OT: Property management companies

[dancinkozmo]

Okay, so we're trying to sell our home , but in this place (Michigan) and in the current market its been a real challenge (to put it mildly !)

We're thinking of renting it out now, and since we'll be out of state , hiring a management company to look after things for us.
Anyone have any experience with a rental management company ? What do they typically charge ? Do they find the tenants ? What if theres a repair required ? etc.

I'd really appreciate any advice and/or experience anyone could offer.

Thanks !!

[R2D2]

Yes we've been in a similar situation with the market and my Dad lving with us.
Usually they take 10%. They will have a network of trusted repair trades people. But you'll foot the bill as repairs are made and deducted from the rent.
Since you are remote, it is really the only smart way to go. You can not respond in a timely enough manner to effect repairs for renters. In our case they also screen and perform background checks. As well as occasionally inspect the property for a meth lab or grow room. Anyway we've managed the property as individuals and thru an agency. I'd always choose an agency from now on. Now bear in mind you'll need to keep good records of expenses, etc. and the agency will most likely produce a 1099 showing the rental income. Hope this helps.............

[93legendti]

I use Michigan Property Managers-they handle everything. Calle Jared. 248-336-0540-tell him Adam sent you.
http://www.michiganpropertymanagers.com/index.php


If your home is in Flint, I have a contact there as well...feel free to email me and I can get you a contact for Flint.

[Ken Robb]

You can hire a Realtor to find and screen a tenant and write a lease/rental agreement. The fee for long term (i year or more) in my area is 6% of the total lease value. Shorter leases are 10%. Really short vacation-like rentals of a week or so of furnished property can be 25-50% of the total rent.

It sounds like you would want to do a long-term lease so figure 6% to get the lessee in the place. If you want full management of rent collection, repair/maintenance/gardening scheduling, bill paying, etc. I would expect another 5-10% monthly.

Many Realtors will be willing to help you with a lease but fewer will offer full management services. If available in your area I would look for a person who can put your rental listing in the MLS to get the broadest exposure to potential renters. Sometimes companies specializing in property management don't belong to the MLS because they want to handle the whole transaction themselves.

Ask around your area for recommendations, call companies you are considering, pretend you are looking for a rental in your price range and see how they handle the call. Then interview the person/people who would handle your business as to how they find/screen tenants, do they have repair people on staff or relationships with independent tradesmen, fees, etc.

I would advise that you really analyze the financial/emotional burden of carrying a property that may not increase in value for a long time. Forget what it was worth 5 years ago. Is there some positive economic change expected in your area like a new or reopening business? Can you rent it for enough to cover ALL expenses like roofs, furnaces, water heaters, appliances, etc? Values in many areas are still going down so how long do you predict (not hope) you might have to carry it before you can sell for your price? What if your area values are lower in five years? How much more $$ will you have to spend fixing it up to sell after a few years as a rental than you would right now? Will keeping this home require you to borrow more on a replacement home?

A good agent should be able to give you an assessment of current conditions and his estimate of what he expects your market to do in the next couple of years. He can help you analyze how much you can net by selling now vs. two years from now and how much you can net from renting in the interim.

If you are considering keeping it as a rental long enough to pay down a mortgage substantially thereby increasing your equity that adds another dimension to the picture but that means 12 years or more on a 30 year loan in my mind.

OK, I'll go back to bed now. Good luck.

[slowandsteady]

All the info above is VERY good and spot on. Read the info and recommendations carefully. There are some good points in there about maintenance, home values, finding brokers and management Co's and headache factor, etc.

Expect 8-10% of your Gross in fees from management companies
Expect 8% (one months rent) to be taken by a broker for a new tenant.
Expect 3-7% annual loss factor for misc problems, repairs, legal, lost rent etc.
Expect a huge headache factor - renting/managing from afar sux, period.

No one ever watches or looks out for your money and premises the way you will. Oversee your management company with an eagle eye. Especially when it come to repairs. Make them get three bids and present them to you for review. Give them the right to make repairs unhindered by you for less than $100, all other to be submitted for review.

Ask who handles tenant legal affairs if it ever gets to that. Do they charge extra for that time?

Do you have any major repairs coming up on the house? HVAC, roof, plumbing , electrical etc.? Unless you see the market coming back significantly in the next 3-5 years it might be better to sell and move on.

I own and manage a property management company so I am happy to help you out if you have questions. Shoot me a pm or ask me to call you...happy to help the best I can.

[MattTuck]

They will have a network of trusted repair trades people. But you'll foot the bill as repairs are made and deducted from the rent.


also known as buddies of the management company's owner. In the case of repairs, I'd independently vet any one you hire.

