Looking after the affairs of your rental income property can be a tough task if you are a first-time landlord. Dealing with tenants, carrying out the repairs, and obtaining a positive cash flow requires serious work on the part of any real estate investor. It becomes even more difficult when you go on adding more investment properties to your portfolio. One easy way to reduce the workload, as well as all the stress, is to hire the services of a professional rental property management company. In this way, you can become free of all kinds of worries about your property by simply paying rental management fees.
Related: Professional Property Management: When Is It Worth the Money?
If you have just started out as a real estate investor, you might be confident about your entrepreneurial abilities thinking you can tackle all the responsibilities on your own. But you are not taking into consideration all the required time and effort just to save a little bit of money from your rental income. You will be surprised by the kind of benefits that come your way if you are ready to pay the necessary rental management fees to a professional property management company. However, these benefits depend upon the kind of services provided by the property manager and the rental management fees you’re being charged. Here are a few of the services you can expect:
Common Services Offered by a Property Management Company
- Marketing of rental property
- Tenant search, screening, and signing of lease agreements
- Collection of rent and accounting of your rental property business
- Maintenance and upkeep of your property
- Periodic inspections of the property
- Redress of complaints and repair requests
As you can see from the list of these services, you can relax with total peace of mind as you are not required to market your property and search for tenants. You will not be bothered with screening tenants and tenant turnover, two of the most frustrating aspects of becoming a landlord. The company will look after the repair and maintenance of your property to keep it in good condition. It will make sure that the rental property costs remain in control so that you are able to enjoy positive cash flow from your investment property. It will listen to repair requests and carry out such repairs to keep your tenants happy. Periodic inspection of individual units of your property will help in making sure that no tenant is causing damage to rental property.
Essentially, by paying rental management fees, you can actually get a higher return on investment as compared to when you try to manage the affairs of your property on your own. This is simply because everything becomes more efficient and your property just functions better at the hands of a professional who know what they’re doing.
When Do You Need to Hire a Property Management Company?
There are still many landlords across the country who believe in the principle of saving money by looking after the affairs of their properties. But the number of investors and landlords enlisting the services of property management companies is on the rise. This is because managing property has become very difficult these days in comparison to owning a rental property. Here are some of the instances when it actually becomes necessary to hire the services of a rental property management company:
- You live far away from the investment property
- You have many properties to look after
- You are finding it hard to manage things on time
- Tenants are causing problems for you
- You are not getting any enjoyment out of being a landlord
- You are not able to obtain a positive cash flow
In any of these cases, it becomes necessary to pay the fees. So, here are a few key ones you’ll have to budget for:
Common Rental Management Fees
Typical rental management fees depend upon many factors such as the size of the property, its location, type, condition, and the scope of services offered. The following is a breakdown of a few common rental management fees charged by most professional property management companies.
Initial Set Up Fee
This is a fee most professional rental management companies charge from the client in lieu of setting up the account. This fee is usually around $500 but some companies do it for free for their clients. Some companies say this fee is charged to analyze the condition of the investment property and also to inform the tenants that they will be hereafter managed by the company.
Monthly Management Fee
This is the most important part of the fee charged by a professional management company. This is a fee that you will be paying to your property manager on a monthly basis. The contract you sign will mention how to calculate this fee and it will also mention all the services the company will provide to you.
This fee can be a flat fee or a fixed percentage of your monthly rental income. Most landlords prefer a fee that is a fixed percentage of their monthly income from the property. Rental management fees usually vary from 6-12% of the monthly rental income. A higher percentage is charged as a monthly fee for properties having less than 10 units. For properties having 10 or more units, rental management fees are 8% or lower.
Many landlords sign a contract without paying attention to the fact that rental management fees are for rent collected or rent due. If you are paying rental management fees based on the rent due, you could be paying even for those units where tenants have not paid their monthly rent. Be sure to budget for this accordingly.
Fee for Placing Tenants
Some companies charge a separate fee every time they place a tenant in your rental property. It could be equal to half of the monthly rent or even a full month’s rent.
Related: What Should Landlords Do to Find the Perfect Tenant?
These rental management fees include the cost of advertising your property, screening tenants, preparing the property for move in, as well as the signing of lease agreements. Some companies charge a vacancy fee which is to manage a vacant unit. This means you could be paying even for units that are vacant in your property.
It is a good idea to do your cash flow analysis properly before signing the contract with a rental management company. You can do this with a rental property calculator. Learn more about Mashvisor’s here.