19 Feb Property Management Cost
Property Management Cost
Property management cost can vary depending on the services needed as well as the company providing them. Before you decide to self-manage or hire a property management company, it’s important to understand what goes into managing rental properties. A beginner may see a rental property as a simple equation of rental income – (mortgage + expenses) = profit. Sure, this basic formula is the principal investment mantra, but property management involves a whole lot more. For example, it takes a lot of hard work to find the right tenants and maintain the rental property. Which are only a few of the responsibilities you’ll have to take on if you decide to self-manage. For this reason, we offer some insight on the value and cost of property management versus self-management.
Property Management VS Self-Management
The decision that is best for your rental business and lifestyle begins with understanding all the duties required of maintaining a successful rental property. For some property investors, it pays to hire a property management company. On the other hand, some investors find success self-managing their properties as a way to reduce expenses. With this in mind, here are the pros and cons of each decision.
The Advantages of Using A Property Management Company
- Outsource: tenant & maintenance issues (saves you time, money, and energy)
- Save Time: outsourcing the management of your rentals means you have time to do other things (opportunity cost)
- Infrastructure: management companies have an office and policies in place
- Minimize Stress: they make your work easier by doing it for you
- R.O.I.: management companies have a good understanding of the market
- Enabling you to get optimal returns on your investments
The Advantages of Self-Management
- Gain Experience: opportunity to learn the ins and outs of property management
- Save Money: avoid spending money on management fees
Considering the opportunity cost can guide you to more profitable decision-making…
Some landlords turn to property management companies, for help with the day-to-day oversight of their rentals. In doing so, they limit their interactions with tenants and increase their availability to invest in other rental properties (opportunity cost). Opportunity cost is defined as the loss of potential gain from other alternatives when one alternative is chosen. For example, if you spend time and money managing your own rentals, you cannot spend that time or money on something else.
Property management companies typically charge between 7-10% of your monthly rent. Although it may seem expensive for a tenant that is renting a unit for $1,800 ($180 per month in management fees), you need to decide how much you value your time. For example, if that tenant calls a couple of times a month, constantly complains about a noisy neighbor, is late on their rent, or does any lease breaking activity. Suddenly, that fee for ten-plus hours of management does not seem like a lot.
The Real Value of Property Management
The real value of property management depends on how much you value your time. In most cases, property management requires you to be available 24 hours a day, 7 days a week. Having to manage a rental property requires time, organization, social skills, and attention to details. The reality is, owning rental homes can be costly. The right property management company can make all the difference. The value of hiring the right property management company means you can protect your investment, minimize your costs, and maximize your income, without interrupting your daily life. Property management companies have a made a career of understanding the rental industry. Most importantly, they understand rental law and what it takes to meet Fair Housing laws and other statutes.
How Much Does Property Management Cost in San Diego?
Property management cost in San Diego has an average base fee of 5% – 10% of the monthly rent. This fee can vary based on the number of properties you need managed, the number of units on the property, the location, and what services are included in the fee. When shopping around make sure to ask what is included in the base fee, especially if it is on the low end. That’s because, some property management companies make up for a low management fee by nickel and diming you with back-end charges. These extra fees can include, set up fees, advertising fees, leasing fees, lease renewal fee, maintenance surcharge, administration fees, and cancelation fees. So, it’s important to understand what the fee does and does not include.
Assessing if a Property Management Company Fits Your Needs
Managing all of the day-to-day responsibilities of property management is a full-time job that requires a high level of know-how and experience. Still, not all property management companies are created equal, and there are a number of things you’ll want to consider when deciding whether a particular property management company will fit your needs. Your success in selecting the right company hinges on your ability to ask the right questions. For this reason, if you have questions about our services, give us a call (858) 576-2176. We are happy to answer any questions you may have.