The owners of investment properties will have to determine how the management of their property is handled. Out of state owners will generally have to rely on a property management company to handle the rental and maintenance of their properties. The selection of a property manager is one that should be researched very carefully as the hiring of a management company will determine how well your property is managed and will impact how much you receive from your rental. The commission structure is one area of consideration but should not be the sole determining factor in selecting your manager. In our area (Florida) the monthly management fee is generally 8% to 10% of the rental income. A number of property owners do not understand that the fees dont end there. The largest expense area involved in owning rental property will be repair and maintenance. Not only is it necessary to maintain your property and protect your investments but it is often used as a source of secondary income by the property management company.
Our experience has been that there is a fee or percentage of invoice that is collected by management companies for coordinating the maintenance or repair of your property. Property management companies are required to disclose the practice of adding fees on to the service performed on your behalf. Initially you may not see this as a big deal but if you add up the numbers over the period of management you might be surprised how much extra you are paying for repairs or maintenance to your property. As a vendor who provides maintenance services to property managers we have been required to add a percentage into our invoices so that the owner of the property believes that is what the service cost but come time to pay us for the service we must provide discounting of 15% to the management company. In other cases our bid or pricing has been marked up as much as 100%.
We have seen companies form just to notifiy vendors by phone or email of necessary repairs who then collect huge percentages for making a phone call or sending an email. Recently we spoke with an owner regarding a mail box that was installed at one of his properties who was outraged over being charged $150.00 for installing a plastic mailbox and post. We were in a position of having to explain that our charge for providing and installing the mailbox and post was only $75.00 and the remaining $75 was split between the management company and the middle coordinating company. I have estimated that my profit on going to the store, purchasing the mailbox and post, driving to the property, removing the damaged mailbox and post, digging the hole, assembling the mailbox and post, purchasing and installing the address numbers on the box, putting the post in the ground and covering it up was roughly $23.00. The property manager received 15% with the balance kept by the coordinating company.
WOW !! I am in the wrong line of work. While I understand that the coordination of maintenance request require some effort I believe that this is outrageous. Take this example and use the same ratio for replacing and A/C unit or a plumbers visit.
When the fees are deducted from the rental income and you are not directly reaching into your pocket I guess it is easier to take but that is your money. Someone else reached into your pocket and took the money out for you and you didnt even know it.
I will have more tips for owners of investment property in the very near future. Let me know what you think. Visit http://www.onlinehomeresource.com/ for specific how to's and help for DIY projects.
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