Monthly Archives: October 2009

Becoming a series, this  post will discuss the cost of property management.  At least here in the Kansas City area.  I do follow costs in other parts of the country but with the diversity of our readership, I’ll just discuss Kansas City rental property management.  You can talk to your local real estate agents for your local details.

Property management here in Kansas City is pretty homogenous, at least in cost structure.

Monthly fees for collected rents run anywhere between 7% and 10%.   There are a few companies that charge one flat fee per door. 

Lease-out fees are running between 50% and 75% of the first full month’s rent when the property manager has to find a new tenant.

Then there are additional fees many of the companies offer.  There are eviction protection fees and rent protection fees.  These are usually add-on services that can run anywhere between $5 and $45 per month.  I’m not a big fan of those.  Sort of like the extended warranty on your Best Buy electronics.  They wouldn’t be offering it if they weren’t coming out ahead so…

When you are considering buying a new residential investment property you want to factor in your property management fees.   Quite possibly even if you intend to manage yourself just in case you change your mind later.  So if you have a place with a $1,000 per month rent and it changes over once a year you might want to consider;

• $960 property management fee.
• $500 to $750 in lease out fees.

This doesn’t absolve you from figuring other costs/expenses as well.  You know, your vacancy and repairs…just to name a couple.

Let’s face it, the toughest and sometimes most frustrating aspect of owning and operating residential investment property is managing the property…or even just working with the property manager.  Let’s look at your choices, shall we?

Self Manage
Self managing your rental property really isn’t too tough if you own one or two or three houses.  You can still work your full time job, show the place every now and again when it becomes vacant and there really shouldn’t be too much maintenance on just three rental homes or less.   You will save the property management fee and you’ll be able to keep a handle on expenses better since they come directly out of your checkbook. 

But then again, maybe you are a softie.  Or you are a professional that really is very, very busy at work and you need all your personal time.  Or maybe you just would rather be at your son’s baseball game. 

Property Manager
Choosing a property manager is a very important process in your real estate investing career.  Sadly, most just go with whomever they find in the phone book or was recommended to them without ever really doing any research.  There are some good property managers out there.  But property management also lends itself to the shadows.  After all, if the owner is California and his property is in Kansas City will he/she ever really know what the condition of the air conditioner really was? 

Then there is the time issue.  If y0u own more than a few properties you have to decide if you are going to be a whatever you are or a property manager.  Where do you make more money?  What is a better use of your time?  Heck, even if someone else charges you 9% and then overcharges you occasionally are you still not better off using a property manager?  (Not advocating the latter position.  Just asking.)