Property Management Blog
Todd Ortscheid of #GTLRealEstate talks about why an additional commission is charged on maintenance and repairs over and above the standard monthly management fee.
We manage a broad range of properties, and maintenance and repairs are a huge source of our expenses. We do not really make any profit in overseeing maintenance and repairs, but we do need to cover our costs; so, we thought of going about that in certain ways that are most fair and transparent to everybody. Older and more run-down properties are a much bigger source of the work we do because they require more maintenance and repairs. On the other hand, brand-new houses and properties that are just a few years old do not entail a lot of repair work, so we very rarely need to send vendors to them. We didn’t think that lumping everything into one big management fee that covers everything, including maintenance, would make a lot of sense, because then the owners who don’t really get a lot of maintenance done on their properties are basically subsidizing the owners who get tons of work done on their properties.
We thought it made more sense to break it out. Things that don’t deal with maintenance and repairs like the basic management, rent collection, and evictions are covered by the standard monthly management fee, while maintenance and repairs are charged with a percentage-based commission on top of the invoice amount. That way, the only people who are paying for maintenance and repairs are the ones who require it.
Some management companies do it in other ways. Some charge a flat fee for every maintenance and repair they do. Some management companies do not disclose that they are marking it up, so they will bill you directly from the property management company and won’t ever tell you that they are adding an override percentage on top of that. And a number of companies have an in-house maintenance unit. While some of them will disclose that it is an in-house maintenance company, others will not. They might also give it another name and will not let you know that it is under the same umbrella corporation that owns the management company. So, what they do is they include their commission in the invoice that they charge from the repair company and they get their money that way.
That’s not how we like to go about these things, as it is not a transparent way of doing business. We always tell our clients that there are no hidden fees. Everything we charge you, you know about, and it’s right on the second page of your management agreement for you to look at. We feel that this is the most fair and transparent way of conducting business.
If you have additional questions about this topic, please send us an email to email@example.com. If you require further assistance or want to see our available #HousesforRentinAtlanta or #HousesforRentinDaytonaBeach, give us a call or visit our website. Thank you for watching!
First, you should take note that the monthly management fee, which can be either a flat rate or a percentage of the rent, is only a part of what you'll be paying for any management company's services. Depending on which company you hire, you could also be paying setup fees, marketing fees, mileage, leasing fees, renewal fees, maintenance fees, etc. Some companies even try to hide these fees from you by burying them in the fine print scattered all over the contract. So if pricing is important to you, it's necessary to look at the full picture instead of just the management fee. You'll likely find that a company with a bargain basement management fee has much higher costs for their other fees. This is frequently the case with companies that have a "flat rate" monthly management fee. We see this from some of the franchise operations and the bigger national companies, mostly. They lure you in the door with a $79 flat rate monthly management fee, for example, but then they gouge you with other fees that companies like ours aren't charging, such as setup fees (in other words, you pay them up front before they've even done any work). It may be smart marketing, but it's also a bit disingenuous, to put it kindly.
But more importantly, is price really the most important factor when you're talking about someone managing what is probably your most expensive investment asset? Would you hire a mutual fund manager who only charged a 1% fee, but who only earned you 2% a year, instead of hiring someone who charged a 2% fee but who earned you 10% a year? Obviously the latter is the better option, even though he charges double for his services. What you want is expertise. That's true when you're hiring someone to manage any of your investments, including real estate. Especially real estate, in fact. It's important to examine many facets of the management company you're considering. How long have they been managing property? Do they specialize in property management, or is it just a small side business to their primary sales business? How many properties do they manage? How many employees do they have to look out for you? Are they doing yearly inspections of your property, or do they only see it at move-in and move-out? What sort of tenant screening process do they use? The list goes on and on. It's important to analyze the total picture of the management company and not just the price. You may find that the least expensive company offers you the worst value.
Give us a call and we'll be happy to discuss not only our pricing, but also our extensive experience and our full service management product.
While these estimates are certainly interesting for things like tracking rent trends, they are not very reliable for determining actual fair market rents of a specific house. Analysts have found that estimates on Zillow for example are frequently off by 20-30%. We’ve seen cases where it is even worse, particularly for houses in rural areas, or for multi-unit properties.
To get a real fair market rent for a given property, it is necessary to do what’s called a comparative market analysis (CMA). Real estate agents learn how to prepare an accurate CMA when they get their real estate salesperson license, and perfecting the art takes years of experience, because it’s hardly an exact science. Every property is different, even in a “cookie cutter house” neighborhood, and knowing how each of those differences affects the fair market rent (or sale price, for that matter) of a given house takes years of experience. Computer algorithms are helpful, and we even use a company called Rentometer to prepare quick estimates of rent, but the final number that we arrive at is based on our experienced agent’s judgment and knowledge of the local market.
So while we certainly wouldn’t discourage you from looking at these online estimates, we would discourage you from thinking that they’re anything more than a broad ballpark estimate. If the rent we’re charging is either higher or lower than what you see on Zillow, trust us when we say that there’s a reason for it.
Just about every brokerage includes a clause in their property management agreement that deals with a situation where the owner sells the property to the tenant. While this happens only rarely, owners are usually interested in how this would work, and it's a common question we get about the management agreement.
Your agreement with us to manage your property does not lock you in to having us sell your property. We are a full service real estate brokerage, and we can definitely sell your property for you, but we don't lock you in to using us. Many owners have a friend who does real estate sales, and they would prefer to use their friend if they decide to sell. We don't have anything in our management agreement to prevent this. However, we would note that we give our property management clients a discount on our sales commission, so you're probably better off using us.
