How much should I charge to manage a student house?
September 23, 2009 6:49 PM
What should I charge to manage a property? A friend recently asked me to help him fill his rentals. I filled all ten in a month with good tenants. We did not set a fee in advance - I wanted to see how it went before I committed to the job. How much should I ask for?
I will probably continue managing the property. So would it be better to charge a finder's fee for the renters I found, a percentage of monthly gross from now on, or a combination of both? How much would I charge for each option?
The property is a university student house, so it's fairly labor-intensive. However, I am friends with the owner and he has been going through tough financial times (he's been losing $1000s to mismanagement for months), so I want to be fair to generous. Google has yielded a wide range of answers, none of which seem to fit these circumstances.
Thank you, hive mind!
I will probably continue managing the property. So would it be better to charge a finder's fee for the renters I found, a percentage of monthly gross from now on, or a combination of both? How much would I charge for each option?
The property is a university student house, so it's fairly labor-intensive. However, I am friends with the owner and he has been going through tough financial times (he's been losing $1000s to mismanagement for months), so I want to be fair to generous. Google has yielded a wide range of answers, none of which seem to fit these circumstances.
Thank you, hive mind!
Oh -- sorry -- forgot to add that the going rate here in Northern Virginia for ongoing property management is nine percent of the monthly rent.
posted by woot at 7:09 PM on September 23, 2009
posted by woot at 7:09 PM on September 23, 2009
Thanks woot - that's very helpful. The 9% is in addition to the finder's fee?
posted by walla at 7:15 PM on September 23, 2009
posted by walla at 7:15 PM on September 23, 2009
This is one of those questions that the answers to will be pretty meaningless to unless they are specific to the location. The finder's fee in New York is wholly different than the finder's fee in Boise.
posted by 517 at 7:25 PM on September 23, 2009
posted by 517 at 7:25 PM on September 23, 2009
Oh yes, I should have added that I'm in the Chicago area.
posted by walla at 7:27 PM on September 23, 2009
posted by walla at 7:27 PM on September 23, 2009
From a property management company in Grand Rapids Michigan started by an old acquaintance:
"Our fees are 8% of gross rents for clients with 10 or more units and 10% for clients with fewer than 10 units. Our leasing fee is 50% of one month’s rent. Once per month, our clients are sent net rent disbursements. This disbursement is accompanied by a line-item statement of all rents, utilities, maintenance charges, management fees, and so on. We are always available by phone or e-mail to address any issues relating to our clients’ properties."
I'd start charging him a monthly rate and not mention a finder's fee.
posted by pseudonick at 7:34 PM on September 23, 2009
"Our fees are 8% of gross rents for clients with 10 or more units and 10% for clients with fewer than 10 units. Our leasing fee is 50% of one month’s rent. Once per month, our clients are sent net rent disbursements. This disbursement is accompanied by a line-item statement of all rents, utilities, maintenance charges, management fees, and so on. We are always available by phone or e-mail to address any issues relating to our clients’ properties."
I'd start charging him a monthly rate and not mention a finder's fee.
posted by pseudonick at 7:34 PM on September 23, 2009
Yes, in addition, but after the first month. So you split the rent the first month, and then from the second month on, you take nine percent.
And one more thing -- the renter we have didn't have much of a credit rating, so he prepaid a few months' rent, which was great. But our smart agent set it up so that those prepaid months came at the end of the year's lease. His point was that he didn't want anyone in our rental property starting out without making regular payments -- he wanted to make sure that our renters were budgeting for their rent from the start. Sounds like you've already got tenants settled, but if you are ever negotiating leases in the future and this issue comes up -- prepayment in lieu of other types of credentials -- you might consider accepting prepayment for the last few months instead of the first few months.
posted by woot at 7:35 PM on September 23, 2009
And one more thing -- the renter we have didn't have much of a credit rating, so he prepaid a few months' rent, which was great. But our smart agent set it up so that those prepaid months came at the end of the year's lease. His point was that he didn't want anyone in our rental property starting out without making regular payments -- he wanted to make sure that our renters were budgeting for their rent from the start. Sounds like you've already got tenants settled, but if you are ever negotiating leases in the future and this issue comes up -- prepayment in lieu of other types of credentials -- you might consider accepting prepayment for the last few months instead of the first few months.
