A management company usually receives 10% of the collected rent. Their fee is for showing the property, arranging repairs, executing the lease, collecting rent, handling all problem calls, etc.
When the manager collects the rent he will pay himself 10% first, then pay any bills such as repairs, advertising, or the owner’s mortgage (if owner asks for this). After everything is paid, the owner receives what’s left. Absolutely nothing is paid for by the manager. Hope this helps.
If you’re new, and will be starting off with a small inventory of units, there no reason, in my opinion, not to self manage. 10% (the usual fee) of the monthly rent is a lot, and will usually wipe out most or all of your cash flow, unless you are putting a lot down or buying a large, multi-unit building. Even if it doesn’t, 10% is still a lot to give away.
Especially on single family homes, in decent areas, management is not that hard. The two most important areas of property management, in my experience, are screening, and collection. In other words, screen all your applicants carefully, and be firm but fair about getting the rent on time. I offer all my tenants a monthly discount for letting me take the money directly out of their account on the first (a draft program), and it’s about the closest you can get to heaven without dying. There are so many good books and courses written about property management, there is more than enough information available for you to handle this task on your own.
Posted by Frank Chin on June 11, 2002 at 11:52:12:
Management companies do management.
1- Getting paid: your tenant mails them the check, they take their commission, and send you the difference. Properly done, there’s a monthly statement that spells out what’s collected, what the commission is, and any advances against escrow for repairs etc.
2- Payments does NOT cover repairs. YOU pay it separately.
Basically, the tenants calls them about problems, such as a stuffed up toilet, they’ll call a plumber, and you’ll be billed for the plumber, or the mangement company on behalf of the plumber.
In the condo I own, the management company has a fee schedule, such as a $25.00 charge for changing a light bulb, so much per month for cleaning hallways, so much for hanging protective coverings on elevators when tenants move, etc. in addition to doing carrying charge billing and collections.
Because of the poor job performed by the managment company, the condo residents hired their own cleaning lady, who’s a neighbor down the street, and volunteers to change bulbs, water the flowers, coordinate residents moves etc.