Property managers are usually paid by earning a percentage of the gross monthly rent. So at a typical rate of 10% of the rent, a condo that rents for $900 a month, would earn the property manager $90 per month. Simple enough. Or so it seems.
One of the first questions I usually get from a prospective Orlando property management client is "How much do you charge?"
That's understandable. Nothing wrong with asking. However, basing your final decision solely on the percentage charge would be a mistake, and it could turn out to be an expensive one. That's because even at 10% property managers couldn't stay in business very long without there being other revenue streams. For example, there are also leasing charges, and re-leasing charges, lock change charges, admin charges, bank roll charges, and well, I could go on for a couple more paragraphs.
These various supplementary charges, when combined, will tell you what a particular property management company is really costing you. But because most investors are either ignorant, or too lazy to dig deeper, they content themselves with finding a company who will do it for less than 10%. The first guy who says that he will do it for 8% get's the business. So far so good.
Let's look at this example in more detail now. How much has this actually saved the investor? On the surface, 2% which is a 20% saving, sounds wonderful. But on the $900 condo rental above, this only amounts to a paultry $18 a month.
"Ah, but you say, it all adds up. $18 x 12 is $216."
That's true. But now let's suppose that this company, let's call them "Company A" re-signs the lease at the end of the year, and charges you a month's rent as a fee, which is very common. And let's say that "Company B" who charges 10%, has a flat rate $299 charge.
Your cost with Company A, the company that saved you a tasty 2% is costing you $72 x 12 plus $900 = $1764. Meanwhile, Company B, who charges 10% a month but has a flat rate charge of $299, has only cost $90 x 12, plus $299 = $1375.
So that 2% saving cost you nearly $400 - or a new washing machine. And this is without even getting into the dozen or so other areas, where you could be up-charged.
It's a simple example, but you get the point: Taking one company over another based solely on their monthly charge could be a false economy. Would you buy a $100,000 Mercedes and then worry about whether to get the economy, or the slightly more expensive windshield wipers? Property Management is no different to any other sector of the market. You get what you pay for. Caveat Emptor.
But that's just half the story. I'll cover the other half of this slippery equation in the second half of this examination.
For more information on our Orlando property management charges and how it all pans out with our company, contact us at Admin@OrlandoPropertyManagementExecs.com or call (407) 901-5161. Spoiler alert: I can tell you right now that we charge 10% - but now you know that this doesn't necessarily mean a thing, because you understand that there's a bigger picture, and ultimately, a lot more at stake.