posted by woot at 7:35 PM on September 23, 2009
Here in Vancouver my property manager (I rent from them) charges the owner half a month's rent to place a tenant, then 8% of the monthly rental to take care of the month-to-month stuff (collecting rent, hiring repairmen, etc etc). Seems like it's a pretty standard rate.
posted by cgg at 7:38 PM on September 23, 2009
posted by cgg at 7:38 PM on September 23, 2009
Another data point: I work in a condominium building in Seattle where some of the units are rented by the owners. Leasing agents typically charge one month rent for finding tenants, with no ongoing fees (but no ongoing service).
posted by kprincehouse at 7:44 PM on September 23, 2009
posted by kprincehouse at 7:44 PM on September 23, 2009
Obviously the rental market is different in the US than Australia, but typically here the agent charges the first week + 6% ongoing.
If the agent also pays the council rates and water bill and then collects this money from the tenant the ongoing percentage would be something like 7%
posted by trialex at 10:40 PM on September 23, 2009
If the agent also pays the council rates and water bill and then collects this money from the tenant the ongoing percentage would be something like 7%
posted by trialex at 10:40 PM on September 23, 2009
I don't think you should be looking for a full fee off 8-10% a month unless you have previous experience managing properties.
Did you run background checks on the tenants? Do you have access / knowledge to start the eviction process if they start to default? Do you know what to do if something breaks? Are you preparing a monthly statement that handles all of the cash flow? Are you handing the payment of the renters each month? Will you be giving him the docs to help file his taxes at the end of the year? Do you know about the Rental Regs and tenant rights in your area?
I'm not saying you don't but it sounded from your question that your just a friend helping a friend that might be too busy to help himself.
On the same flip side, I wouldn't "give" my work or time away either. If he has rental properties hes "probably" not hurting for cash so any discount you give him over what you would charge a stranger should really be based on your friendship, not your perceived notice of his financial state.
If if where you --- scratch that --- I am a Realtor, but if I were you and was NOT a Realtor ;). I'd charge him a flat % for finding the tenants (did you review the lease or did he?) and a small monthly % (2-4) fee for ongoing management.
Of course all of this is based on some assumptions. If I was wrong, disregard and follow the more main stream advice here!
posted by crewshell at 11:09 PM on September 23, 2009
Did you run background checks on the tenants? Do you have access / knowledge to start the eviction process if they start to default? Do you know what to do if something breaks? Are you preparing a monthly statement that handles all of the cash flow? Are you handing the payment of the renters each month? Will you be giving him the docs to help file his taxes at the end of the year? Do you know about the Rental Regs and tenant rights in your area?
I'm not saying you don't but it sounded from your question that your just a friend helping a friend that might be too busy to help himself.
On the same flip side, I wouldn't "give" my work or time away either. If he has rental properties hes "probably" not hurting for cash so any discount you give him over what you would charge a stranger should really be based on your friendship, not your perceived notice of his financial state.
If if where you --- scratch that --- I am a Realtor, but if I were you and was NOT a Realtor ;). I'd charge him a flat % for finding the tenants (did you review the lease or did he?) and a small monthly % (2-4) fee for ongoing management.
Of course all of this is based on some assumptions. If I was wrong, disregard and follow the more main stream advice here!
posted by crewshell at 11:09 PM on September 23, 2009
One thing to consider for the "finders fee" is to offer to have it paid over six months, given his financial condition.
posted by megatherium at 4:36 AM on September 24, 2009
posted by megatherium at 4:36 AM on September 24, 2009
All great info and suggestion above, thank you! Crewshell, those are good questions. I actually have some experience managing my own properties, although I am not a professional property manager. I did do background checks, drafted leases and cosigning agreements, and unfortunately, I do know how to begin an eviction process. The reason he asked me for help is I'd been successful with my own rentals. I guess this puts me somewhat in between a professional and a friend helping out a friend.
posted by walla at 6:17 AM on September 24, 2009
posted by walla at 6:17 AM on September 24, 2009
I filled all ten in a month with good tenants.
