Real Estate Management Fees – Know The Difference

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Managing multiple self storage facilities or rental properties is a task oriented, time consuming business that can easily take up a majority of an owners time. In addition, an owner may have the business savvy, but not the mechanical and technical knowledge to maintain the properties. On the flip side, and owner may be stellar when it comes to replacing counter tops and fixing faulty wiring, but know next to nothing about all of the fiscal and budgetary issues or customer service points that come with managing multiple locations. For these and other reasons, many owners of multiple properties, be they family homes, retail shops, storage units or restaurants, have turned to management companies that can assist them in the variety of tasks and duties that amass when more than one location is present. 

These companies vary widely as to how they calculate what kinds of real estate management fees they will charge for their services. It is important to understand the various ways that these companies may choose to calculate their fees, so that you may have a better grasp of where your money will be going should you choose to utilize their expertise.

Many such companies calculate their real estate management fees based on the income that your combined locations are bringing in. The company routinely charges a percentage of the income in return for their services, which may or may not be a good deal for one or both parties. It is important to realize that the combined income of your locations is in no way relevant to the cost of maintaining the buildings themselves. This income based method does not take into account the amount of work and effort required to keep the buildings running smoothly, nor does it seem fair when there is a high vacancy rate and the company receives less money as a result, yet the same amount of effort went into maintaining the buildings themselves.

A second method of calculating the appropriate real estate management fees is used when companies charge owners a price per square foot. In this instance, you are being charged for space that may never need to see any kind of maintenance. In the long run, it may work in your favor, supposing that a great deal of maintenance needs to be done, however, and you will not have to pay any more out of pocket for these expenses above and beyond your agreed upon square foot pricing.

Perhaps the fairest method for calculating real estate management fees is obtained when several factors are taken into account, including the condition of the buildings and how much maintenance they are wont to receive, the amount of work and manpower that will be required to keep the buildings functioning effectively and other important factors. When all of these variations are considered, the owner and the company can reach a flat fee agreement that is impartial to the actual income coming in from the locations. This is perhaps the most well rounded, non biased and equally distributed approach, as everyone has come to an agreement of the terms and conditions.

Hiring outside management assistance can help you maintain your operations without straining, stressing or having to learn new skills. If you choose wisely, this can be a beneficial experience for both the owner and the company providing the service, and the real estate management fees agreed upon will not break your bank account.

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Disclamer: This entry is intended to promote our partner StorageMart and some or all participants received compensation.