REI WEALTH MONTHLY Issue 31 - Page 83

NEW PROPERTY MANAGEMENT BUSINESS MODEL GARY GEIST Maintenance Fees - These charges are for maintaining the property. Most management companies will send their own employees to the property to handle maintenance issues. Sometimes they use contractors who will be paid by the property manager with the bill being passed to the investor. the For services performed by management company, the property manager bills the labor and material cost for each task and deducts this bill from the collected rent. If the bill for work is more than Current Property Management Business Model the collected rent, the property manager will bill the investor for the Property management companies today have various control balance. mechanisms that are billed as one of three types of fees These fees are not all This process can work well, but this is inclusive, but do describe how the current business models bill the where a lot of problems develop investor for management services. between the property manager and associated with managing property. the investor. Many management • Management Fees companies only have one labor rate • Maintenance Fees and they charge all their staff this • Other Fees. labor rate for all tasks, no matter what employee performs the work. Usually Management Fees - The most widely known fee colleted by this rate is set to cover the cost of management companies is the management fee. Generally, this their most expensive staff member fee is a percentage of the collected funds each month and can run and when the work is performed by from 8% to 15% of collections. This fee covers the company's junior staff members, the investor gets general operating expenses and to gives the property manager a billed at the same rate and not at a satisfactory profit margin. There are other fee structures in use lower rate. like the flat fee which is a single fee per property per month no technicians making $10 an hour work matter what the monthly rent. No matter which system is used, on your property, you get charged as if these fees are deducted from the collected monthly rent before a the investor gets his check from the proceeds. technicians did the work. highly So when low salaried skilled $30 an hour