Has anyone had much experience with a property management company called Property Management, Inc.? It appears to be a franchise and there's one in my local market.
As a new investor (have yet to acquire my first rental property), I'm wondering:
1.) Am I crazy to consider hiring a property manager from day 1?
2.) Does anyone have any information on what they typically charge for full property management services?
Any advice is appreciated.
Never heard of that company before.
no your not crazy lots of people hire p.m. especially out of state investors.
pricing variers. Student housing and vacation rentals will be higher. Regular p.m. is around 10% of rents. Fees for placing tenants as well.
@James Wise , even people that live in the same town / next town over? I just want this to be truly passive. I work full-time and would rather not be too involved unless I really save $. 10% might be do-able.
I have no idea about PMI.
But A good & experienced property manager will not only offer you property management service on your property. They can also offer you knowledge & advice of area, general renter info & will advise you the crime factor of your property's neighborhood, so you have a better idea what you are getting into.
Also residential rental tends to have more issues than a NET lease commercial tenant, so this may be a better investment choice for you.
Rates vary quite a bit. 10% of collected rents is a good baseline. Around here they also charge half to a full months rent to fill a vacancy. They are also going to charge you if the tenant calls and they have to get someone there to fix something.
Thank you for the comments. I agree that there are likely to be more tenant issues with residential vs NNN, which is why I'm considering property management.
I thought I heard (Podcast, maybe?) or read somewhere that when you first get started, you should self-manage to learn what you're doing before outsourcing. Someone also referred to this in one of my first posts as "buying a job," which really stuck with me. I think that was partly due to the numbers I posted and the fact that the deal wasn't very strong.
In any case, this PMI company near me seems like it could be a fit. I know the second guy in charge there from previous business dealings. We're supposed to be getting together soon, so hopefully I can get more info at that time. I just don't want to buy my first rental, immediately turn it over to property management, somehow get burned and be forced into doing it myself without any real experience. I guess that's part of the gamble, though, right?
To Job's point, since I'm not handy at all, I'd likely be calling the same people for repairs, etc., so hopefully their pricing is slightly better due to economies of scale with their other clients. To me, it sounds like 10% off the top for a truly passive investment. Sounds okay to me.
You definitely want to discuss rates with PM's in your target area. Around here, if I was using a PM I would use 14%. That's 10% off the collected rent plus half a month's rent once a year to fill a vacancy. For a $1000 rental that's $1680 a year. In my experience (which is not extensive) I spend about 20 hours per year per rental. A PM wouldn't completely take away that 20 hours because some of it is my accounting. But even if they did I'm paying that PM $84 per hour. Even though doing the PM work is "buying a job" I'm willing to invest that time for $84 an hour. If that scales up to 100 rentals and becomes a full time job then I would be making $168K for the PM work, in addition to any income the property is generating. IMHO that's a pretty good income for the effort required.
For truly passive income if you have cash I think there are better avenues than rentals. In the real estate business you can earn a pretty solid 10-12% returns making loans to rehabbers via a broker. That's not risk free, but its less risk than rentals. I've not seen NNN deals that could get you up that high, but you can get pretty close. I think the risk with those is that your one tenant may go belly up (think about all the big box stores that no longer exist) and leave you holding a purpose built building that has little value. Think about all the empty and reused WalMarts and Pizza Hut building around.