What Does Sacramento Property Management Cost
What Does Sacramento Property Management Cost
As a real estate investor, hiring a Sacramento property manager can be one of the best decisions you make. Today, we're speaking with Scott Raymond –founder of Raymond Property Management, now part of Mynd – about the sorts of expenses or fees an investor must account for when deciding upon the right company to manage their property or properties.
But first, here’s some background information on what property management entails.
How much does a property management company in Sacramento charge?
Mynd’s Sacramento property management service packages start at $79 per month.
Are Property Management Fees Tax Deductible?
Yes, you can write off property management fees!
Is hiring a property manager worth it?
Definitely. Not everyone has the temperament, time, energy, professional network, or experience to be a property manager – particularly a Sacramento property manager. All places are different and come with their unique challenges.
What does a property management company do?
Property managers in Sacramento do a lot.
- Write rental property listings
- Tenant screening
- Rental property turnover
- Seasonal maintenance
- Help you make tax deductions
- Avoid surprising liabilities
- Early lease terminations
- Encourage qualified tenant renewals
- And more
What are some of the considerations a property management company makes when deciding how much to charge?
The more square footage, the more effort it takes to maintain, which makes for a bigger fee.
The type of property being managed impacts the fee. It takes different skills to manage a residential, commercial, or vacant property.
The newer the property, the less maintenance it requires.
If comparable properties in the area have a higher rent, then the property manager may use that as a reason for increased fees. At the same time, lower fees may be charged for an area where the rent is less.
The number of services your property management company provides will determine the amount they charge. You can often choose various service plans to fit your needs.
What are some fees a property management company might charge?
There are many fees a property management company charges. However, not every cost is justified, and some fees may be a red flag that you should work with a different property management company. Here are some fees you may encounter.
A setup fee is the first fee you're likely to encounter. The cost is often under $300. It covers the labor associated with setting up an account. The fee may also cover the cost of a property inspection and any welcome materials.
Make sure you know whether or not the fee is charged on a per-unit or per portfolio basis. Also, see if the price can be lowered if your rental property has tenants before you hire a property management company.
Finally, some companies charge higher setup fees to make up for charging less for other services. This is a red flag, so make sure you get a clear breakdown of what each fee covers.
The management fee is what covers the cost of the property management’s services. Usually, the fee is 8% to 12% of monthly collected rent for single-family homes. Make sure your fee is based on rent collected rather than the rent that's due, scheduled, or the rental's value. You don't want to pay if there's a vacancy. By ensuring that the company gets paid only if there's a tenant, the company is motivated to keep tenants in place.
Finally, make sure you're paying for the services you want. Some companies charge a blanket fee, so you may end up paying for services you don't use.
Tenant Placement Fee
When a new tenant is placed, you may have to pay a percentage of one month's rent or a flat fee depending on your contract. This fee covers all the costs associated with finding and placing a new tenant.
Some companies will provide a full refund or a prorated refund in the event of early termination or eviction. If there isn't such a rule, you can ask about it. That way, your property management company works harder to find a qualified tenant.
Lease Renewal Fee
Like the leasing fee, a lease-renewal fee may be a percentage of rent or a flat fee. It covers everything that re-signing a lease entails, such as comparative market analysis and getting a tenant signature (although this can be handled 100% digitally now).
Overall, you should budget for 1.5 months’ worth of rent to cover maintenance, depending on the property’s age. In some cases, you can give your property management company autonomy when it comes to maintenance. You can even set a threshold when a maintenance request requires your approval.
Maintenance isn't supposed to be a source of income for property managers, so don't work with any company that charges a fee greater than 20% for maintenance.
This is a fee you sometimes pay if the company has a crew on retainer for emergencies. This is a less common fee because most management companies don't require an additional charge to handle an emergency. Although, this fee shouldn't keep you from working with a particular company.
Some companies require that they be the ones who sell a particular property so that they can collect the corresponding commission. You need to know this before using your broker because the company may still demand a commission.
If your company makes such a demand, then let them handle the sale but stipulate a timeline. That way, if the company fails to make a sale, you can use your broker. Also, make sure that the commission is agreed to in the contract. If the company uses their broker, then they should split the fee between themselves and the broker.
A property management company may charge an hourly fee ($25 to $50) or a flat fee to handle the eviction process. That includes everything from time in court to supervising the eviction.
A late fee is a charge you incur if you fail to pay for your property management fee or a particular service. It may range from either 25% to 50% of the cost of any service or around 1.5% for every day the payment is late.
Bill Payment Fee
Some property management companies, for a fee, can handle expenses associated with property ownership that you would otherwise handle, such as monthly mortgage payments or home insurance.
Returned Check Fee
A bounced check may result in a charge of around $35. That would only go to covering the cost of a bounced check.
Early Termination Fee
This is a fee that you likely have to pay for breaking your property management contract early. The terms of the agreement will dictate the fee.
Late Tenant Payment Fee
You shouldn't work with any company that collects a portion of the fee tenants pays for late payments. Those fees exist to deter and compensate for late payments. If the property management company collects a percentage in the form of profit, it creates motivation to collect payments late. Do not work with a company that does this.
Lease Violation Fee
Similar to the above, do not work with any property management company that collects a portion of the fees a tenant is charged for lease violations. If a lease violation is broken, you might lose money, which means you are entitled to those fees.
What are Some Expected Costs Associated with Maintaining a Rental Property?
In addition to property management fees, there are some other costs one should expect to pay. Some of these may be folded into your rent, depending on whether you plan on including utilities in the rent.
What Are Common Fixed Rental Property Expenses?
- Property Taxes
- Pest Control
- Waste Management
- Homeowner Association (HOA) Fees
- Property Management Fees
What Are Common Variable Rental Property Expenses?
