REI WEALTH MONTHLY Issue 31 - Page 85

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.