I would really like to buy my first duplex sometime this year. (I am still learning and analyzing so nothing in the works at this time) However, when it comes to property managers, what is the going rate I should expect to spend? Are the additional fees they charge as well as a percentage of the rent? Currently my Mom has a manager for her rentals in the Chattanooga area and his only charge is 10% of the rents. However, he is getting older and if I would to get my own unit(s) I would be interested in getting a different manager who is not getting old enough to retire in the next 10 years, and who is familiar with and practices "Bigger Pockets Mentality" I have learned a lot in the Bigger Pockets Managing Rental Properties book. However, I still want the face of another human between me and my tenants. :) How much would that cost me and who do you recommend?
I own a PM company here in Chattanooga. Fees are one thing (and I'll get to in a minute) but there are other, more important questions you need to be asking, IMO. First, what is your goal with the property? What is your rental philosophy? On that second one, what I mean is as an owner how will you want to handle maintenance and capex long term? That matters and can have a big impact on a property's value in the medium and long term. Regardless of your answer, you want to make sure your PM is aligned with them.
You'll also want to set expectations and make sure they PM can adhere to them. How will communications be handled and in what time frame? What are maintenance thresholds, and so on? This will be partly how you hold them accountable going forward.
As for fees, 8-10+% is what you should expect to see. It will vary somewhat based on rent range and location. Leasing fees of 50% of the first month's rent are quite common, but you'll want to find out about other fees. Set up fees, Lease renewals, vacancy fees, eviction fees, and so forth are all somewhat common. Maintenance markups are also a big one. That can be 15% at the low end and go up from there. If you buy an older property with a bunch of deferred maintenance and opt not to address it at the outset you'll get eaten alive on maintenance costs. Most small PM companies derive up to 50% of their revenue from maintenance markups.
10% is a good average for most PM. If you have multiple properties with the same company, they will likely be willing to negotiate that number down to 7-8%.
One of the MOST important questions to ask when qualifying a new PM is the fees you've outlined in your question! Ensure you absolutely ask that as all PM have different fees like the cost to place a new tenant, handyman work, bids, etc.
I also am a huge advocate of going to a local RE meetup and asking who the real investors in your area recommend. PMs can be hard to pick out so go ask the best who the best is and they'll be happy to refer you out!
Hello Sandy, this is going to vary a lot by area. However, you can normally expect 8% on the very lowest end, 10% is more common now. Additionally, most property managers will have additional fees. For instance, when they have to place a tenant they often will take the first month's rent. There are normally fees associated with anything they need to do that goes beyond standard operation.
I would really like to buy my first duplex sometime this year. (I am still learning and analyzing so nothing in the works at this time) However, when it comes to property managers, what is the going rate I should expect to spend? Are the additional fees they charge as well as a percentage of the rent? Currently my Mom has a manager for her rentals in the Chattanooga area and his only charge is 10% of the rents. However, he is getting older and if I would to get my own unit(s) I would be interested in getting a different manager who is not getting old enough to retire in the next 10 years, and who is familiar with and practices "Bigger Pockets Mentality" I have learned a lot in the Bigger Pockets Managing Rental Properties book. However, I still want the face of another human between me and my tenants. :) How much would that cost me and who do you recommend?
Hi Sandy, all property managers are different and every market is different. IN our area we have several different charges and fee's:
10% of rent collected, we scale that down for large portfolio's or higher end units
Loading fee to screen, find, and place a tenant
Hourly charge for maintenance, we have in house maintenance staff
Mark up on outside vendors. I basically have to have a full time staff person to coordinate with outside vendors, plumbers, electricians, appliances, etc... so we have to bill a mark up fee. However, we go to all of our vendors and negotiate volume discounts so we try to make this a wash for investors.
Far more important than fee's is the companies experience and business systems. Our systems are built around transparency so we have built in photos of before and after pictures, a software system that provides reports on cash flow, maintenance, a P+L, an after hours call service for emergencies, built in legal advice and contracts, built in accounting for clients, etc.. All of this is included in our package.
@Sandy Keller 10% is pretty standard in Chattanooga. Most PMs also charge 1/2 months rent for placing a tenant. They may also charge an override when coordinating repairs from other contractors.
I'd say 10% is the industry standard here in Chattanooga. I know a lot of PMs here will give you a discount if you have a full portfolio with them, I've seen some go down as far as 8%. The different fees and such vary so much between PMs, it's tough to be able to say for sure what fees will and will not be included in there. So I'd make sure to get everything in writing with whatever PMs you speak with / interview so you can make sure you're getting the full picture.
Blake England with Adobe Property Management is outstanding, and my go-to PM here in town. I'll message you his info :) Best of luck!!
2) Neighborhood & Property Class (time to manage Class A < Class B < Class C < Class D)
3) Property condition (slumlord properties hard to manage)
4) Number of units (some economies of scale, but not as much as owners think)
5) Owner expectations (some owners really want a personal assistant!)
Don't confuse SFR pricing with that of MF. It's always interesting when a newbie owner contacts us stating they saw 4% online and want that for a SFR! We've seen 3% for 100+ unit apartment complexes, but they also have onsite staff not included in the 3% management fee.
Two other pricing options to properly understand:
1) Fee charged based upon tenant payments or just occupancy. Some PMC's will charge a lower percentage fee, but will charge it whether tenant paying or not. Challenge is where is their motivation to properly screen applicants and get rid of nonpayers?
2) Many flat fee PMC's charge whether property vacant or occupied, tenant paying or not.
Lots of games also played with Maintenance fees. Many claim they do not charge a markup, but then aren't transparent with invoices, etc.
1) If a PMC charges $x hourly, their markup is built into that hourly rate as they are NOT paying their workers that hourly rate.
2) Many PMC's send you ONLY their invoice, or from their wholly owned maintenance company, not the underlying invoices from Home Depot and contractors. What markups do you think they may be hiding from you?
3) If their handyman can't handle a repair issue and they have to hire outside contractors, many PMC's will then charge a markup for their time - but they don't tell you this upfront or disclose in their management contract. NOTE: we agree with charging for their time, but not the lack of disclosure.
4) Some PMC's also get kickbacks from contractors, so the price you see on the contractor invoice sent to you, is really not the true price. Unless they cover this somehow in their contract, this is illegal.
Hope this helps!
Please send us any feedback via email, as we do not use the DM feature here.
Also, if you like our response, please don’t be shy about giving us a vote😊
I own a PM company here in Chattanooga. Fees are one thing (and I'll get to in a minute) but there are other, more important questions you need to be asking, IMO. First, what is your goal with the property? What is your rental philosophy? On that second one, what I mean is as an owner how will you want to handle maintenance and capex long term? That matters and can have a big impact on a property's value in the medium and long term. Regardless of your answer, you want to make sure your PM is aligned with them.
You'll also want to set expectations and make sure they PM can adhere to them. How will communications be handled and in what time frame? What are maintenance thresholds, and so on? This will be partly how you hold them accountable going forward.
As for fees, 8-10+% is what you should expect to see. It will vary somewhat based on rent range and location. Leasing fees of 50% of the first month's rent are quite common, but you'll want to find out about other fees. Set up fees, Lease renewals, vacancy fees, eviction fees, and so forth are all somewhat common. Maintenance markups are also a big one. That can be 15% at the low end and go up from there. If you buy an older property with a bunch of deferred maintenance and opt not to address it at the outset you'll get eaten alive on maintenance costs. Most small PM companies derive up to 50% of their revenue from maintenance markups.
