Manage Your Company With a Qualified Manager

When you hire a property management company to serve as the liaison between yourself and your tenants, you want to be sure you’re getting the best possible property management services for the money. The services a property management company provides can range from ala carte to an all-in-one inclusive package. Along with that comes an array of fees for each. There is no set in stone fee structure we can provide you. But we can educate you on what common fees to expect and what each is commonly for. In the end it will be up to you to compare company fee structures and choose the best one that fits within your budget. Below are some of the most common fees and what service they provide.

Commission

This is an ongoing monthly fee charged to the owner to compensate the property manager for the responsibilities of overseeing the management of their property. This fee can vary from as little as 3% to over 15% of the monthly gross rent. In place of a percentage some managers may charge a flat monthly amount which again can vary from $50 to over $200 per month. All property management companies generally charge this fee.

Lease-Up or Setup Fee

This fee is charged to the owner to compensate the property manager for their initial time invested and resources used in setting up an owners account; showing property and/or other activities resulting in tenant placement. I guess you could look at it as a “finders fee” for placing a tenant in your property. Once a tenant has been placed and first rent income comes in, the property manager will deduct this fee from the rent proceeds. Some property managers have been known to require this fee upfront prior to tenant procurement. Usually this fee is non-refundable once the property manager has started the process of tenant procurement or any legwork has been initiated with the property. This fee can vary from none to as much as the first months rent, and usually is a one-time fee per tenant.

Lease Renewal Fee

This fee is charged to the owner when a property manager renews a current tenants lease and covers the costs of initiating paperwork or communication involved in implementing the new lease document. A property manager may also justify this fee if they perform a year end inspection of property. This fee can vary from none to $200 or higher, and may be charged every time a lease renewal is implemented.

Advertising Costs

Depending upon the property management company’s contract, either they will pay the advertising costs or the owner or they could split the costs. If the manager is willing to cover this cost, most likely they will charge the lease-up or setup fee as outline above. If the management company covers this cost make sure to find out what type advertising or marketing of your property is included. If it’s placing your listing on their own web site and other free online classified sites you may not be getting your monies worth. They are many good rental or tenant resource online web sites that bring in qualified tenants for a reasonable fee and you will want to consider these. And don’t forget about print media, yard signs, listing on the MLS or even an open house. Nothing is worst than having your property vacant, bringing in no money only because you or your property manager skimped on advertising.

Maintenance Mark-up Charges

This is one of those costs you may never really of known about or had it disclosed to you. A “Mark-up” is a charge over and beyond the final bill on maintenance and/or repair work done to your property initiated by your property management company when using their vendors or in-house maintenance staff. This should be disclosed in your Manager/Owner contract which usually will state the markup as a percentage above the final invoice from vendor. For example, your manager had to call a plumber to replace the dishwasher in your rental property. Total charges for completing the job: $400. If your property manager contract states you will incur a 10% markup on all maintenance work the actual cost to you will be $440. Just one of those things to be aware of as these all eat into your profits.

Early Cancellation Fee

The dreaded “3 months and no tenant”. Your property manager insist he or she’s doing everything they can to find you a tenant. But here it is 3 months and still no tenant; what do you do. Well, look at your Manager/Owner contract and that might be your deciding factor. I am not a fan of this fee, and believe it to be an unnecessary fee and for you manager out there this could be the deal breaker. I’ll tell you why; if a property manager is doing their due diligence and keeping the owners in the loop as far as decision making, market conditions and communication lines open an owner will not be second guessing his property managers abilities. The odds of this scenario happening is unlikely but you must be prepared for it. A cancellation fee can range from none to over $500. To be fair, some managers legitimately deserve this fee especially if they have pocketed advertising costs, incurred lots of legwork and time invested in your property.

“You’ve Got To Be Kidding Me” Fees – These are ones I have personally had the pleasure of running into.

Your property is vacant, but we still will charge our monthly commission or a small flat fee.
“A For-Rent Yard Sign Fee”. I believe this was $25/mo.
“Preventive Maintenance Fee”. This was to cover the “just in case” and changing out A/C filters. If “just in case” never happens they still pocket the money. I believe this was $20/mo and I still was charged for filters.

In Summary

Read your Manager/Owner contract, understand what you are signing, ask lots of questions and know what the fees will buy you in services. A good real estate lawyer can help in negotiating the terms in a contract that suit both parties. These contracts are not set in stone. If your property manager will not negotiate, there are other property management companies that are eager to earn your business.

How much time and money do you devote to your company’s sales pipeline? Think about the resources, the software, the meetings, the forecasting, the managing and measuring you do, and the time and effort you give it. If you’re like most CEO’s or VP’s or sales managers, your sales pipeline is your life blood. It’s what you run your company by; it’s how you make decisions, and often times it even drives your stock prices.

While the pipeline is a vital part of the sales process, it is also where the most fundamental mistake is made, and this mistake costs companies millions (if not billions) of dollars every year.

The problem is that most companies spend too much time, money and energy on measuring and managing the pipeline rather than managing and improving the quality of leads that go into – and ultimately come out of – the pipeline.

In other words, most of the leads that go into your pipeline are never going to close, should never have been put in and, as a result, your company wastes hundreds of thousands of dollars generating and then chasing, and measuring and managing leads that will never close. That’s the real problem.

Ask yourself: “What is my sales department’s closing ratio?” I’ll bet you can answer that, can’t you? A typical company will report that it takes an average of 50 cold calls or contacts with decision makers to set 15 appointments out of which 10 will turn into proposals or pitches which will result in 1 or 2 sales.

And once this metric is established (as measured by the sales pipeline, of course) the sales strategy is set – to get more sales, you just have to set more appointments. And if you want more appointments, then you have to get your sales team to make more calls! Suddenly everyone works harder, goes out on more appointments, and…and…the desired results don’t come, do they?

And here’s why: until you address the fundamental problem- the quality of leads that go into your pipeline – you won’t improve your close ratios or your sales. Remember, you can’t close an unqualified lead, so stuffing more of them into your pipeline isn’t going to get you the results you want. In fact, it will just cost your company more money, frustrate your managers and wear out your sales team.

You’ve got to stop managing your pipeline and start training your sales teams how to generate more qualified leads. That’s the only real answer.

In fact that’s the secret of all top sales producers. Look at your own top reps. What are their closing ratios? I’ll bet they are the highest in your company, aren’t they? They would never consider setting and running 15 appointments because they don’t have the time to waste. They would rather spend their time qualifying (I call it disqualifying) out the non-buyers so they can spend their time finding, qualifying and working with real buyers. And they know how to do this because they understand sales. Unfortunately, 80% of your sales team doesn’t.

And that’s why sales training is your only real answer.

But sales training is what most companies don’t do well. In fact, if you want to know how well your own sales training is working, simply shop your sales team. Either call in, or get on your lead list and have some of your reps call you. Try throwing them some objections and see how they do. If you’re like most companies, you’ll be appalled by the results.

Again, this is the real problem. Until you solve this basic problem of training your sales team, having them generate and stuff more unqualified leads into your pipeline won’t get you the results your company needs. That’s why most companies end up spending so much time and effort managing and measuring the pipeline. It’s something they know how to do.

If you want to get out of this unproductive cycle and actually start improving your sales and revenues, then here’s what you need to do: Get back to the basics of sales training and redefine what makes up a qualified lead. Identify all the elements and create a qualifying checklist. Make your reps fill it out completely before any leads are generated. If you’re not sure of a lead, have a manager re-qualify it for them.