...and how an 8% management quote turned into an 11% total management cost

 As a property manager, we spend a lot of time educating owners about our specific value to them as a professional resource with sound expertise.  So it was...I'll say ironic, when we found ourselves square in the middle of a great lesson, courtesy of a property management company we ourselves hired in San Antonio, in the real costs that can accrue to an owner when this expertise may be lacking.  What our experience provided was the opportunity to truly see the issue from an owners perspective, and a rare chance to analyze the actual out of pocket costs, in detail, that can result from a lack of sound management practices.

 Owning residential rentals and operating them profitably can take nerves of steel and an unwavering focus on running all of the different aspects right- every time.  There are a lot of moving parts that need to run well; 3 critical aspects, and how can cost you money when they aren't run properly, are:

•·         Solid market knowledge and aggressive advertising, with excellent advertising plans and leasing performance, ensures that units are priced optimally and vacancies are kept to an absolute minimum.  If a property manager doesn't market your property aggressively, it will sit vacant longer, which costs you lost rents.  In our case, after 6 weeks without hearing from the property manager, we found that he couldn't give us a clear answer as to how many showings had been done, what people's feedback on likes and dislikes with the unit was (which would have been very useful in addressing any needed changes to make the unit more appealing), or how long he felt the unit would be on the market before a renter was secured.  As it turns out, in San Antonio, the property manager rarely shows their own properties directly- they rely on listing rentals in MLS and having other agents find, show and close interested tenants.  Thus, they do little direct advertising, and aren't involved in the majority of inquiries or showings with interested tenants.  As a result, the unit was vacant for a full 2 months, during which the property manager had no real sense of how well the unit was showing or what the overall response was. Over the course of the 4 years, with 3 turnovers per unit (we have 2 of them), this added up to about $895.00 in additional vacancy due to longer time on market than if the property manager had been more aggressive and directly engaged in marketing the units

•·         Consistent, legal and assertive execution of lease terms, to protect the owner, the tenant and minimize cost and disruption to the physical maintenance, as well as the financial operation of the property.  We had several maintenance issues which the property manager never investigated, but which they paid for repairs and charged us the cost.  One was a damaged garage door over the weekend a tenant moved in.   Obvious to the casual observer was that the tenant had backed into the door with their moving truck.  We understand accidents happen, and would have been willing to perhaps split the cost with the tenant, however the property manager insisted that it was caused by "nearby construction crews" and charged us the entire $350.00 repair bill.  In another case, the property manager failed to call for approval to make a $432.00 repair to repair the sprinkler system in the front yard- which is maintained by the HOA.  Another cost we had to cover, but shouldn't have had to.

•·         Hidden fees.  The property manager we hired charged a 10% "service fee" on top of all vendor repair invoices. It didn't seem like a big deal at the time we signed the contract, but over 4 years (and the above unnecessary charges), this added about $320.00 in direct costs.  A good property manager with hawkish attention to repair and maintenance issues, and keen oversight of vendor, HOA and tenant responsibility and performance in this regard, shouldn't be incented to drive commissions from repair and maintenance invoices.  Our property manager also had a "fine print" clause upon contract termination that future management fees for leases in effect would be due through those lease terms, which added a whopping $912.00 in costs when we terminated the contract.  This type of assessment against future rents isn't even legal in most states, but is apparently standard in Texas. 

 All up, the above items, based on the practices our property manager employed, cost us $2,969.00 over the 4 years they managed our properties.  While we thought we were getting an 8% management rate with them, these costs actually raised the total management cost by an additional 3.7%, totaling 11.7% in management costs.

 So how can you be sure you select a reputable property manager, to avoid issues like these?

 •·         Check their professional affiliations.  NARPM (National Association of Residential Property Managers) is the largest, and membership with them ensures that the property manager adheres to standard best practices, ongoing education and certification, and a national code of ethics.  If a property manager doesn't belong to this, it's worth inquiring why.

 •·         Check their local affiliations and involvement.  Here in Seattle we have several property management associations, chambers of commerce, and other community organizations.  Participation in these shows that a property manager is interested in running the business professionally, and is willing to engage, learn, and improve business practices in conjunction with other business owners (and that they may have things to share with other owners as well). 

 •·         Ask a lot of questions, and think through typical scenarios with them.  "How do potential tenants reach you to see available properties", "what are the steps that occur when a maintenance issue arises", and a detail of fees are all good starting points.

 •·         Look at the properties they manage.  This is a very easy way to tell a lot about a property management company.  Get a list of available properties they are advertising, and drive by them.  Do they appear well maintained?  Are they as advertised (views, location, etc)?  These types of details reveal the detail with which they run the business, and how they will manage your property.

 And even if everything is running perfectly, you'll still have the occasional unexpected issue that has to be dealt with (water heaters burst on holidays more than any other time, for some unknown reason), but that should be the exception, not the rule. 

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About RD House Real Estate and Property Management:  We are a leader in relocation, in-town condo and executive Seattle rental properties, working with Microsoft, Amazon, Fred Hutchison Center, the Bill & Melinda Gates Foundation, Alaska Airlines, Nordstrom and others. Many of our listings have video blogs/tours, and can be found on our website at www.rd-house.com.

 If you are a Corporate relocation specialist and in need of help placing clients or employees, please contact our relocation team at (206) 728-6063.

RD House Real Estate and Property Management

Leaders in Property Management

159 Denny Way #110

Seattle, WA 98109

(206) 728-6063

www.rd-house.com