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Hiring a property manager can save an investor time and money. This is, if the investor has an understanding of what fees are applied to their services. Today, we are speaking with Doug Brien. Doug is CEO of Mynd Property Management and he is here to discuss with us the costs and fees investors can expect when partnering with a property management company.

Alex Osenenko: Boys and girls, Alex here with Mynd Property Management. We’re talking about investing in Vallejo real estate, specifically. My guest today will help us unpack and share the wisdom with you, the viewers. My guest is Doug Brien. Doug, how are you?

Doug Brien: I am good and excited to be here talking to you about Vallejo. I own a property in Vallejo, myself. So, I’m a big fan of Vallejo.

Alex Osenenko: A property. That’s, that’s very humble because Doug is the CEO of Mynd which is great in itself—because we’re a property management company, so we know a thing or two. But also, more relevant I think for the Vallejo real estate investing realm, he is a founder and CEO of a company called Waypoint which purchased 750 homes in Vallejo over the last decade or so. So he’s got a little bit of experience there.

Today’s topic, Doug—we’re going to dig in into the costs of property management. Let’s demystify this subject. Let’s dig into it. How are property management services priced in Vallejo?

Doug Brien: Yeah, so in many markets, property management fees are expressed as a percentage of rent collected. But I think it’s important for investors to know, at the end of the day from any of the jobs associated with property management, there’s a cost in dollars. So a property management company is looking at the average rents in Vallejo and applying a percentage. On average—at least in the Bay Area—Vallejo has lower rents. And so, as a result, you’re going to see slightly higher percentages because a property management company just needs more dollars to get the work done and make a fair profit. So, it’s a wide range. I would say, if you’re talking about small residential, 30-40 unit buildings or smaller, you’re going to see anywhere from 5-10%, and it’s really going to vary based on how many units are in the building; is it a single family home and the quality of the neighborhood are going to be a factor in what your rents are. And so, with lower rents, a tougher area, or a single-family, one unit, you’re going to be in that 8-10%. But 5-10% on average.

Alex Osenenko: How do you feel about—when you are searching for property management company, yourself, in the area where Mynd does not manage—how do you feel about companies who publish pricing and companies who do not? I mean, most people don’t publish pricing. Does that factor into your research? The last episode we filmed was all about how to find a property management company (For those of you watching, go to Mynd.co, M-Y-N-D dot CO and search for Vallejo real estate to find that previous episode), which I think was very interesting on the criteria of evaluating property management companies. We didn’t really get into price. Now is the price conversation. How do you feel about publishing the price or not publishing the price? Do you care?

Doug Brien: Yeah, I care. I think that property management fees are an issue in real estate investing and I’m a big believer in transparency and just letting people know upfront. People should know what all the costs are. And hidden fees are something that bother us all. I’m a fan of companies where I can just go online and cost is part of it. To me, it’s not everything. And if you don’t mind, I’d like to comment on that after I answer this question. Pricing is not everything, but I want to know what it is and I want the company to be transparent about what it is, about what their pricing is and how it works. That’s helpful for me to make a decision.

Alex Osenenko: Now, what was your comment? Were you going to add some color to it?

Doug Brien:I think that a lot of investors get too hung up on what the property management fee is. And the thing that I like to say to investors is, the most expensive property managers can be the ones with the lowest fee. So if you look at the expense structure of a building or a unit, property management is one line item. There are other line items in your p&l that are much, much more impactful to your total return.

For example, the rent that you get, the amount of vacancy that you experience, and the amount of cost you incur around repairs and maintenance. Like if you don’t have someone managing those three line items really, really well, your property management costs can be going through the roof. Now it’s not showing up in the property management line, but it’s showing up in your bottom-line profits. You’re paying more because you have a lower rent, too high a vacancy or way too high for repairs and maintenance, but you’re lured into thinking the property manager is the right one because that property management line item is cheap.

I think I would encourage investors to look at the range. And within that range you’re going to find some property managers that are average or above average. But if you can actually look at documented results and talk to references that say these guys are reliable, they are responsive, and they deliver results, it’s worth paying another percent or two in property management fees if they can get you 50 bucks more in rent. Or, instead of 10% vacancy you have 5% vacancy or your repairs and maintenance are cheaper.

So I think that’s just a factor. And I would encourage people not to be overly-focused on what the fee is, but to look at your overall cost structure and who is the partner that can deliver the best overall results.

Alex Osenenko:Gotcha. So to recap, in Vallejo, expect to pay 5-10% depending on the neighborhood, your rent, the size of the building—that kind of stuff (5-10% of rent). But there are other very, very important pieces to the puzzle which we covered in our previous episode. Again, it’s called How to Find a Property Management Company. Doug, thank you for your time.

Doug Brien:My pleasure. Thanks for having me.

Alex Osenenko:I appreciate the wisdom here. And those of you who are watching, I hope you enjoyed it. Hope we helped you out. Thanks a lot and we’ll see you next time.

Professional property management companies can save investors in the long run by providing expertise and infrastructure to mitigate any problems that may arise. But, this does not mean that choosing to hire a property manager is always the cheapest option. As such, it is imperative for investors to understand what costs are applied to a property manager’s services—particularly in a unique market like Vallejo.

For example, an investor in Vallejo can expect to pay around 5-10% of collected rent on any given property. Of course, this depends on the neighborhood, overall rent and size of the property, as an example. This may seem like a lot to some investors. But, given the relative age of many properties in Vallejo, such a fee can prove to be the cheaper option—particularly for a property that requires a fair amount of upkeep and attention.