Just because everyone is doing it, doesn’t mean it’s right:
Remember getting in a cab five years ago and thinking to yourself, “Jeez, I just waited 30 minutes to get in this car and I know I’m going to get gauged with a ridiculously high fare?” Or maybe you remember that time ten years ago when you had to pay your CPA $400 to get your taxes done. It sucked, but it was the way things had been done for years, so everyone went along with it. Well, that was the case until Uber let me press a few buttons and get a cab instantly for a price I could understand, and when TurboTax walked me through the entire process online for $50.
Here at Castle, we think property management pricing sucks. Maybe 50 years ago it might have made sense, but now it’s 2016, and Castle is here to let you know why flat fee property management is the future.
#1: Percentage based management fees
Problem: The industry standard for property management pricing is a percentage of rent ranging from 4-12%, but it’s typically around 10% for small, residential properties, so let’s use 10% as our baseline. Let’s also assume that a property manager provides the same basic services (marketing/listing a property, placing a tenant, collecting rent, coordinating maintenance). Now that we have those assumptions taken care of, I’d like to walk through a quick scenario.
Let’s assume a property management company manages a property that rents for $3,000/month owned by Max Dingman and one that rents for $700/month owned by Tim Nussenbaum. Max will be paying his management company $3,600/year and Tim will be paying his management company $840/year (not including other fees). The management company is responsible for the exact same services for each property, but Max is paying over 4x what Tim is paying. That’s like my brother and I going into a barber shop and the barber telling me that my haircut is $60 and my brother’s is $15 because my head is bigger.
Solution: Flat fee property management! Because Castle is responsible for the exact same things at each property, we charge the exact same price!
#2: Tenant placement fees
Problem: Another pricing flaw is to charge the owner first month’s rent to place a tenant. At first glance this may seem fine. Cool, my management company worked hard and found a qualified tenant, they deserve this extra fee for their hard work. Again, let’s walk through another example so I can point out why this needs to change.
Let’s assume a property management company took on a new property and worked really hard to find a tenant. We listed / marketed it, showed the property to qualified tenants, and then one of them signed the lease. Since rent is set at $1,000/month, we’ll take the first months rent for our trouble. But let’s think about this another way. What if the management company didn’t really work that hard to find a qualified tenant and just chose the first one that applied. They knew they’d be getting the first month’s rent regardless, even if the tenant never paid rent again. Doesn’t this fee provide a disincentive to place an amazing tenant on day one if the management company knows that if the tenant leaves they can just collect another placement fee again in the near future?
Solution: Flat fee property management! Here at Castle, our flat fee property management pricing includes the cost to place a tenant so our incentives are aligned with those of property owners. The only way the business works is if we find amazing tenants, so we work our butts off to make sure there is minimal turnover.
Learn more about the tenant placement process
#3: Maintenance coordination costs
Problem: Here at Castle, we hear this one every single day. “My old management company would charge me $50 each time a maintenance issue came up at my property.” Not only is that property owner stuck with the bill for the maintenance issue, they also have to pay their management company to coordinate the maintenance. Ok, I’ll confess, I kind of sort of understand this one. Maintenance issues are tough, and the time required to coordinate them is variable based on the severity of the issue. That said, this property management pricing standard is still broken! Here’s how Castle eliminates this problem:
Solution: Robots! Not really, but kind of. Here at Castle, our amazing team of software developers has created innovative technology that allows our management team to automate this entire process. Let me explain. A tenant calls Castle and says their toilet is overflowing. Castle’s management team uses our software to dispatch a maintenance professional to that property based on profession (they’re a plumber) and location (that plumber services that properties area). It happens with the click of a few buttons on Castle’s end, so there is no need for us to charge a maintenance coordination fee. Pretty cool right? Well, that is, until our software becomes sentient and takes over the world. But that’s a discussion for another blog post.
Hey, it may not be super sexy, but neither are cabs or taxes. When we started Castle, we didn’t want to do things like everyone else. We wanted to start with a clean slate and question everything. We looked at the pricing structure and asked why. Our solution is a flat fee property management structure. $79/unit/month. That’s it.
If you dig it, go ahead and get in touch. We’d love to talk.
