REI WEALTH MONTHLY Issue 31 - Page 84

NEW PROPERTY MANAGEMENT BUSINESS MODEL GARY GEIST Many property managers tout the benefits as being a one-stop-shop for maintaining property, saving the investor money. But experience working with different management companies has proven otherwise. While it is true management companies can perform general maintenance tasks, there are questions about the quality of this maintenance and what the real costs are for these simple tasks? For the more difficult maintenance tasks, the property manager's staff may lack the skills or experience to perform, and if they do perform the work, they take too long. And because they lack skills, training and experience, they can not properly diagnosis the problem to determine what needs to be fixed. Thus, when the management company staff tries to fix the problem and can't, you will have to hire the "expert" in the end. In you will be buying many unnecessary parts, paying for larger quantities of material, and not getting the advantage of local sales on many components and materials. Always using the management company's staff to handle maintenance because you are a "captive client" can be very expensive. either case, it will cost you more. Other Fees - There are many other fees a When the management company performs the majority of the maintenance, you have a single source supplier with no competition. This eventually leads to over pricing on not only labor, but also material costs on the work orders. In addition, because of the maintenance staff's inexperience, management company can charge depending upon their business model. Here we will only address the most common one including: Leasing Fees, Check Writing Fees, Parts Handling Fees, etc. These fees are deducted from the collected rent each month and paid to the management company. • Leasing Fees - These fees cover the management company's cost for leasing the property and can be a flat fee or a percentage of monthly rent. This fee is generally charged when a property is leased the first time and is not charged the second time if the property has to be re-rented within management the first companies year. have a Some reduced "leasing fee" for all subsequent times the property is leased.