Flat Rate Versus Percentage Based Property Management
Temecula property management companies (and other property management companies in your area) take care of most of the behind the scenes work of a rental property so you don’t have to. They handle tenant screenings, background checks, rent collection, home repairs, taxes, accounting, and marketing. Some property managers charge a flat monthly rate for their services, while others base their fees on a percentage of the rental value of the home. The payment schedule you choose depends on your particular financial situation, the type of management services you require for your rental, and your long-term financial goals.
Both the flat-rate model and the percentage-based model have their own unique set of pros and cons. Here is a breakdown of the two most common fee schedules used by Murrieta and Lake Elsinore property management companies, along with most other property management companies in the area.
Flat Rate Property Management
Property managers that use a flat rate fee model charge the same amount every month for their services. Landlords know precisely what they are going to pay every month, and this fee does not change based on how much or how little work is done for and on the property. This is a popular option for landlords who are new to owning a rental property. It takes the guesswork and questions out of what they will owe each month. Many landlords prefer to work with property managers who used this pricing model because it does not penalize them for making money. This pricing model also allows landlords to buy property wherever they see fit.
Gives Property Owners More Options
A flat-rate pricing model means that landlord to buy property in C-class areas pay the same amount in management fees as a landlord buying property in an A-class area. Even though one property may require more work than the other, and one property may generate more income each month than the other, both landlords pay the same amount in management fees. This opens up the door for landlords to buy property wherever they see fit instead of limiting themselves to an area where property management fees would be lower.
Many Murrieta property management companies (and other management companies in the area) use the flat rate model to appeal to a broader audience of landlords. If you are new to real estate investing, or you simply like to know how much you are paying each month in management fees, the rate pricing schedule may be the right fit for you.
Percentage Based Property Management
Typically, property management companies that use a percentage-based pricing model charge anywhere between 8% and 12% of the property’s rental value, plus expenses. If you own multiple units and are looking for a property management company to manage them all, a percentage-based property management fee schedule may work in your favor. Where you fall in the 8% to 12% range depends on the type of property you have, the location, and how many units you need managed.
Rent Due Vs. Rent Collected
There is a big difference between management fees based on “rent due” and management fees based on “rent collected.” Look carefully for this specific type of wording in your management contract. Fees based on “rent due” means the property management company gets paid the same amount every month based on a percentage of the rent that’s due, even if there is no tenant in the unit to pay it.
Fees based on “rent collected” means a management company earns a percentage of the rent that actually comes in. There is a big difference, and landlords should avoid property management companies that base their fees on rent that is due versus rent that is actually collected.
For Affordable (And Flat Rate) Property Management Services: Choose Benefit National
Choosing a property manager for your rental is a very personal decision. You must find a company that knows the area well, has excellent reviews and a solid reputation in the industry, fits with your communication style, and offers high-quality services within your budget.
Benefit National is a Murrieta & Temecula area Property Manager that provides flat fee management services. Our service areas include Murrieta, Temecula, Menifee, Winchester, Wildomar, Fallbrook, San Marcos, Lake Elsinore, & Corona.