It may seem like a good idea for property owners to hire a property management company. The stress of daily jobs like finding good tenants, collecting pay, and repairs is lifted. However, a lot of property owners do not think about the extra costs that come with property management services.
If you do not think about these costs, they can cut into possible income in a big way. To get the most out of your investment, you might want to work with a real estate accounting firm in Seattle, Washington, that deals in property management accounting.
The true costs of property management – beyond the obvious.
The management fee every month is the most obvious cost, but there are many other costs that can sneak up on property owners.
- Costs of doing business.
Property management firms have many costs that come with running their businesses, such as building rent, staff pay, marketing costs, and administrative fees. Most of the time, these costs are added to the management fee, which makes it seem bigger than it really is.
- Costs of compliance.
Property management businesses must strictly follow all local, state, and federal rules. This includes rules about fair housing, protection deposits, and how to get kicked out of a home. If you do not follow the rules, you could face big fines and court fees, which could be passed on to property owners.
- How much does it cost to fix and maintain?
Maintenance and repair costs will always be there, even if you hire a property management business. For fixes, the property owner is responsible for both the work and supply costs, even though the company may organize these services.
- Costs of insurance.
To protect themselves and their clients, property management companies often need certain types of insurance. The costs of this protection can be high, and they might be part of the total fee.
- Lawyer’s fees.
Legal help is needed for things like property disputes, problems with tenants, and removal procedures. These court fees can be very high and quickly cut into income.
- How much does it cost to market and advertise?
Finding good renters is a process that never ends. Property management companies often spend money on ads and marketing to get people to rent their properties. The property owner may be charged directly for these costs, or they may be added to the managing fee in a roundabout way.
- Technology is pricey.
Property management firms use a range of apps and tech tools to make their work easier. People who own land can be charged for these tools, which include permits and upkeep.
A closer look at the fee structures.
Property management companies charge their clients in a number of different ways. The most common is a portion of the rent, which is usually between 8% and 12%. But there may be other fee systems, such as:
- Flat fee: A fee that is always the same for each property, no matter how much rent is paid.
- Hybrid fee: This type of fee is a mix of a flat fee and a fraction of the rent.
- Performance-based fee: This type of fee system rewards the property management company for certain goals, like getting new tenants in quickly or making the most money from rentals.
Tips for property owners to make informed decisions.
To cut down on the hidden costs of building management, owners should do a lot of study on property management companies and compare prices, services, and reputation. Talk to management companies about fees, especially for contracts that last a long time. Go over contracts carefully to make sure you understand the costs, duties, and fees.
Keep track of all the costs, even the ones the management company charges. Owners can take care of their own properties if they have the time and skills to do so. This way, they can escape the secret costs that come with hiring a property manager.
Property owners can protect their investments and get the most out of their rental income by learning about the secret costs and choosing a property management company with care.