Property Management Blog

Question of the Week: “What Do You Charge?” 

All right, we're going to jump into this month's question of the week. Now, these questions are designed to explain to people how an owner should actually vet a property management company.

Okay, here's one of the most common questions owners ask: What do you charge? I get this all the time and I know we've had this similar question before, but I just got this exact question yesterday and it drove me crazy during the call because I immediately want to jump into education.

And I get why people ask it, but here's the problem. Every company has a fee. That question tells you nothing about service quality and encourages shallow, sales-driven answers. That's the biggest problem in my opinion.

Here's the better question. If you're vetting a property management company, ask this instead: Can you walk me through what happens from the moment my property goes vacant until the day a qualified tenant moves in?

That question is gold and is exactly how my calls personally are designed. Why? Because it forces the company to explain a few things. How they price your home. How they market it. How showings are handled. How tenants are screened. How applications are reviewed. How communication works. And how accountability is built into the process.

Good companies light up when you ask that question. Bad ones pivot right back to price.

If you want to go deeper, here are a few rapid-fire follow-ups you can ask. How do you determine market rent? What feedback do you track during leasing? How quickly do you recommend adjustments? How do you protect me from vacancy drag? And what does success look like in the first 30 days?

Here's the teaching moment. The quality of the answer tells you more than price ever will.

And we'll close with this. If you want a better property manager, ask better questions. Plain and simple. Mike, what's your thoughts?

I mean, I couldn't agree more. We talk about this a lot, and I think we have maybe done a video or at least a partial video on it. Not that pricing is irrelevant, but a percent here or there on the management fee or $100 here or there on a leasing fee is going to more than pay for itself if you hire a quality manager over a poorer quality manager.

I mean, in terms of vacancy costs, in terms of quality of tenant, you get a poor-quality tenant in there, they don't have a good tenant screening process in place, they can do thousands of dollars worth of damage. You're going to kick yourself for trying to save 1% on management fee or whatever it is that you were trying to do.

There's just so many ways that a quality property manager can pay for themselves.

Yeah. And I wish I would have recorded this conversation because this is all true. I just had this conversation yesterday. And he was adamant about just going over what fee structure has or was. And my first response was really, I mean, if that's all you're concerned about, there's lower-cost management companies out there. There just are. That's the reality of it.

So if that's what you're searching for, save us both some time. But I also wanted to explain to him why he should be searching for so much more than that.

How many times have we taken on clients from other property management companies that that's where they started their journey, right? Eight percent rather than nine percent, and they thought they found a gold mine. And then a year or two years later, they're coming to us because they couldn't place a tenant or the tenant they placed was unqualified and now they've spent a fortune in turn costs. That 1% cost you so much more than 1%. It's unbelievable.

And we've even had owners that started with us. This is actually recently. I won't drop his name. But he started with us. We were the first property management company he came to. Our BDM did such an amazing job. He didn't have to search out any other property management sources.

This is a large client of ours, has several properties. Well, recently, of course, he wanted to just test the water, see what else was out there. And I don't blame him for that. In fact, we helped facilitate that in a way. And he did, and it didn't take long at all before he came running back.

The option that he chose was an 8% versus our 9%. And just to give you the spoiler, we now have those two properties that left. They're right back, right back at home, right back where they should be.

So all that to say, if you're about to place one of most people's largest assets into someone else's care, you better care about more than 1%. Your vision has got to see more than just the savings of that 1%.

Yeah. I mean, we were just talking in the previous video that you gave an example of an average rent of $1,800. Let's just say you're trying to save 1%. That's $18 a month. That's $216 a year.

You're going to hand over a home that's worth two, three, four, $500,000 to somebody to take care of, and you're worried about saving 200 bucks a year. That seems just a little bit short-sighted with all of the things that the property manager can affect.

Yeah. And just to expand on this a little bit more, I had another call late last night with an owner and we were wrapping it up. When I get into these good conversations, I've been doing this so long, I find myself getting into more of the education because I want them to make smart decisions whether they come with us or with someone else.

It's not about that. It's about educating them because I know the cost of going with an improperly vetted property management company.

We got into the popular saying, you get what you pay for. And that's true, but I hate using that sentence because it's so much more than that.

What I'm getting to here is that in order to properly protect your asset, and what we've discovered here at Red Door over many, many years, is it costs money to put the right processes in place. The company you're hiring to protect your highest asset has to be able to afford the proper processes and employees to bring you the results you're ultimately looking for.

That 1% can be the difference.

Yep. Yeah. One hundred percent. It gives you the resources to reinvest into the people, the processes, the software, everything that it takes to properly manage a home. And it does take a lot.

We spend a lot of money. Just our technology bill alone is insane. But it's needed. Every system, every platform Red Door invests in is used to protect and better serve you and your asset. Plain and simple.

Yep. Okay. All right. That's going to wrap up this month's question of the week. Hopefully, you found some value in that. And hopefully you find some value in asking a more qualified question than how much do you charge?

That's a wrap on that.