Beware of the 5% Property Manager
How many of remember the age-old adage “You get what you pay for?” Perhaps we also remember the statement “If it looks too good to be true than it probably isn’t?”
Those statements are still valid today, especially when it comes to someone who will manage as valuable an asset as your rental/investment property.
The Real Cost
It seems that today there are suddenly more property managers than ever before. Please don’t misunderstand me, there are still plenty of good honest and competent property managers in the marketplace but there are also many more that are less than competent and honest. Here in Fort Myers and Cape Coral, Florida real estate is a big business and property management / rental property is a close second. In managing rental property there can be various and assorted costs/fees charged companies that manage such properties. Be sure to ask about any and all fees prior to engaging the services of a property manager. Fees vary from one company to another. There are three primary fees that most companies charge:
1. Leasing fee-This is for marketing the property, screening and placing a tenant for you. 2. Management Fee-This is usually a percentage of the rental price. This fee is charged for the ongoing business of managing both the property and the relationship with the tenant(s).
3. Renewal Fee-This fee can vary from one property manager to the next. The fee is charged at the renewal of an existing tenant and covers the cost of market analysis of the rental prices in the area of the property, a full inspection of the property and can also encompass recertifying that the tenant is still able to continue to keep up their side of the rental contract.
It is important to note that these fees can be flexible depending on the number of properties in an owner’s portfolio.
4. One “Hidden Fee” that is sometimes charged is a mark up on labor and materials involved in maintenance issues at the property. Be sure to ask about this since one major maintenance problem, such as an air conditioner or hot water tank, can easily equal several or more percentage points of management fees. There is one situation that an owner described to me that involved a $1500.00 hot water heater. The approximate cost of having a licensed plumber install a hot water heater in the Fort Myers area is about $850.00. The difference in the two figures is profit for the property manager. If we brought in the example of the hot water heater in this case the total management cost would be $1902.00. If you express that figure as a percentage of the management costs the management fees increase from 8% to over 13%.
Although this is only one example it is always a good idea to be able to access all of the invoices and receipts charged to the maintenance of your property. This way you can track of costs and also have your tax professional deduct the appropriate expenses from the income of the property.
At All County Medallion Property Management we supply clients with and online Internet portal that allows them to track costs relating to their property. All receipts from maintenance performed on their properties are uploaded to the portal so that clients can track their costs.