parents and I bought our first property, I didn't even know professional property management was a thing, so I just did it on my own, and I learned a lot by trial and error. A few years later, and I realize a better way of doing it would have been by a lot less trial and error. Now that I PM many homes, and this is my full time job, I know I wouldn't want to do this AND hold down a full time job if I had multiple properties.
@Barbara G. I think we're both arguing the same point in different ways :) That's exactly the conclusion I would want someone to come to when it comes to investing. If you don't have GOOD PM in place, and you don't know an area outside of your area like the back of your hand, then you should think long and hard about investing there. Build a solid team/connections first, then buy. Also, I think you are talking to the wrong companies. I charge 1/2 of one month's rent for a placement fee and 8% of rent collected for management. That's it. No overrides on maintenance. No tenant retention bonuses. No admin fees, etc. And I think my fees are pretty in line with what others charge in my area, give or take a few dollars.
Actually I just met a colleague who is from the area I wish to invest in, and he introduced me to a company that is pretty much in line with your last post...no extra fees, babysitting fee and has a great reputation overall. Now that I've closed the loop on that part of gathering a team...the grind continues. Thanks
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