Caveats of Using a Property Manager
A property manager is typically paid for tenant placement, ongoing management, or both. Tenant placement is generally a onetime fee that is different from 1/3 to some full month's rent. Ongoing management is paid each month and it is normally 5-10% of the rent collected. However, sometimes you will find hidden fees or any other junk fees the manager may charge.
Making profits from repairs
Property management companies may have their very own in-house repair and maintenance division or even a sister company. Their main business may well not originate from managing properties, but from making repairs. They can charge outrageous high hourly rates on repair and maintenance. They can also mark up the type of material without providing you other available choices to choose from.
Often times they could not enable you to use another contractor. Even worse, they find unnecessary things to repair or replace to generate a huge profit for your expense. Be important site to negotiate these types of services and be sure they may be on the property management agreement. If not, pass this business up and appearance elsewhere.
Extra charges during property vacancy
There are property managers that won't receive money unless the property is rented. It offers them incentive to have your premises rented immediately. Some companies ask you for even when the home is vacant. Some charge exactly the same rate as when the property is rented, while others charge extremely low rates.
On the surface of that, they charge you a fee for finding a tenant. Even if the property manager claims free during vacancy, there might be a catch. A new tenant of an friend of mine moved in on October 1st and the house was vacant in September. However, his property manager still charged him full commission for September. The reason he gave was since the lease was signed in September.
Late fee policy
Some property managers collect the whole late fee or perhaps the fee for non-sufficient funds. They argue collecting late payments requires work. It is true to some extent; nevertheless it doesn't make sense for them to profit from it. This is true especially if those fees are set at a pretty high amount inside the lease agreement.
You might wonder if the manager is attempting to make a simple benefit from collecting such fees. In addition, they are the ones who recruited the tenant in the first place! Splitting the fees between owner and property manager, or capping what the manager can keep to your certain amount in a given year, seems more reasonable and fair.