A property management company can take a lot of the hassle out of renting out an apartment. In this week’s Amateur Landlord, we looked into what a management company actually does and how much it costs to outsource landlord responsibilities.
“The issue is really a question of time and resources,” Rick Gersten, founder of Urban Igloo, a residential rental brokerage firm, said in response to whether or not it makes sense to hire a management company. “Doing all your own management work can be very time consuming. Some people have the time and resources to do the accounting and the repairs that are necessary over the term of the lease. But a lot of people don’t.”
For amateur landlords that decide to go with a management company, it can be a huge load off.
In addition to advertising the unit and screening prospective tenants, the company will also coordinate the execution of the lease and collect rent. During the course of the lease term, the company will also coordinate maintenance and repair work, and most will document monthly cash flow statements and provide 24-hour emergency service.
In return for these services, management companies in the District typically charge fees of between three and ten percent of each monthly rental payment.
“Eight percent for full service property management has been the standard in DC for a long time,” Mary Kay Welch, president of Investors Management, a residential property management firm in Dupont Circle, told UrbanTurf. “But some firms now charge ten percent.” In addition to the monthly charges, the firms typically collect a leasing fee of one month’s rent. This makes the true, amortized monthly fee more like 16 percent total.
To put this in perspective, we calculated what the total annual management costs would be for a one, two and three-bedroom apartment at an eight percent monthly fee plus one month’s rent for the leasing.
- DC one-bedroom at $1,495/mo. — Annual prop. management cost = $2,930.
- DC two-bedroom at $2,400/mo. — Annual prop. management cost = $4,704.
- DC three-bedroom at $3,300/mo. — Annual prop. management cost = $6,468.
The calculations above show that a property owner would have to part with approximately two monthly rental payments a year to have a property management company take care of everything. This might seem like a lot of money, but to some landlords the cost-benefit analysis of such an arrangement can be more attractive than the headaches that come with managing a unit themselves. This is particularly true for landlords who live far away from their properties.
Not surprisingly, maintenance and repair requests and rent collection are the issues that prove to be where owners get the most bang for their buck from using a management company. For delinquent tenants, management companies can be a tremendous help when it comes to pursuing litigation or evicting tenants that do not pay. Since companies collect their fees from rental charges “you can bet that they are going to ensure that the rent is paid and that local laws are followed,” Urban Igloo’s Gersten said.
For landlords looking to find a good local management company, check out the National Association of Residential Property Managers website. The site is used to find NARPM-approved property managers in specific neighborhoods.
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