QUOTE (GrahamWhite @ Jan 16 2008, 02:21 PM) Chris,
A couple things that might be helpful.
First, you need to be clear about your expectations of what the management company does. In my experience they don`t do nearly the same job and owner/manager does no matter who they are. (We had a horrific experience with Hope Street and I would steer you away from them.)
Read the contract they want you to sign very carefully because in all the ones I`ve seen, they`re fully protected but if you`re not happy with their performance it will cost you to take back your properties or hire another company.
If you have a lot of units in one area you`re going to be able to attract better quality managers who work harder for you than if you have just a few units in one area. The easier your units are to manage (upscale apartments downtown vs. older houses with illegal suites).
There are a couple economic realities to consider with property managers:
1. RENT RATES
They`re looking to make the most money with the least expense to them. That means they don`t have the same incentive as you to charge top end rents because it means they have to work harder to find and screen tenants.
Let`s say you`re paying 10% management fee - $1200 as opposed to $1100 for your two bedroom unit means $10 more per month to them, but might mean four more hours of staff time in order to attract that top end tenant. Four hours at $30/hr is $120 which means they simply break even while the difference to you is $1080.
2. RELATIONSHIP WITH THE TENANTS
An owner/manager might go over to collect the rent, talk to the tenants and maintain a personal relationship. By doing so, they keep their finger on the pulse of what`s happening to their property month to month and will check out little things (you know, like a crack in the bathroom tile that will eventually lead to a $2000 repair bill) that a management company might never hear about.
There`s also a huge difference between how tenants treat a place when they have a relationship with the owners vs. one with the property manager (or none at all).
3. REPAIRS & MAINTENANCE
As the owner, you have an incentive to create cost effective solutions - meaning the lowest cost for the best result possible. A property management company is likely going to make just one call and some add on a percentage to the bill (15%) for the trouble of making the call and following up.
My advice to someone who has never used property managers before is that you should budget 25% for the cost of full property management the way you think of it as an owner. If you hire a management company, recognize that 15% still needs to come from somewhere (unless you`re fortunate enough to have highly desirable units in new buildings with on site property managers and long-term renters).
Thanks Graham. Good advice!
Chris
