NEW PROPERTY MANAGEMENT BUSINESS MODEL GARY GEIST
•
Check Writing Fee - The second service fee is the "check writing fee" and is charged when the
management company pays bills for other vendors, subcontractors, utilities, taxes, or insurance for the
investor. These charges are often on a per check charge and generally run $10 - $25 per check. These
fees are not popular with investors since they should be a cost of doing business and covered by the
management fee.
•
Handling Fees - These service fees, maintenance fees and parts handling fees again are charges that
management companies have developed over time to supplement their own business overhead expenses.
Proposed New Fee Structure
The business model described above was based on covering the
cost of property manager expenses for managing the property.
Nowhere in this discussion of this pricing structure was there any
consideration of making
profit.
The new breed of investor
entering the world of rentals from the stock market and has raised
serious objections to this business philosophy.
They are
concerned about every charge - what it was for and why it was
needed. They are requesting justification for all charges including
receipts, labor charges, fees, and all supporting documentation
and the property managers do not like this scrutiny.
Basically the investors want the property
managers to have a "vested interest" in
managing
the
property
by
making
them
responsible for making a profit each month. If
the property manager always gets 10% of the
collected rent and has his expenses covered
each month, why should he work smarter to
make things better? When tenants move, there
is no rush to get the property re-rented. It is
business as usual and he has his costs covered
whether or not the property is rented. Longer
flip times to flip mean higher the cost and lost
revenue for the investor.