- Seasonal Maintenance
- Appliance Maintenance
- Emergency Maintenance
- Capital Expenses ("Big-Ticket" Improvements)
What makes a successful property manager?
Good property management requires expertise and level-headedness. You need to know how to anticipate challenges, negotiate prices, and communicate well with others.
A good property manager has a professional, respectful, and amiable disposition at all times. Property managers encounter everything from tenants thrilled to discover their new home to residents in hard times confronting eviction.
What should I look for in a rental management company in Sacramento?
Your property manager has to look after your property as if it was their own and make the tenants feel valuable. That means everything from responding to repair requests ASAP to performing regular maintenance to keep everything safe and secure. One of the most frequently given complaints from tenants who leave a property is that their property manager didn’t respond to communications quickly enough or that the property manager was rude.
What should I know about my property management company before I hire them?
You’ll want to know how experienced your prospective property management company is.
- How long have they been in business?
- Where do they invest?
- How many clients do they have?
You want to make sure the property management company you’re potentially working with has enough employees to handle all the responsibilities of a property manager. If one person is responsible for purchases, rehab, tenant relations, and maintenance, then that’s too much work for one person. You need to make sure there are enough employees so that you and your properties get enough attention.
Do you need a license to be a property manager in California?
A license is required to perform full-service property management in California because renting and leasing are categorized as real estate activities.
What is a property manager's first responsibility to the owner?
A residential property manager’s number one responsibility is protecting the property owner’s investment. Everything the property manager does boil down to this top priority, from acquiring and keeping qualified tenants to minimizing harm the possibility of harm to the investment property to following all rules and regulations and getting the most out of tax write-offs.
Can a property manager evict?
Property managers take care of evictions and early lease termination. Ultimately, anyone can become a tenant who has to be evicted, including an excellent long-term tenant. Evictions can take a long time and end with property damage, so you’ll want a property manager who knows how to deal with challenging tenants.
Does a property manager collect rent?
Yes, rent is collected by property managers. Mynd offers an easy-to-use Resident Portal for easy online rent collection.
What is the purpose of an operating budget for a property manager?
An operating budget makes it easier for your property management company to know how much financing they have at their disposal so that they can serve each property appropriately. Documentation also makes it easier to make the most of eligible tax deductions.
What are the three duties of a property manager?
The property manager has three primary responsibilities.
- Protecting the property owner’s best interest:
Mynd maintains your property, selects quality tenants, follows all rules and regulations, and maximizes the tax deductions.
- Protecting the tenant’s best interests:
By providing top-notch service for your tenants, Mynd increases the likelihood of lease renewals, reduces vacancies, and maintains uninterrupted positive cash-flow.
- Following the law
Mynd protects investors from losses, renters from harm and maximizes savings from tax deductions by following the law.
What Does Sacramento Property Management Cost?
Alex Osenenko: Boys and girls, Alex with Mynd Property Management here. Today we are talking about investing in Sacramento and how to be successful in doing so. Specifically, Sacramento real estate. I have a guest to help me unpack this vast topic, and his name is Scott Raymond. Scott, how are you?
Scott Raymond: Hey Alex. Doing great. Thanks for having me.
Alex Osenenko: Yeah, we're lucky to have you, man. Ten years of successfully investing in the Sacramento area. Founder of a company called Raymond Property Management, which is now part of Mynd. And today, Scott and I are-well mostly Scott-is going to unpack the question: what does property management in Sacramento cost?
Scott Raymond: Yeah, this is a good one. Obviously a topic near and dear to many investors looking for property management companies in Sacramento. So basically, property management companies in Sacramento generally either charge a percentage of rent collected each month, like five percent and up to as high as eight or nine percent, or a flat fee per month. So typical management fees would range from, say $75 per month to as high as $150 or $175 per month. If you had ten units and the rate was $100 per month, you would expect to pay somewhere around $1,000 per month for that property.
The next typical property management fee that's charged in Sacramento is leasing fees. These are essentially commissions that the property management company charges to lease up a unit. And they also can either be a flat fee of say $250 or $300 for each new lease, or they could be a percentage of the actual rent or the first month's rent. Many companies charge anywhere from 25% to 50% of the first month's rent. So, for example, if the property management company leased a unit for $1,000 and the rent was $1,000 per month, the cost for that lease-up would be somewhere between $250 to $500.
For companies that basically have their own in-house maintenance staff in Sacramento-they generally bill them out at hourly rates of between $55 per hour up to as high as $95 per hour. Other types of costs for property management companies in Sacramento include markups on vendors like HVAC and plumbers and electricians, administrative fees for posting notices, collecting utility reimbursements, and those sorts of things. So one thing that's really important to keep in mind in closing is the lower the base fee from the property management company, the more likely there will be a bunch of other different fees that they charge you for throughout the process, while some companies in Sacramento offer an all-inclusive price. So, it's really up to you to kind of vet those out and see which one's right for you.
Alex Osenenko: Excellent. That's good. Lots of wisdom here, Scott. Thank you very much for sharing.Thank you for watching our viewers. If you find this on YouTube or other video sites, go to Mynd.co, and you'll find a number of episodes that Scott and I have done on and around investing in Sacramento.
Scott, thanks a lot for your time.
Scott Raymond: Thanks, Alex.
Alex Osenenko: And thank you for watching.
A property management company can provide investors with the infrastructure and expertise to save them time and money.
But this can come at an expense. Whether they are providing in-house maintenance or supervising the leasing process, it is imperative to know not only what types of services your property manager provides but what these services will cost.
Hiring a property manager can mean the difference between staying afloat and creating a profit, or being able to enjoy income with the headaches of solving residents’ problems. An understanding of fees is a major part of making your decision.
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