A question we get asked on a daily basis is: how much does property management cost? This is a bit of a loaded question because lately in the industry, a lot of Realtors, specifically the selling Realtors, are telling people not to pay more than five percent to a property manager because it looks bad on the balance sheet when it’s time to sell.
Maybe when you’re looking at a pro forma spreadsheet, five percent looks like it helps the bottom line. But that kind of management fee is misleading, at best. Having been in the business for 30 years, we know that any property management company in the country, but particularly in California, operating on a five percent management budget must be operating on a shoestring. That means they will not be able to do the best job they can do for you.
Low cost property management companies will have to rent properties quickly and cut corners which means you could get a less than qualified tenant. A tenant who isn’t highly qualified means you’ll risk having increased turnover and the potential for property damage if the home isn’t treated well and kept in great condition.
Because these property managers need to rent quickly, they might also rent it for below market rents. The data we have collected shows that a property manager charging five percent is renting out a property for about 20 percent below market. So if you hire a five percent property manager thinking that you’ll save some money, you’ll actually lose as much as 20 percent off your bottom line. The tenant quality won’t be as good, and at the end of the year your 3 percent savings is actually a net loss of 17 percent.
We rent to highly qualified tenants. I personally interview every single tenant. We place tenants and have an average length of stay of four years. They are happy with our management and they like the properties they are living in. They get a good response when they have a maintenance issues and those tenants pay on time. They feel they are paying a justified rent because the property is managed well.
If you meet a property manager who will rent a property for five percent, run – don’t walk – away. You’re getting into a situation where you won’t get the service you need and deserve.
It’s important to get everything you can out of your rental property. If you’d like to talk about how we can increase the value of your property by up to 40 percent in six months, contact us at Santa Barbara Property Management.