Are property managers worth the cost?
Updated: Mar 3
When speaking with real estate investors, I often deal with the question: are property managers worth the cost? 80% of real estate investors in America are do it yourself landlords. As the owner of a property management company that has clients with various portfolios, I have a secret to share: most of the 80% are not very good at managing a rental property, that’s why we are in business.
In this article I will give you 3 great real life examples of how we have more than proven our worth as a property management company. When you are finished reading this article I think you will agree that property managers are definitely worth the cost.
The first example of how we made our clients money: Forced Appreciation
We used to have a property management client in New Brunswick (I say used to because we dropped the client…yes, property management companies can and do fire bad owners). The owner owned a property and was renting it at the time and dealing with tenants that were causing all sorts of headaches (sound familiar?). The two units she had were each being rented for $3100 a month. We were charging a 10% management fee (so earning $310 a month).
We focus on three counties in New Jersey when it comes to managing rental property: Middlesex, Somerset and Union county. The reason is that we are experts of these areas and are close enough to deliver quality service. We knew the area of this client’s property extremely well and we knew that each property was under rented, despite getting nearly $3100 a month.
At the time, the value of each property was about $370,000. Value of a rental property is often derived off the rent it generates. Long story short, we got both tenants to leave and increased the rent to $3400 a month per unit. This was done within 6 months.
By hiring us, the client now collected $600 more per month in rent (essentially making our service free) and…what about the value of the home? The value of each unit increased to $410,000. Meaning, we helped our client earn $80,000 of equity in 6 months, while increasing their cash flow $600 a month.
Without hiring us, they would not have known the true value of their New Brunswick rental property.
The second way we have made our clients money: Zoning Issues
We have a client who owned a two family rental property that was in beautiful condition. When the town came by to inspect to give a certificate of occupancy, they determined that one of the rooms was not a bedroom and that walls would need to be removed. I obviously don’t have to explain further that if a house you own suddenly does not have as many bedrooms, it’s not worth as much.
To solve this problem, the owner would have needed to hire a land use attorney. We know of some good ones, but they run $400 an hour. Thankfully, our property management company understands zoning laws in a lot of towns. We were able to draw up sketches, present an argument to the town (based on our knowledge of the zoning) and it resulted in solving the problem for the owner.
We did that at zero cost to the owner, but it took a few hours of our time. If the owner had hired an attorney, that would have cost him about $1200, plus the cost of a survey and possibly architect plans.
The third way we have made our clients money: Vendor Pricing
One of our property management clients owns a multi-family building with a sprinkler system installed. They hire a company to do inspections of the building and make sure everything is on the up and up. What our client didn’t know, was that this company was over charging them by making more visits than they needed to make! The company was charging our client $2500 a year to do this. The vendor we use for our own building where our office is located is a little over $600.
When we brought this to our clients attention, he was floored! $2100 saved by having us as his property manager.
Verdict: Property Managers are well worth the cost
All of these stories don’t talk about all the problems we inherited when we were managing properties (vacancy, tenants who trashed the house, landlord/tenant disputes, etc). There are a multitude of ways property managers prove their worth. Those three aforementioned stories are some of the more interesting ones but we have many others.
Are properties managers worth the cost? Like anything else in life, you get what you pay for. If you hire Tverdov Housing to manage your property, the answer is a resounding: hell yeah! Ready to make that plunge? Contact us today!