If you try and manage properties yourself you'll never have the freedom of time.
Outsource managing your property. We'll talk about cost in a moment. But first, why get a property manager? What do they do?
A great property management company will:
- Find quality tenants
- Arrange leases that protect you
- Collect all rent in a timely way
- Keep your property well maintained
- Deal promptly with tenant complaints
Evicting tenants is not on the list. If you have a great property manager, they've secured quality tenants who won't need evicting. But yes, if they have to, they will evict them and deal with the legal process. Not something you ever want to do yourself.
Property management companies typically charge 10% of rent...or more. Many also charge an additional one months' rent as a fee. Those are big costs. Those costs eat directly into your profit and cashflow.
I'm going to show you how to get your property management fees for more than half off.
Your #1 job as a Lazy Landlord is to have only ONE property management company that you use to buy and lease. Pay no more than 5% rental fees. Build your businesses together.
When you buy and lease through one property management company, then the company:
- Gets 2.0% to 2.5% commission at purchase (paid by the seller)
- Is willing to offset some ongoing property management fees for the up front commission
- Will want to find properties that will rent with low hassle
Your incentives start to align.
Look at the numbers from the property manager's point of view.
If you buy a building with 3 units in it for $500,000 using a typical real estate broker, she takes home about $6,250. ($500,000 sales price x 2.5% buying agent's commission x 50% fees to brokerage she works for).
If you then took that building to a different property management company and rented each unit for $1,000 per month, the property manager takes home about $10,800 over 3 years ($1,000 per month x 3 units x 36 months x 10% commission).
Now use one property management company to buy and lease through. I've negotiated 3.5% to 5% per month per lease AND get a rebate on every property I purchase.
With the same property as above using one property management company to buy and lease, the property manager makes $5,000 at purchase ($6,250 as above x 80% as I get a 20% rebate) PLUS $5,400 ($10,800 as above x 50% as I give only half as much commission). The property management company makes $10,400 and you are both incentivized to stay in a long-term relationship.
And that's the secret. Get the same property management company to be your buying agent and your leasing agent.
You only have one relationship to manage. More time for you.
You both make money together.
Now you just have to choose the right property management company.