Property Management
Hello all,
I really do believe that this board has been one of the best tools that I have had in my real estate belt. Anyways, my question is if I buy an apartment complex and hire a property management comapany to take care of the day to day details, would they have to pay for any repairs and/or replacements needed after a tenant has moved out? I do understand that they charge a certain percentage for the work they do but typically how would the transition of moving one tenant out and another tenant in work?
Is the money thats made on a month to month basis put into an account jus for that complex, so when repairs and things are needed, the property management company takes the money out?
If anyone can jus breakdown the whole ins and outs of what the property management company is suppose to pay for and take care of. Everyday repairs included. Thanks
thanks for the reply. But as an owner, what is the cheapest way to cut down on the expenses of fixing up a unit when someone moves out. I can imagin that if the property has a high turnover rate then the owner will be spending alot more money than whats comin in. Would an onsite handy man cut major cost?
IMHO it all depends on how much property management wants to charge. If you know negotiate a falt feel for turnover (limited to a certain amount of damage) That might be the best way.
Some property managers mark-up all services so it really depends.
Most "damages" should be paid out of the security deposit - including cleaning (if you include that in the lease). Your PM should deduct the damages and pay the tenant what is left over. However, if you have a long term tenant move out - the unit will need to be painted, new carpet (maybe) etc etc.
You PM should have a "handyman" available to take care of repairs as they occur.
The best way to save some money can be to have an onsite manager that can take care of the little repair stuff (leaks, change locks, cleaning after turnover, touch up paint etc..)
Instead of free rent, you can offer them a monthly stipend for regular monthly stuff (lawncare, snow removal, tenant calls, etc) + an hourly charge for extra repairs. You can then decide to have your management company handle advertising, leasing, legal and large renovations etc..
In our experience many management companies make their money on maintainance and can subsequently bury your cashflows. Often times they will keep rents low as well to reduce turn over. On the other hand, if you do everything yourself you may initially save money and get higher rents, but it is easy to forget how much time you are sinking in.
Really all companies are different, ask your local multifamily brokers for advice and references. Interview them, look at their contracts, negotiate. Be careful not to choke out all the profit from them. You want to create a good relationship with them so they will care about your property and future business. You get what you pay for and bad management creates poorly maintained properties. You should make your money on the value of the assett not the measly monthly cashflows
The bottom line is, the bigger the property the better access there is to better, more efficient management companies. In may be cheaper for you to hold a 40 unit than 2-20 unit properties. When searching for properties, assume that you will pay at or above market management rates. If the deal is still stable, great. Focus on your deal, not saving a few hundred from your manager.
By the way, we self manage our properties, that way we have control over the value of the asset and our monthly costs. We still subcontract laborious daily work, just not the core business of the property.
Management companies charge a flat fee of 3%-12% normally depending on the size of the property. 3 percent of a 500 unit building is still pretty good deal, but a single family at 1000 a month is a pain in the butt...12%.
I always have the property pay for onsite management and repairs.
do people expect to pay for a mentor or just share in some deals with them?
a couple of months ago, I joined a real estate investing club that claimed to have hands on "mentoring". the more meetings I went to, the more it seemed like one sales pitch. $500 level...$1000 level...$5000...$10000 level. where are all you real mentors out there?
Most real estate mentors that i have seen want money - 5k to 25k - and they want to share in your deals.
I think a mentor is someone altruistic not money hungry.
Inconsideration of this I gladly share in the deals we develop.
marriage counselor who is having an affair with your husband
Good point. and this is a blatantly unethical, by the cannons of the profession, situation.
.nullUSE their "students" as an income source and as a bird dog for deals.
Who wants to be used?
I consider all the regulars on this site to be my mentors. They may not hold my hand and take me through an actual deal, but they are always there to answer any questions that come up- and while a few would like to slip a hand into my pocket, most are free and open with their advice.
Thanks, everyone!
Chris
The key to your success in this business is having
a mentor. I had a mentor my first 3 years in the
business.
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No advertising in signature please[ Edited by ypochris on Date 11/30/2007 ]