Our Pricing: Why Do We Charge What We Charge?
If this is your first time reading our blog, I’d like to welcome you and I sincerely hope you enjoy yourself. I’ve made it a personal goal this year to blog more often. Embarrassingly, I studied Literature in University, so you’d think I’d be pumping out blogs like crazy. Turns out not so much…
So, I decided to do a series of blogs about what it’s like to work at a Property Management company. I think there’s a lot of misconception about what actually goes on behind closed doors in Property Management, so I think a peak behind the curtain might answer some questions (If you feel like encouraging me, leave a comment or suggestion down at the bottom.)
Being the first point of contact for inquiries into our services, you can imagine I get this question a lot…
And it’s a very valid question! Needless to say I thought it would be good to clear the air about our pricing, as over the past few years we at Drummer have made the commitment to be as transparent as possible with our clients. Everything from our logo to our new website is aimed at this approach.
At Drummer we have three main fees; a Sign Up Fee ($150), a Leasing Fee ($600), and our Management Fee (10%/Month).
These dollar amounts may change over time.
I will break down each fee into what it covers and why it is set up the way it is.
Sign Up Fee
This fee gets a new owner started with us. You see, a lot of work goes into setting a new owner up in our administration system right off the bat. This fee covers all the work that needs to go into getting a new (to us) property set up within our systems.
There’s a TON of information to be received, processed, and set up. We need to set up the owners banking information to send them the rent, and create (and pay for) their profile within our databases. Past documentation regarding work done in the property is required, appliance warranty information, home insurance, and we need to pull the land title to verify the owner of the property is correct (which has a cost associated). If there are tenant(s) currently in the property, then there are a number of other documents we also require; tenant’s insurance, move-in reports, the security deposit, and the tenant’s banking information.
So if we do all this and the owner decides a month later that property management isn’t for them, or their family member is going to move in, or they decide to sell; this fee covers a small portion of our man-hour and administration costs.
Leasing Fee
The Leasing Fee covers all costs associated with leasing the property. If you’ve ever self-managed a property before, you know how much work this can be. If not, I’ll explain.
Before you get a single call or email, you need to advertise the property. So, you need photograph it, write an ad, set it up correctly in the ILS of your choice (we use Rentfaster currently), and post it. Depending on the type of property you will want to have a sign put out front as well. There are costs associated with all of these tasks.
I’ve given a number of seminars on this subject for the CRRA, so if you’re a member you can access my presentations on their website.
Now that you’re advertising, you should be getting inquiries. Now what? Well, you’re going to have to screen them to weed out any unqualified applicants. I wrote an article about how we at Drummer do that (here).
Now you’ll need to show the property. People want to see the property with their own eyes before committing to live there.
Now, you might get lucky and only have to do one showing, with someone who shows up on time and answers your emails/calls. They might apply the very next day, and that application may look great and you may have the lease signed and deposit received within the week!
Far more likely however; you will be showing the property multiple times per week, the applicants might show up on time (if at all), you will have scheduling conflicts that result in you losing good quality tenants (many applicants will have different work schedules), or you may have applicants wish to see the property several times just to sign a lease somewhere else. Very time consuming.
Ok, you’ve shown the property and now have some applications. Great! But now you have to make sure these applicants are who they say they are, are financially responsible, and are employed. At Drummer we run every applicant’s credit, do rental reference checks, and verify their employment. There are costs associated with these checks. Often applicants seem great in person, until we dive into their credit and rental references. See this article for our process.
Ok so let’s say you’ve found your tenant, they’ve seen the property submitted an application and it checks out. You now have to get the contract signed and collect the security deposit. This can also be a time-consuming process.
Then you need to move them in and complete a thorough move-in report (with photos and documentation of course!) to keep on file to protect yourself when that tenant moves out.
Drummer’s Leasing Fee covers all of the above, and also includes the Property Manager’s commission, mileage, and phone bill. This fee occurs whenever we place a new tenant. If the tenant stays for ten years, we only charge this fee once.
When looking at only the dollar amount of this fee alone, some owners question how we are incentivizing ourselves to act in their best interest. It may seem like it would be in our best interest to place tenants that are more likely to move. But when you consider all the work that goes into placing a good quality tenant, we don’t make any money from this fee. I’ve also written an article explaining that in further detail. Needless to say, we want long-term tenants just as much as you do!
Management Fee
This monthly percentage based fee comes off the executed rental amount. By placing good quality tenants who are a good personal and financial fit for the property, we’ve seen a higher percentage of tenants stay for multiple years. Which is good for both ourselves and the owner.
That being said, there are many services that are included in this fee for our owners.
We maintain a 24/7 Maintenance Emergency Line and keep a full Maintenance team on our payroll to handle any calls or grievances your tenant might have. By having our own ‘handyman’ on salary, we can then charge you, the owner, less for maintenance visits to your property (in comparison to calling in an electrician or plumber to do a basic repair). In the cases where we do use 3rd party contractors, we have several vendors that we give a LOT of business to, so they give us preferred pricing. We do not mark up these services when applying them to your account. In fact, we attach all receipts to your statement so you know that we’re charging exactly what we paid. Remember, we’re all about transparency!
Out Accounting team collects rent, takes into account any maintenance charges, prepares your statement, and sends it to you along with your rental income.
We also throw in one free inspection every time a new lease is signed. We’ve found this invaluable in making sure we have placed the right tenant.
I hope this has helped whoever is reading to better understand why our fees are the way they are. I’ve always found that the more you understand about something, the more likely you are to trust it. For us, being transparent is very important, because the trust of our clients is the only reason we’ve been in business as long as we have (over 35 years)!
If you want to know something about Drummer, or the Property Management industry, leave me a comment! I’ll do the research and write you a blog!
Cheers,
JP