But, a different situation comes up when you don't have your house listed for sale, but the tenant that we found and has been renting your house for a while decides that he wants to make an offer to purchase it. How does it work when your house isn't listed for sale but you enter into a sales transaction with the tenant?
Like the other brokerages, our management agreement does include a clause to address this in case it happens. Our typical commission in this situation is 5%, which is reduced from the more common industry commission of 6%. However, if the tenant doesn't have their own real estate agent representing them, then we don't have to share the commission with another broker, and we'll usually discount your commission even further to only 3%.
The common question we get is about why the commission is lower if the tenant doesn't have their own agent representing them. The way real estate commissions work, the seller of the property pays the commission for the sale. The buyer, even if they have their own agent, never pays a commission to their agent. Their agent's commission comes out of the commission that the seller pays. So, if there are two brokers involved (one for the seller, and one for the buyer), two brokers have to get paid out of the commission that you pay. Essentially, they split the amount received, so your broker gets half, and the buyer's broker gets half.
So, if we're representing you and the tenant doesn't get their own agent, we don't have to pay another broker out of our commission. Most brokers would still charge you the full commission and keep it all for themselves. We don't. We pass that savings on to you. So instead of paying the full 6% that most brokers would charge you, we discount it to 3%.
This is just one of the many ways that we put our clients first. We believe strongly that our business grows because we treat our clients right. Instead of wringing every penny we can out of our clients, we treat them fairly, and then they'll talk to their friends and we'll get more business. We may make a little less money from each client, but we make up for it by our business growing from word of mouth when a satisfied client tells his friends.
If that sounds like the kind of brokerage you'd like to work with, give us a call and we'll get your house rented to a quality tenant and take care of full management for you.
Many owners of rental property have friends who also own rental property, and they sometimes wonder why it's taking longer to rent their house than it did their friend's. There could be many reasons, including the condition of the house, the neighborhood, the condition of the house next door, etc.
But more than any other reason, the primary cause is usually the school district, especially when all other factors are equal. Let's use Fayetteville as an example. The city of Fayetteville, GA is split between two counties: Fayette and Clayton. And because of this, some residents of Fayetteville fall into the Fayette County school district, and some fall into the Clayton County school district. This is obviously a major area of concern for tenants, because Fayette County has some of the best schools in the state, while Clayton County has some of the worst.
A house in a bad school district is always difficult to rent, and the monthly rental rate is always going to have to be at a significant discount when compared to a neighboring good school district. A house that rents for $1,200/mo in Fayette County would have a difficult time renting in Clayton County at $700/mo. We frequently have to offer lease incentives (half off the first month's rent, for example) to get a Clayton County house rented.
So if you're wondering why your house in the same city as a friend's is taking twice as long to rent, check out the school district. That's probably your answer. If not, then the house is probably priced wrong, or might need to have some work done on it. In any case, we can help you with any of these issues to get your house rented as quickly as possible for the best price possible. Give us a call or fill out the form on our site to get more information.
The latest rental property occupancy data is in from Axiometrics, one of the leading providers of multi-family property data in the country. The occupancy rate, a very important metric for income property owners, remained high at 95%. This is up from the 94.8% occupancy rate of a year ago, and is quite encouraging, as this is the second month in a row where occupancy was at 95% or higher. For long-term comparison purposes, the occupancy rate five years ago was below 92%.
Aside from occupancy rate, effective rent also held strong, with the frequency of rent incentives (half month off first month's rent, for example) declining. The rent concession rate was down to only 0.78%, the lowest rate in at least five years. Effective rent rates are up by 4.5% year to date. Of course, these are national numbers in the aggregate, and not every market has experienced the same improvement, but it does give good indications for the strength of rentals as more and more families decide to rent rather than buy.
Looking at the greater Atlanta market, numbers are quite good, with Atlanta landing in the top 6 of the largest markets in the country. Occupancy rates in Atlanta were at 94.04% in June, and effective rent grew by 7.14% when compared to a year ago.
Of course, this is multi-family (apartment) data, so it doesn't transfer perfectly to the single family housing market, but again, it's a good indication for the strength of income investment property over "flipping" and other forms of real estate investment.
Please give us a call if you'd like to get started in real estate investing to take advantage of this great market. And if you're already a current investor with multiple properties, we offer investor discounts!
This is a question we frequently get from potential clients: "such-and-such competitor tells me that they'll charge 1% less than you; will you match their rate?"
Well, the short answer is yes. But the long answer is that you probably don't want us to. Allow me to explain. We are set apart from virtually all of our competition by our very simple and transparent fee structure. Most property management companies try to nickel-and-dime their clients to death. Setup fees, marketing fees, mileage fees, postage fees, eviction fees, the list just goes on and on. So when they tell you "we'll beat Central Georgia Realty by 1%," what they really mean is that they'll beat our monthly management fee, but that's because they more than make up for it with their outrageous fees, most of which are usually hidden and they don't talk about until you're already getting billed. And since most companies make you sign a long-term agreement (we don't), you're stuck with them after you're getting hit with these hidden fees that were buried in the fine print.
So, again, we'll match their monthly fees if they're lower than ours (most aren't, by the way). But if we do, we'll have to also match all of those other fees that they're charging. Usually, you're far better off taking our simple and transparent fee structure that includes everything in your basic management fees and leasing fees. We'll be more than happy to discuss it with you, though. Give us a call to get started with our services and put away those landlord headaches for good.