Good Afternoon Everyone,
Today I wanted to show 21 additional revenue streams that we see used by property management companies across the nation. We can help implement and manage these ideas. Take a look, let us know what you think!
Top 21 Income Streams for Property Management Firms
1. App Fees*: This one is pretty simple. If you are not using the Appfolio Application, I would recommend getting that set up immediately! I often see firms charge anywhere from $35-$100/applicant.
2. Admin Fees*: This is a fee you can charge to both tenants and homeowners. I often see admin fees charged for renewal of leases, project management for an owner, eviction of tenants etc. This fee is generally used for anything a PM company does outside of its normal operating procedures as described in their management agreement.
3. Parking/Garage: We find monetizing your garage space to be successful in appfolio. We typically set this up as an additional rentable item or a separate unit under the owners property/unit structure.
4. Pet Rent*: Pet rent is exactly what it sounds like. You charge additional rent determined by number of pets, weight, etc. You can also charge monthly pet rent. I have seen firms take 50-100% of pet rent and fees charged to a tenant.
5. Security Deposit: In some states you may hold your security deposit in an interest bearing escrow account. I have seen management companies do this and at time of lease have tenant sign a form stating they are entitled to any interest earned. At move out, tenant may elect to be paid interest collected. If they do so, the management company will charge a $60-$100 admin fee (accounting fee) to account for, and pay this out to the tenant. Interest earned per deposit is usually in the range of $20-$50/deposit. Ultra-high end real estate may have to charge a higher fee for this. You will also want to determine a pricing sheet for typical move out charges. 1 bag of trash costs $100, carpet cleaning costs $250 etc. The idea is to cover all of your bases at lease signing.
6. Redecoration Fees*: This goes back to the last section in which we discussed a pricing sheet for typical move out charges. You may also charge a redecoration fee at move in. I have seen companies charge anywhere from $300-$500 for an "easy move out" package. This package includes basic cleaning, and painting. You will want to know your average cost to turn a condo for a new tenant before charging at the beginning of the lease.
7. Trash*: Often overlooked, this is one of the potentially largest money makers on the list. Recently "Valet Trash" services have exploded in apartment communities throughout the nation. The typical setup is pretty simple. Management firms will pay for and install bins near the front door of each unit. These bins look just like a small bench and provide a good look to the community. The bins hold 2-3 full size bags of trash. For a fee… Often $20-$30/month trash will be picked up from the tenants bins and delivered to the compactor by a team member. By doing this you will limit the overuse of the compactor by tenants while making a healthy profit.
8. Storage: This is pretty straight forward. Some of the best investment returns I have ever seen were on storage units and garages. If Storage is separate from the unit, I wold advise making it a rentable item.
9. Water: If you own a large community, there are a couple of ways to make money here. You could sub meter each unit and bill each tenant individually plus a service charge. Large communities may elect to pay the water for the entire property and flat rate tenants. Budget forecasting is very important for the later option.
10. Furniture Rental: Very straight forward. I have seen this idea fail in lower income areas, and thrive in higher income areas.
11. Cable/Internet: Call your local cable company and try to work out a "Bulk Services" deal. These are often cheaper than market pricing for the same service. Wrap the services into your rent for higher rental rates.
12. Gas: I imagine this is a lot like the water situation above. Sub meter each unit, charge for gas, or charge a service fee.
13. Electricity: For this to work, you really need to know your average costs per month on electricity. Bringing the entire fee in house and charging tenants directly is a great way to increase cash flow!
14. Corporate Usage Fees: Centered around corporate housing. This fee is rarely used. It may be a good idea for any owners with highly transient property, or high numbers of rentals per year.
15. Washer/Dryer: This is one of the most used ancillary services for property managers. The idea is simple. Provide washers and dryers to tenants to use for a fee. There are companies that will install and service the system in exchange for a percentage of monthly income.
16. Pest Control: This is a must and another most used service. All tenants should be billed a monthly fee for pest control. Not all tenants will use this service, but it is a must in the event of a large pest problem. This is both a money maker and protection policy.
17. Short Term Lease: You should always charge more for a shorter term lease. Typically this is income to the owner. I have seen management companies charge an additional fee for the shorter term.
18. Misc. Property Amenities: If you manage a property with great amenities, or a large number of amenities, it may be a good idea to monetize these items. I would not advise charging admission to use the pool. But I would provide additional items tenants may purchase or rent on a monthly basis.. For example, maybe we have 3 parking spots that are the perfect spots. I would make those VIP spots. Tenant will still be assigned a parking spot, but if they want VIP parking, they will need to pay an additional $20/month.
19. Early Termination: I have seen this fee always go to the owner at move out. There are some companies that guarantee a monthly rent to the owners. If that is the case, I would see where the management company would keep an early termination fee. Aside from that, if the management company is paid in relation to rents received, I do not see taking this fee as fiduciary at all.
20. Damage Fee: I would advise developing a pricing sheet for typical move out costs. This sheet should be part of the lease and signed off on by the tenant. At move out, if the tenant lease a mess, you can charge according to your sheet, and reimburse the owner for actual costs. You will need to check your state laws in regards to move out costs prior to implementing this.
21. AC Filters: In warmer climates, AC maintenance is imperative. Trusting each tenant to keep up with Filter replacements does not work. Why not order and deliver filters directly to your tenants? Management companies typically charge $15-$20/month.
Additional Comments from Firms using these services:
RUBS – Gunti Weissenberger indicated that they don’t prefer using RUBS as their residents don’t like the way utilities are broken out. He mentioned that when they switch to submetering, they lower rent to mitigate resident complaints, and then make plans to raise rents upon renewal or with new residents.
Fees Versus Upgrades – Higher end PM companies focused on upgrades that residents opted into paying for, while other PM’s ancillary income derived more from punitive, fee-based income from late charges and the like.
Renter’s Insurance Lapses – Having renters insurance lapse is a challenging problem, some PM’s charge a $50/month fee if the resident lets their renters insurance lapse until they get it reinstated.
Common Area Maintenance? In some markets, it is common to charge a "Common Area Maintenance" fee, intended to provide cleaning services for hallways. In an off-the-cuff polling of some on the Insiders community, we didn’t find much use, or even knowledge, of this fee, but maybe this will expand to other markets in the future?
Real Estate Taxes Fee? Real estate tax increases for multifamily properties are done without much consideration from multifamily owners. So they are considering a fee to pass along those tax increases in order to have their residents have a vested interest in any potential increase. The idea is that the residents would join in any push against a rise in real estate taxes.
Unit Upgrade Income – A PM will provide upgrades to a unit (if they are in line with the existing design of the apartment) for a charge to that resident. Once that resident ultimately moves out, they then charge subsequent residents for that upgrade, as those upgrades remain with the apartment.