Setting your property management fees can be tricky business. Obviously, you’d like to obtain the greatest amount of money
possible for your services.
On the other hand, it’s important that your prices remain competitive in order to secure new clients. Following are some things to take into consideration when setting and evaluating your property management fees.
Know Your Competition
While your prices shouldn’t be totally dictated by what your competitors are doing, it is important that you have an idea of the going rate for property management services in your area. While you don’t want to undercut yourself, you will likely also have a difficult time selling your services to potential clients if your rates are significantly higher than your competitors’. If they are higher, be sure you have a compelling answer lined-up when potential clients ask why that is (for example, “We offer more automated services for you to utilize” or “We have twenty more years of industry experience than our closest competitor”).
Compare Apples to Apples
In that vein, when evaluating competitors’ prices, be sure that you are taking similar companies into account. For example, if you have ten years of experience and several successful properties under your belt, you should not compare your prices to those of a relatively novice, start-up property manager. Obviously, the converse of this also holds true.
Account for the Local Economy
How are things in your area? Are vacancy rates high? Or is business booming, bringing lots of new residents to town? Keep your fingers on the pulse of your local economy and remember to be flexible and nimble. Perhaps things were booming three years ago, but such is not the case now. You may have to adjust your rates to compensate for this in the interest of acquiring new business.
Don’t Undercut Yourself
With the above point in mind, though you may be able to command higher rates at some times in contrast to others, never devalue yourself or your property management business. If a property owner is unwilling to pay a fee you know you deserve, hold out for better customers. Dedicating your time and skill set to an unprofitable endeavor will harm your business in the long-run and take up resources that will ultimately be better used elsewhere.
And a couple of final thoughts: When explaining your rates to potential clients, be sure to be explicit about what these rates do and do not include (for example, if maintenance fees are an additional charge, be sure that both parties agree on this from the off-set). And, finally, be sure to re-evaluate your rates on a regular basis (we suggest annually). A good customer will understand that rates rise over time as the cost of living increases and you continue to prove your mettle.
Be sure to check out our previous blog post for more specifics on setting your property management fees.Read more on Scaling