Why all the variation in property management fees? Partly to suit the buying public's taste in what it believes it should be paying, but mainly because - we think - not very much thought goes into a fee structure when the company goes into business. A good management company spends approximately 6% of gross rents collected just on running its business. An investor will pay more than that per month with some variation -- either through maintenance mark-ups or "phantom fees" (vacancy, lease-up, marketing and other fees). When comparing total management fees, however, we've found that most of us in our market end up charging about the same: about 12% of gross rents collected. There are many variations to get that 12%, but the end result (surprisingly, we think) comes up about even amongst the larger companies. We've even constructed a spreadsheet to compare DIA against our competition on the Valley's average rent (right around $1,000 per month).
But DIA wants to let you know about why our vacancy rate is lower than much of our competition. That rate is probably as important to an investor as property management fees. In our market right now DIA's vacancy rate is LOW -- only about 1% of inventory -- and the reason for that is how we structure our fees. They're roughly the same as our competition but structured differently.
DIA's fees have these key features:
* NO vacancy or start-up or administrative fees to start your service
* A rental commission - paid from the first month's rent - usually equal to 2/3 of the first month's rent
* Management fees of 6-8% of gross rents collected (depending on your property)
* 'Preferred Vendor' rates on most maintenance work, for which DIA charges a fee
Keeping in mind that - in the end analysis - most companies will be charging roughly the same, DIA distinguishes itself with it's low vacancy rate. DIA accomplishes this with charging an incentive-producing rental commission with a lower management fee. Most of the rental commission will be paid to the agent who rents your property (and to the agent who sign you up). This fee compensates the agent for his/her efforts in locating a tenant. We've found that salaried personnel simply aren't provided the incentive to 'beat the bushes' to locate a tenant; a commissioned sales person wants to do everything possible to locate that great tenant.
Still, you might say, that's more than the competition charges. Yes and no. Many management companies that charge a $200-400 'marketing' fee then charge 10%+ for the management fee. Plus, consider this big question: how long will your property remain vacant? One month's vacancy is, on average, $1,000 or more! In addition, DIA tenants tend to be pretty satisfied -- 12 month lessees tend to stay in your property about 18-20 months, and we don't charge a 'lease re-writing fee' to keep them there. Our 24-month tenants stay even longer - more than 34 months. In the end you'll be saving, too, on property wear-and-tear as move-outs decrease.
Desert Investment Advisors can compare our fees to our competition. Contact us to see if we can cut down on your vacancy rate and save you some big money.
Our property of the day: The Fountains, Scottsdale Ranch, Scottsdale:
Most of the units here have been lovingly cared for and maintained by 'snowbird' owners. A well-run HOA cares meticulously for the grounds. True Arizona.........
That’s sound comfortable and should appreciative for the investors purchasing wonderful home. I like the idea and must Property Management rules. thanks!