Property Management Blog

Is your flat fee property management company really charging a flat monthly fee?

Is your Flat Fee Property Management Company really charging a Flat Monthly Fee?

A Property Management firm is the most important business partner a building owner can have. In order to protect your investment, it’s critical to align with an experienced property management company that has your best interests in mind. Because a partnership is only successful when both parties share the same goals & receive equal value.

For building owners looking to outsource the management of their building, there are typically two models to consider: Traditional Management & Flat Fee Management. 

What does a Flat Fee Management model look like? 

You should actually be asking yourself, what SHOULD a Flat Fee Management model look like?

The advantage of having a flat monthly fee is to keep monthly costs as consistent and transparent as possible. For building owners, this is very important in retaining value of your property and being able to rely on a consistent budget with minimal surprise charges.

Many times though, Flat Fee Property Management companies include enough additional charges that they really aren’t charging a flat fee. Once all the add on services are included, services that should have been included in the original Flat Monthly Fee, you end up as a building owner paying inconsistent highly than budgeted month to month fees.

So, what SHOULD a Flat Fee Model Fee look like?

  • Management fees are consistent month to month
  • Management Fee should include a defined number of service calls – for example, 3 service calls per month, per unit, should be included in the Flat Fee
  • Property Management is now incentivized to fix maintenance issues correctly the first time – are actually penalized if maintenance issues linger post original fix
  • Management Fee includes any tenant turnover
  • Management Fee includes any tenant renewal
  • Property Management company is now incentivized to bring in stable long-term tenants, leading to a stronger building culture and environment for all tenants

Why is a TRUE Flat Fee Property Management company better for the tenant?

  • Property manager is incentivized to fix building issues the first time, creating a better living experience for the tenant
  • Property manager is incentivized to limit tenant turnover, creating a strong and stable community for all tenants
  • Better neighbors – new tenants undergo thorough vetting process
  • Better building – lower management fees free up cash for larger building upgrade projects that improve the long-term conditions of the building

When a building owner has a TRUE Flat Fee Property Management company as their partner, two things will happen:

  • Monthly management costs will actually be lower
  • This in turn increases the value of your building – for every $100 saved in previous monthly management costs = a $15,000 increase in your building’s value (at 8% Cap Rate)

In the end, as a building owner looking to protect and grow your investment, having a property management company with aligned goals is the key to a strong long-term partnership.  Many property management companies say they are a Flat Fee management company.  But make sure you do your homework and select a property manager that uses a TRUE Flat Fee model.

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