If you have an extra apartment or an office space that you don’t use and is lying vacant, it is essentially a wasted investment. Not only do you lose potential revenue by not putting it up for rent, an unused property often degrades over time when there is no one to maintain it. A double whammy! This is where a property management company comes in. Such a company can help you find a suitable tenant for your property without much effort from your end. From marketing of the space and screening of tenants to the preparation of rental agreements and inspection of the property, property managers take over all the responsibilities related to your property. But while hiring the services of one, you should be wary as they can charge quite a hefty fee. However, with a little research, you could find a property management company that is both cost-effective and efficient. Here are a few points that can help you find a cost-effective property management company.
Components of Property Management Fees
There are various aspects of the property management fee that one needs to look into. You need to be aware of all these components to be able to find a cost-effective property management company. The typical fee arrangement can involve either paying a percentage of your monthly rent, which is generally about 8 to 12 percent, or a flat rate of a fixed amount every month. Out of these two options, which one would suit you better and would be more advantageous for you, would depend on your particular situation. Furthermore, some companies expect you to pay a fee irrespective of whether the property was occupied by a tenant or not. On the other hand, some companies charge you only for the duration in which they provide you with a tenant, otherwise, they don’t charge you at all. That being said, while looking for a cost-effective property management company, it is imperative that you look not just at the amount that they charge but also at the services and deals they provide.
Look For A Company With A Price Model
A company that presents you with a proper, well-defined price model inspires a lot more confidence than one that doesn’t. A large number of property management companies often do not describe their fee on their website or on their advertisements. When a well-defined price model is not in place, the company can charge different clients different fees based on their mutual agreements and understanding. Although this gives you some room for bargaining and the chance to tip the scales in your favor, more often than not, you may end up with the bitter end of the deal. It is safe to assume that you would be better off with property management services that are transparent regarding their pricing model. Such companies have a standard pricing model against the services offered, which remains the same for all their clients. Consequently, it becomes simpler and straightforward to forecast your expenses and be prepared for them beforehand.
Things to Watch Out For
While hiring the services of a property management company, it is important to watch out for hidden fees. While it may seem that certain companies charge a low monthly fee, they might be passing on other bills to you in the form of advertising bills, maintenance fees, or inspection fees. In addition, there might be some other services that one company might be offering as part of their regular services while another company might be charging extra for; such as eviction fee, tenant placement fee, or an initial setup fee. While a company might charge a lower monthly fee, when these additional costs are added up, the net amount that you need to pay gets inflated significantly. So you need to choose carefully whether paying a higher all-inclusive monthly fee is beneficial for you or rather a lower monthly fee with additional charges based on the services availed. A good way to gauge the legitimacy of your property management company is to see the certifications that they carry. However, these vary from one state to another.
Another aspect you need to look into is the language that is used in the contract. If you are paying the company a monthly fee based on a specified percentage of the rent, is it a percentage of the ‘rental value’, the ‘rent collected’, or the ‘rent due’? In the first case, you are expected to pay the company irrespective of their success in finding a tenant. In the second case, you will have to pay the company a portion of the rent collected, which works in your favor. In the third case, you will have to pay the company a portion of whatever rent is due. So even if the tenant refuses to pay the rent, you still have to pay the company their share of the money.
When it comes to finding a cost-effective property management company, it goes way beyond simply picking the company that charges the lowest fee monthly fee. There are various factors that have to be considered. However, if you keep these points in mind while selecting a company to manage your property, you are bound to end up with a cost-effective and reasonable deal.
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