As the former owner of a much smaller building, I know just how hard this is and wanted to stress it. I don't think you are, but just in case: Don't sell your self short now doing a favor because you may grow to resent it later. It sounds like you have enough professional experience to realize this but since you asked, I'm bringing it up.
My suggestion is to find a number you'd feel comfortable with (finder's fee + percentage) charging a non-friend, and then reduce it by whatever friendship discount you want. Let him know both numbers, just so he has an idea of what you're worth and what he's getting. I say this not as a dick move that will undercut your nice efforts but to keep lines of communication open and expectations set -- something I feel is incredibly important when doing business/professional favors for friends and family.
posted by MCMikeNamara at 7:55 AM on September 24, 2009
As the former owner of a much smaller building, I know just how hard this is and wanted to stress it. I don't think you are, but just in case: Don't sell your self short now doing a favor because you may grow to resent it later. It sounds like you have enough professional experience to realize this but since you asked, I'm bringing it up.
My suggestion is to find a number you'd feel comfortable with (finder's fee + percentage) charging a non-friend, and then reduce it by whatever friendship discount you want. Let him know both numbers, just so he has an idea of what you're worth and what he's getting. I say this not as a dick move that will undercut your nice efforts but to keep lines of communication open and expectations set -- something I feel is incredibly important when doing business/professional favors for friends and family.
posted by MCMikeNamara at 7:55 AM on September 24, 2009
You might also consider a different finder's fee for those first 10 that you have completed, compared to what you will charge in the future. Since there was no agreement up front, maybe a steep discount is part of your 'favor' or 'friendship discount', but going forward, here's what the fee would be to find another tenant.
posted by CathyG at 9:47 AM on September 24, 2009
posted by CathyG at 9:47 AM on September 24, 2009
I used a property management agency that charged 10 percent of the rent to manage. Make sure you promise to do regular walk-throughs, though -- my tenants painted the kitchen electric blue and silver and the property manager never told me a thing about it.
posted by vickyverky at 12:16 PM on September 24, 2009
posted by vickyverky at 12:16 PM on September 24, 2009
So sorry -- but I am shocked by some of the advice here.
Property Management can be serious business, that is why there are so many laws governing landlord and tenant issues. You say the property is in a university area and your friend has been having trouble due to mismanagement? That is sort of a red flag for me, and I hope you proceed with caution.
To quickly address your first two issues:
#1 - Your friend should pay you a commission for each rental. You can start by asking him what he thinks is appropriate and negotiate from there.
I like 1/2 a month's rent for each, but a round number like $200 or $300 per unit is good, too. If you want to be nice and allow him to pay in installments, go ahead. (Be warned -- by the time you finish reading all of my advice, you might not wish to charge him anything. That's ok, too;)
#2 - Don't manage the building. Offer to be available for advice if he needs.
It might not be legal for you to manage the building, anyway. See below.
I will outline 3 major reasons for you to decline to manage this property. But trust me, I can name 100's of reasons. Hell, I can name $1000's....
A) The law and liability concerns might not be in your favor in this endeavor.
Some states require a broker's license or have other requirements if you manage a property but do not own it.
Why? Among other reasons, there is potential for a tenant, a neighbor of the building, a contractor or plumber you engage to work on the property, or even your friend (the owner) to sue you as a result of your involvement in this property.
You really want to know what you are doing when you administer a property with multiple dwellings. Even generally, you will be responsible for hiring skilled workers to perform repairs, keeping the property safe and legally habitable, adhering to discrimination laws concerning tenants, etc., etc., etc.
If you really want to do this management thing, get educated and licensed to do the job -- or politely pass on the opportunity.
B) As the manager, you will be "on-call" 24 hrs a day, 7 days per week.
