People who rent out multiple residential properties and multi-unit apartments generally have a property management company taking care of them. One question I often receive is why property owners have to pay a maintenance fee. These fees that are paid to a property management team can help keep your property from falling into disrepair. A good property manager’s maintenance team will help pay for itself by making your home more attractive to potential and existing tenants.
Homeownership naturally requires annual repairs to keep a house livable. This maintenance expense covers the upkeep of the electrical, plumbing and heating systems as well as repairing problems with the roof and floors. Some exterior upkeep to porches and lawns might also be needed to keep up a house’s curb appeal. For our own houses, we try to allocate between 1-2% of the home’s price for yearly maintenance. This is why is so important to pay a property management firm their fee to take care of these tasks for you.
Maintenance costs are obviously not the only thing that you have to look at when deciding which company will manage your rental properties. You need to know how those maintenance costs fit into the management company’s overall fee structure. You also want to see what’s exactly covered as part of the maintenance plan. Here are some important questions you should ask a property management team to help determine if they are going to be the best fit for your needs.
If you’re always watching your bottom line, you need to know about the management team’s fee structure. Every management company sets these fees a bit differently. Very often, a management company will have a very low monthly management fee but also tack on additional charges. You can typically see 8-10% charged as a service fee by property managers. This percentage is typically assessed based on the monthly rent. If the rent is set at $2,500 a month, then a 10% service charge equals $250 per month as the management fee.
Most management fees are figured on a 12-month contract. Always try to look for a full-service management company that advertises its services as being all-inclusive. If it’s not all-inclusive, the management company might charge you for a signing fee (sometimes called a lease-up fee). This is the fee that gets charged when they place a tenant in your property. A signing fee is usually one-half of the first month’s rent. Other charges to look out for could include trip charges or inspection fees. If the property management company has to visit the property, they’ll often have an additional charge that gets billed to the home owner.
Prefer all-inclusive companies as you don’t need to worry about any additional charges. Is good to know that you’re getting work done for just a flat monthly percentage of the rent collected. This should include advertising expenses (to give the property exposure), tenant screenings and background checks.
The property management team and the property owner both have the same goal, which is to get that rental agreement signed and the security deposit handed over.
When maintenance is necessary on a property, how much is it going to cost to get things fixed? Many property management companies might even make a profit when they do repairs to your property. For example, if they send out a plumber to a property to clear a drain or to replace a broken garbage disposal, there might be a cost of that repair and then some markup that actually goes into the management company’s pocket.
Finally, the most important concern for a property owner is when do they actually see the funds? Some property managers remit funds on the 15th, and others wait until the very end of the month. The monthly tenant’s rent is going directly to the management team, so make sure to read the contract on when you’ll see that money going into your bank account. Make sure your property management team will be proactive in collecting late rent. If the tenant pays late, it’s their responsibility to go and make sure that the rent gets collected.
You as the homeowner are at the mercy of your property management team. This is especially true if you have more homes than you can deal with directly. That’s why we the management team at Keyrenter Silicon Valley work hard so you never have to wait for your funds, and if you know that things are getting taken care of without you having to worry about it.