Setting Your Property Management Fees
One of the reasons why the property management field is so competitive is because there really is no set price rate for the services that each company provides. This means that sometimes you’ll come across firms that charge exorbitant sums, as well as companies that undercharge for their services.
However, at the end of the day, most property managers will base their prices on the standard fees in the area that they operate in, as well as have their own system when it comes to the prices they set and how they vary from the norm.
While your company might also be one of those that already have an established price range in place, there are still a few things you might be overlooking. We’re not saying that we’ll change the way you do business with this information, but we hope to at least shed a bit of light on a few things that can improve the way in which you set your property management fees.
Setting your property management fees too low
As we mentioned before, the property management field is quite competitive, so most companies are constantly looking for ways to stand out among their rivals. A lot of them do this by simply making sure that their property management fees are lower than their competitors, but sometimes that isn’t such a good idea.
Keep in mind that yours might not be the first firm that’s come to this conclusion about the prices. The other property management companies are sure to have thought of this and maybe even tried it already. But in the end, they might have decided to stick to a certain price range because even though they were pulling in more customers, the low prices meant that they weren’t making much of a profit.
While there are places where you can afford to lower the standard price, or up the price on certain services, you won’t be able to stray too far from the average property management fees in your area.
Learn about your competition
The best way to entice potential new clients, without having to bankrupt yourself in the process, is to offer better services than the other property management companies in the area. This refers to both the quality of the service that your company offers in general, as well as the number of services which are included in the prices that you charge.
A good example of this is how a lot of property management companies don’t require unit advertising and marketing payment fees from property owners until the unit is actually rented out. Or maybe the option to not have to pay the ongoing property management fees for a unit that doesn’t have a tenant occupying it at the moment.
That being said, we would recommend that you offer these additional services sparingly, since there will be times when the job might be a bit too demanding to be financially feasible at reduced fees. Luckily, there won’t be a lot of cases like that, but it might be better to let certain clients go, rather than waste a lot of time and manpower for very little profit.
If you’re wondering how you can find out which services other companies offer in order to match them, the answer is the internet. There are multiple sites that people use in order to find the best property management fees and rates, and you can use them yourself in order to keep an eye on your competition and know what you need to do in order to surpass them.
Should you charge fixed rates or a percentage?
You can either charge a fixed rate for your services, or charge a percentage of the rent.
The standard price for property management services can be between five and ten percent of the weekly rent amount for the unit. The exact percentage will vary depending on the city, company, and the property itself, but these are the usual rates that include the tenant vetting process and all of the ongoing management fees.
Percentages are a useful way to entice clients to sign a contract, as they are given the assurance that they won’t have to pay any unnecessary fees while there is no tenant on the property.
Fixed rates are much more useful if the property doesn’t have a constant tenant, is vacant for long stretches of time, and ensures that the company will get paid the agreed-upon sum regardless if the owner is receiving regular rent payments or not. They are charged based on the size of the property and the services that were provided.
The truth is that flat rates will be better for certain clients and charging a percentage will be better for others. The point isn’t to find only one method of charging for your services, but rather have a flexible policy for both, in order to ensure that you’re properly compensated for the services rendered.
Finding the right balance for the fees you charge is always going to be difficult. Ideally, you never want to overcharge your clients, but on the other hand, you won’t be able to pay your employees, as well as yourself, if you undercharge for your work. At the end of the day it all comes down to experience, and eventually, you’ll get the hang of how to be fair with your fees, but also be able to increase earnings as well.