A good property manager from a reputable property management company can take off the stress from managing your rental properties, as he or she can easily take over your tasks and responsibilities. If you have been reading real estate tips for some time now, then you may have come across the importance and benefits of having a property manager in managing your rental properties. And perhaps now may be the time to consider hiring one for one yourself.
Sure enough, hiring a good property manager can certainly be a blessing to a landlord. However, the operative word here is “good.” There are many property managers and companies out there who aren’t even half as good as they claim they are, and last thing you want to do is to spend your money and take on some additional stress only because you hired an inefficient and incompetent employee. This is where the importance of evaluation comes to place. With any business, there are many things your property manager may not be telling you that you would most likely encounter, for example, hidden charges, middle man fees, and false promises.
Here are some important tips you need to know before hiring your potential future property manager.
Know Your Options
Generally, you’ll have two options when looking for someone to manage your rental property. There are property management firms and then there are independent managers. Usually, those who are associated with big companies, tend to charge a higher premium (with a commission of up to 10%), while independent property managers will often times charge a lower percentage (rates of 5-6% are uncommon), or even at flat rate. For independent property managers, if you can convince him or her that your property is relatively new and won’t require much repair or maintenance work, then you could benefit to negotiate a lower rate.
Ideally, there should be no application fee involved here. However, most companies will demand a $300 to $500 application fee just to enter your rental property in their system. No matter what type of system these companies use, or how sophisticated their software is, it should only take them about 5 minutes to setup and input your rental property to their system. Most companies charge this fee simply for profit.
Cost of Leasing
Some companies charge upfront up to 100% of the first month’s rent, but ideally, you should pay no more than 50% of your monthly rental income. There are many legitimate and reputable companies out there who won’t charge more than 50% of the first month’s full rent.
Also, there are companies out there who may try to ask for leasing fees up front even before securing a tenant. In this case, you should only pay property management company after a successful completion of the job. Make sure you see this in writing, the leasing fee should only be charged after they find and sign on a tenant for your rental property.
With the exception of a small amount fee for signage, you should never pay for an advertising fee for your vacant rental property. No matter how they claim they’re going to use the money, paying them for their service is more than sufficient. Advertising is part of their responsibility. If the property manager highly recommends a particular advertising service that requires a fee, ask him or her to detail and justify for that expense. Are other advertising avenues unavailable? What about Craigslist or Apartmentlist?
Before signing a contract, make sure you look out for any clauses requiring maintenance by their property management company’s preferred contractors. There may be a markup involved, and you may not get the most competitive bid available.
Sometimes fees are not explicitly detailed out in the contract laid out by the management firm, therefore it’s imperative to determine beforehand what the total cost will be in hiring a property manager. First, ask a property manager for a quote, then follow up with the costs for detail expenses. Really know whom you’re hiring and what’s it going to cost you in the long run.