At first glance it seems easy to you, I can tell. But the truth is you will be administering the requests and concerns of an owner plus all tenants on a full-time basis. That is a HUGE commitment, especially for the amount of compensation you seem to be favoring from the suggestions provided in other answers, above.
C) There is every possibility your friend isn't a good and responsible property owner or landlord.
I suspect this might be the true source of past mismanagement issues, regardless of what you were told. Your friend owns an income property. He is having money issues. He is an adult and is ultimately responsible for his property and his predicament.
Do you know if he is tight-fisted regarding repairs and payments for services rendered? Do you think your friend has good business judgement, generally speaking? Do you really want to put yourself in a position where you will have to find out?? Think about these questions, please.
BONUS CONCERN: 10 vacancies seems very high. There will be heaps of repairs and concerns to be handled as the new tenants settle in. Do you think it seems reasonable to assume there has been a fair amount of irresponsibility surrounding this property? Are you sure you want to put yourself in a position of responsibility in middle of all that?
----------------
MY Bottom Line: Unless you are an owner and share in the rewards conferred by long-term successful maintenance of this property, I suggest you restrict future help to giving tips and advice.
-----------------
I super applaud that you want to help a friend out. Truly! And I think you've done your friend a great favor by finding him decent tenants.
Wish him well with the property and take his calls when he needs advice. Your state might not allow for you to engage in property management w/out some kind of license (real estate broker's or otherwise) and this alone might give you a polite reason to decline deeper involvement with this property.
Good Luck.
posted by jbenben at 1:00 PM on September 24, 2009
Property Management can be serious business, that is why there are so many laws governing landlord and tenant issues. You say the property is in a university area and your friend has been having trouble due to mismanagement? That is sort of a red flag for me, and I hope you proceed with caution.
To quickly address your first two issues:
#1 - Your friend should pay you a commission for each rental. You can start by asking him what he thinks is appropriate and negotiate from there.
I like 1/2 a month's rent for each, but a round number like $200 or $300 per unit is good, too. If you want to be nice and allow him to pay in installments, go ahead. (Be warned -- by the time you finish reading all of my advice, you might not wish to charge him anything. That's ok, too;)
#2 - Don't manage the building. Offer to be available for advice if he needs.
It might not be legal for you to manage the building, anyway. See below.
I will outline 3 major reasons for you to decline to manage this property. But trust me, I can name 100's of reasons. Hell, I can name $1000's....
A) The law and liability concerns might not be in your favor in this endeavor.
Some states require a broker's license or have other requirements if you manage a property but do not own it.
Why? Among other reasons, there is potential for a tenant, a neighbor of the building, a contractor or plumber you engage to work on the property, or even your friend (the owner) to sue you as a result of your involvement in this property.
You really want to know what you are doing when you administer a property with multiple dwellings. Even generally, you will be responsible for hiring skilled workers to perform repairs, keeping the property safe and legally habitable, adhering to discrimination laws concerning tenants, etc., etc., etc.
If you really want to do this management thing, get educated and licensed to do the job -- or politely pass on the opportunity.
B) As the manager, you will be "on-call" 24 hrs a day, 7 days per week.
At first glance it seems easy to you, I can tell. But the truth is you will be administering the requests and concerns of an owner plus all tenants on a full-time basis. That is a HUGE commitment, especially for the amount of compensation you seem to be favoring from the suggestions provided in other answers, above.
C) There is every possibility your friend isn't a good and responsible property owner or landlord.
I suspect this might be the true source of past mismanagement issues, regardless of what you were told. Your friend owns an income property. He is having money issues. He is an adult and is ultimately responsible for his property and his predicament.
Do you know if he is tight-fisted regarding repairs and payments for services rendered? Do you think your friend has good business judgement, generally speaking? Do you really want to put yourself in a position where you will have to find out?? Think about these questions, please.
BONUS CONCERN: 10 vacancies seems very high. There will be heaps of repairs and concerns to be handled as the new tenants settle in. Do you think it seems reasonable to assume there has been a fair amount of irresponsibility surrounding this property? Are you sure you want to put yourself in a position of responsibility in middle of all that?
