Speaker: Flat vs Percentage Based Management Fee For Your Nashville Rental. That’s the question we’re going to talk about today and our property management, uh owners, questions owners ask.
So I’ve got Spencer Sutton here, we’re going to talk a little bit about the differences between the two.
There’s a bunch of different companies out there.
Everybody’s got their own theory so, Spencer, you want to start off, let’s talk flat fee.
Spencer: Well, with a flat fee, I think, for the owner that they just know exactly what it’s going to be.
And, a lot of times if you have a nicer home and you’re getting, you know, uh, $2,500 in rent, you know, $2,000 and above, that flat fee looks very attractive just kind of depending on that price point but, uh, from what I’ve seen, the flat fees tends to be a relatively inexpensive compared to rents when they’re nicer houses.
Speaker: Yeah. I think the whole theory behind it is it doesn’t take that much more effort to manage a $2,500 house and a $2,000 house.
So why pay bigger management fee because your house rents for more, and the whole idea of a flat fee is that it takes takes basically the same amount of time to manage both, so you get paid a flat fee to do that.
Spencer: Yeah, I mean that was our… that was our faults when we actually started discussing internally, should we charge a flat fee or should we stick with percentage-based?
That was what we came back with.
And, I remember these discussions like why are we charging more, or why would we charge $200 a month as opposed to $100 a month for example, if it’s not taking us that much more effort to manage that property.
So a great point.
There’s a lot of property managers that say, “Hey, you know, uh, I want to get paid based on what I collect for you and I should only get paid a percentage of what I collect”.
That’s kind of the thought behind percentage base.
Spencer: Yeah, and I think that’s traditionally been what property managers have charged.
I know that when I first owned rental property and gave them over to a management company, it was actually GK houses.
And Matthew had to explain to me, “Hey, we’re charging 10% of rent collected”. I was okay with that because that was kind of what was expected. But…
Speaker: Yeah, well it’s very traditional.
Different managers charge different things and a lot of that depends on the number of services that they provide.
So, um, if you’re interested in percentage-based management, uh, there’s a lot of property managers that provide that.
Spencer: Yeah, and then there’s this hybrid model.
So, and that’s something we’ve developed at GK houses is we want to give owners uh, options.
And so we recognize that investors are really used to this percentage base, they like it, especially if they’re, if they’re in some, uh, moderate-income areas and they’re, you know, the, the rents are a little bit lower, the percentage base makes sense.
And then we also have a flat fee option.
So we’ve got this hybrid model that we say, “Hey you, it’s up to you. You decide what works best for you”.
And then, you know, we like to advise our clients “Hey, this would probably make more sense to you”.
So really across the landscape of property management, you can find a lot of different ways that people are doing it now.
Speaker: Yeah. I think the point here is you need to decide which philosophy makes sense for you.
And then I would I would go find a property manager that has that similar philosophy.
We found that property managers and owners need to have kind of a same general philosophy.
Are you one that buys in to the flat fee, which says, “hey, it really doesn’t take that much energy and effort to manage house A versus house B, or do you say,
“Hey, I want a percentage base, so I want you to earn money as you collect money, and earn a percentage of that money”.
So again, two thoughts there. Uh, one of them is not right. One of them is not wrong. It’s just the way you look at the world.
So that’s about it.
Spencer: Yep, that’s it.
So if you are interested in learning more about GK houses, obviously you can find all this information on our website at gkhouses.com you can also call our Nashville office (615) 925-3880 extension three thanks so much. Bye.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.