When running numbers on an apartment building with about 20 units, is there a good number to use for property management costs? I understand it varies depending on the company, the property and area but just for a ballpark to see if this deal is even worth looking further into (percentage of gross income?).
Looking for anyone with experience to give some advice…thanks!
10-15% of gross monthly rental.
Keith
Around here, it is 10%, but that doesn’t include anything but collecting the rent checks. Expect to pay a lot more for repairs than if you manage yourself, and you might have to pay for each new tenant obtained.
I do some property management on the side here in addition to my rentals.
I charge 10% of all gross for management. It includes normal activities such as dealing with tenants and check in/check out and leasing type things. On top of that I charge $35/hr for maintenance or 10% of a charge if I hire a third party to do maintenance for my time scheduling and inspecting the work. If your rentals are very spread out you can expect more on the hourly rate - mine needs to be higher.
In short my bills are between 10% and 20% pretty reliably. A typical month is about 11-12% of rent received and averages around 15%.
estrogens breakdown is pretty clean. larger unit complexes can vary but 20 is not large enough to factor under 10%
When I was getting a property management company in Las Vegas, I was told that if I would have even just fourplex, I would pay already less than 10% of the rental income. I think they were talking about 8%, so I guess it varies but I would believe that for 20units you could get some better rate.
It’s a tough call, generally owners pay around 10%. Very worth it if you have more than 10 properties and something other to do than manage them. It’s the maintenance that gets tricky. As a past property manager myself, I learned that it’s not just the 10% they make the money from, it’s maintenance. Be very careful when using a property management company if they are also taking care of maintenance- if it is not a completely honest company, they might throw in nonexistent problems that will be paid from your profits. When you get your owner’s statement, you will see rent received, maintenance and etc paid from that, then your check. It’s easy to breeze through them and not notice little general maintenance issues that would seem common and necessary. They might hike up the cost of a water heater, the cost of labor (…easy to get away with since usually they have their own maintenance workers…), or simply make up something that sounds legitimate such as AC units going down at the start of summer. It’s usually something that is hard to prove unless you have direct contact with the tenants, and if you are using a property management company, generally you have no contact with the tenants. I recommend using a clause in the contract telling them to call you and get your approval prior to fixing a maintenance issue if it’s going to cost over $100, or even $50. Yes, it may be more hassle for them, but that should keep them in check and keep your check intact.
Great reply by bosslady. Most PMs make more money on maintenance than they do on the PM fees. Keep the amount requiring pre-approval low, and ask lots of questions. Make sure they know that you’re “on it” and watching. There are also lots of things that go wrong in tenant’s units that can be solved over the phone with a few intelligent questions (such as, “did you accidentially turn off the switch on the side of the furnace”). If the PM has a maint. staff sitting around, there is lots of incentive to get them out on runs to the units.
I pay 10% of rents, and the PM just forwards me the checks, so his services are a little scaled down compared to some. However, he does not charge any additional lease-up fee. PMs can make a lot of money from lease-up fees (often .5 to 1 mth rent plus application fees, etc.), thus many almost benefit when you have turnover. My PM with no leasing fee has incentives that align with mine. He only makes money when the unit is occupied. This approach is the exception and not the norm, but if you can negotiate this, or find a PM who does this routinely, it’s a great approach.
Make sure you ask how they screen tenants (exactly what they do), how they advertise vacancies, examples of reporting that you will receive, etc.
One other thing on the fees: my PM reduces the fee by 1% for each 20 units you have, flooring at 5%.