[bagochips3]

My brother and I inherited our Dad's house when he passed and have been renting it through a property management company for the past several years. They take 8% for their services (finding tenants, collecting rent, coordinating repairs, etc). This is a good deal from what I can tell and has worked well for us so far.

My wife and I are considering a move and looking into renting out our current house instead of selling. I met a property management company yesterday and they charge 6% to find a tenant (1 year lease) and 7% to manage it. This company has a reputation in the area for being very good but on the pricier side.

I would be looking for 1 year leases (and then monthly after the first year). Good, long term tenants are the way to go. Less wear and tear, less vacancy, etc.

[eddief]

is near the property and about 1000 miles away from where I live. the property has been good to me over the years, but it is always tough to trust the management company to do the repairs. they do do the repairs, but my biz partner and i never know the degree to which they do "makework" and the degree to which we are fairly or not fairly charged for the work that gets done.

but they do it all, and i almost never have to lift a finger.

[dancinkozmo]

..thanks SO MUCH for the responses everyone. this place really is terrific ! :beer:

[brians647]

You can hire a Realtor to find and screen a tenant and write a lease/rental agreement. The fee for long term (i year or more) in my area is 6% of the total lease value. Shorter leases are 10%. Really short vacation-like rentals of a week or so of furnished property can be 25-50% of the total rent.

It sounds like you would want to do a long-term lease so figure 6% to get the lessee in the place. If you want full management of rent collection, repair/maintenance/gardening scheduling, bill paying, etc. I would expect another 5-10% monthly.

Many Realtors will be willing to help you with a lease but fewer will offer full management services. If available in your area I would look for a person who can put your rental listing in the MLS to get the broadest exposure to potential renters. Sometimes companies specializing in property management don't belong to the MLS because they want to handle the whole transaction themselves.

Ask around your area for recommendations, call companies you are considering, pretend you are looking for a rental in your price range and see how they handle the call. Then interview the person/people who would handle your business as to how they find/screen tenants, do they have repair people on staff or relationships with independent tradesmen, fees, etc.

I would advise that you really analyze the financial/emotional burden of carrying a property that may not increase in value for a long time. Forget what it was worth 5 years ago. Is there some positive economic change expected in your area like a new or reopening business? Can you rent it for enough to cover ALL expenses like roofs, furnaces, water heaters, appliances, etc? Values in many areas are still going down so how long do you predict (not hope) you might have to carry it before you can sell for your price? What if your area values are lower in five years? How much more $$ will you have to spend fixing it up to sell after a few years as a rental than you would right now? Will keeping this home require you to borrow more on a replacement home?

A good agent should be able to give you an assessment of current conditions and his estimate of what he expects your market to do in the next couple of years. He can help you analyze how much you can net by selling now vs. two years from now and how much you can net from renting in the interim.

If you are considering keeping it as a rental long enough to pay down a mortgage substantially thereby increasing your equity that adds another dimension to the picture but that means 12 years or more on a 30 year loan in my mind.

OK, I'll go back to bed now. Good luck.

This is a great post. Spot on.

Remember too that if you rent it out more than a few years, you'll lose that nice tax-free capital gains exception.
Unless you're risking a credit-challenging situation by selling now, I'd focus on moving on. Housing prices will be stagnant for a bit.

[Ralph]

I would listen carefully to Ken Robbs advice above.

If me....I would sell it for market value....if a deficiency....would attemp to work out a private loan with mortgage Co. Some might attempt to do a short sale....but you usually have to be months behind on mortgage and have destroyed your credit to get mortgage co to do that.

Then try to make up loss on low purchase price on next house.

If you own the house mortgage free...same advice....but it's easier to sell it.

[dancinkozmo]

...hey guys , thanks again for the very helpful info.
...we've paid off the mortgage, and i'd prefer to sell and move on , but its just not happening. im not really happy with our realtor either...thinking of giving her the boot...
...couple of reasons for doing this rental thing,

1....theres a chance we may move back here in a few years
2....seems to be a double dip happening in the housing market now, i agree with what the previous posters have said about prices remaining stagnant for some time to come..im hoping we can just ride out this second dip.

...is the rental market any better right now than the buyer market ?

[93legendti]

Rental market for nice houses is very strong in Michigan-according to a broker I trust.

Another option is land contract-get a nice down payment, plus monthly payments. Buyer is responsible for upkeep, taxes and insurance...

[R2D2]

also known as buddies of the management company's owner. In the case of repairs, I'd independently vet any one you hire.

In some cases they could me buddies. My experienece with the management company we are using has been top notch.
Repairs and maintenance are much better quality and done at a more reasonable price. It can vary from area to area, but in my case it has worked out well as the company has a lot of properties to manage and they can't fool around with substandard work. The job has to be done correctly on time.