----------------
MY Bottom Line: Unless you are an owner and share in the rewards conferred by long-term successful maintenance of this property, I suggest you restrict future help to giving tips and advice.
-----------------
I super applaud that you want to help a friend out. Truly! And I think you've done your friend a great favor by finding him decent tenants.
Wish him well with the property and take his calls when he needs advice. Your state might not allow for you to engage in property management w/out some kind of license (real estate broker's or otherwise) and this alone might give you a polite reason to decline deeper involvement with this property.
Good Luck.
posted by jbenben at 1:00 PM on September 24, 2009
OK. I just noticed you were in Illinois.
Info on management licensing requirements here.
Basically, you may not advertise the property, lease vacancies, accept checks or deposit monies, etc., if you are not a licensed real estate agent. You can legally order up cleaning, repairs, and other maintenance without any sort of exam or license.
(There is also a provision where you can get some sort of "leasing agent" license instead of a full r.e. agent's license. Maybe you can look into that? But whether you get the real estate license, or the leasing agent's... I think a fully licensed real estate broker has to be involved somehow.)
I also did a little research on what a "student house" might be, because I was a little unfamiliar with the term. Do you mean a house shared among students, with bedrooms individually leased? If so, 10+ vacancies must be a big house/property. It seems super work-intensive to manage. I think the 8% to 10%-type estimates other folks gave you absolutely applied to the management of a building w/ individual apartments. In other words, I don't think those estimates are applicable to your situation. They seem low.
Hey... There is one more important thing I wanted to mention.... If you are renting to college students, keep in mind you will also be dealing with their parents. I've rented to folks with over-protective parents. Nightmare. A bit like doubling or tripling the amount of demands and the amount of accountability regular property management usually entails. FYI.
Overall, when I discuss proficiency with housing laws or being licensed, I am doing so because the probability you will need both if you manage this property is fairly high. I wish you good luck, and I hope my experience and advice have been helpful to you.
posted by jbenben at 2:31 PM on September 24, 2009
Info on management licensing requirements here.
Basically, you may not advertise the property, lease vacancies, accept checks or deposit monies, etc., if you are not a licensed real estate agent. You can legally order up cleaning, repairs, and other maintenance without any sort of exam or license.
(There is also a provision where you can get some sort of "leasing agent" license instead of a full r.e. agent's license. Maybe you can look into that? But whether you get the real estate license, or the leasing agent's... I think a fully licensed real estate broker has to be involved somehow.)
I also did a little research on what a "student house" might be, because I was a little unfamiliar with the term. Do you mean a house shared among students, with bedrooms individually leased? If so, 10+ vacancies must be a big house/property. It seems super work-intensive to manage. I think the 8% to 10%-type estimates other folks gave you absolutely applied to the management of a building w/ individual apartments. In other words, I don't think those estimates are applicable to your situation. They seem low.
Hey... There is one more important thing I wanted to mention.... If you are renting to college students, keep in mind you will also be dealing with their parents. I've rented to folks with over-protective parents. Nightmare. A bit like doubling or tripling the amount of demands and the amount of accountability regular property management usually entails. FYI.
Overall, when I discuss proficiency with housing laws or being licensed, I am doing so because the probability you will need both if you manage this property is fairly high. I wish you good luck, and I hope my experience and advice have been helpful to you.
posted by jbenben at 2:31 PM on September 24, 2009
jbenben - As I said, I have a fair amount of experience with student tenants from my own properties, so I'm not too worried that I don't know what I'm getting into. Your advice is helpful and well-taken, though.
Thanks everyone for your info and suggestions. I feel like I have a much better basis for coming up with a number now. Much appreciated!
posted by walla at 10:16 AM on September 25, 2009
Thanks everyone for your info and suggestions. I feel like I have a much better basis for coming up with a number now. Much appreciated!
posted by walla at 10:16 AM on September 25, 2009
This thread is closed to new comments.
posted by woot at 7:08 PM on September 23, 2009