Many real estate investors struggle with the question of whether or not to hire a property management company. Some investors would never consider purchasing real estate without first hiring one. On the other hand, some find it difficult to break free from the “do-it-yourself” mentality that holds them back from achieving more.
You might be wondering, “Is hiring a property management company really worth it?” Or “What does a property management company do?” At the very least, we are sure that the advantages of hiring a property management business significantly exceed the disadvantages.
What is a Property Management Company?
A property management company is a third party that oversees real estate and physical property for a monthly or annual fee. This comprises of a variety of operational responsibilities as well as handling all tenant communications. A property management company can handle all aspects of running a successful rental business, depending on the company, contract, and the owner’s unique demands. As a result, landlords can focus their efforts and energy on other things knowing that their rentals are being looked after.
What Does a Property Management Company Do?
Property management businesses relieve landlords and real estate investors of several responsibilities. Landlords pay them to manage both routine and emergency activities. A contract will explain the exact list of responsibilities that will be transferred to the property management company, as well as payment terms.
These companies may use their own employees to complete the work, or they may hire outside contractors to complete certain projects. A property management company, for example, might hire a handyman for minor repairs, mowing the lawn, and cleaning any shared spaces within a multi-tenant property. For larger repairs or to prepare a unit for a new tenant, they may employ a professional carpenter or painting crew.
The following are some of the typical services provided by a property management company:
- Advertising a property that is available for rent.
- Conducting background checks and screening new tenants.
- Giving tours to potential clients.
- Cleaning and prepping units for new renters after the previous occupants have left.
- Drawing up lease paperwork and getting it signed
- Handling rental inspections and compliance with local regulations
- Rent collection, banking, and bookkeeping.
- Taking care of requests for maintenance and repairs.
- Dealing with late payments, tenant conflicts, and, if required, evictions.
Typical Property Management Costs/Fees
Initial Setup Fees
This is the cost of first establishing your account with a property management company. This fee is not charged by all companies, but if it is, it is typically less than $500 in the Muskegon area. This charge may also include fees associated with inspecting the state of your property and notifying tenants that they will be managing the property.
Monthly Management Fees
Instead of collecting a fee based on a percentage of a month’s rent, some property management companies provide a fixed fee structure. The fixed price is usually determined by the type of property, its square footage, and the property management services given.
The fixed property management charge for a single-family home may be roughly $100 per month, however, management rates vary by market.
Percentage of Rent
The majority of property management companies charge between 8% and 12% of the monthly rent received as a monthly fee. If your home rents for $1,500 per month, the property management cost would be $150 based on a 10% average rate.
A cost for vacancies could be included in a property management contract. This could be a one-time cost equivalent to one month’s rent or a fee per unoccupied unit, such as $50 per unit.
Other additional fees include:
- Maintenance fee
- Eviction fee
- Tenant placement fee
- Early termination fee
What to Look for in a Property Management Company
You should look for the following qualifications in the property management company you hire:
Professional Licenses and Certifications
In Michigan, only licensed Real Estate Brokers are allowed to own property management companies. Other states allow people with just a real estate license to manage a building. You do not need a Brokers License in Michigan if business activities do not include leasing or renting services.
Ensuring that the company you pick has proper qualifications will save you a lot of time and trouble. It is a basic demonstration that they have the technical knowledge required to complete the job.
As Muskegon’s top Real Estate Law firm, we have experience with many of the property management companies in the area. If you need recommendations for a property management company in Muskegon, please call and speak to one of our attorneys at (231) 726-4484.
When hiring a property management company, be sure they have experience dealing with your type of property. For example, a company that specializes in single family homes may not be best suited to managing an apartment complex. Ask them about their past experience with properties like yours. Ask them how long they’ve been in business and how they got started.
A priority should be to ensure that they have a good reputation. Check the Better Business Bureau (BBB) website to see whether they have a good rating. You can also look at online review sites to learn more about what their tenants have to say. You may want to reach out to the Muskegon Area Rental Association and see if they have any recommendations.
Other things to look at include hiring a property management company with:
- Low vacancy rate
- Strong policies
- A large client base
- Great customer service
- Transparent contracts
Only your attorney can guarantee that the actions and contract for hiring a property management company – as well as your interpretation of them – are suitable or suited to your specific situation. We can assist you with any inquiries you may have about landlord-tenant law. Contact us at (231) 726-4484.