Author Topic: How much to charge for managing family properties  (Read 781 times)

Stachetastic

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How much to charge for managing family properties
« on: May 25, 2018, 02:30:11 PM »
My FIL died unexpectedly last month, leaving my MIL with 3 rental properties (2 duplexes and 1 SFR). She is going to be listing them with a realtor in the next week or so, but has indicated that if she doesn't get the price she wants, she will keep them. DH and I own 2 SFRs of our own and are pretty experienced at managing them. DH has indicated he thinks MIL will ask him to manage her properties if they don't sell, so we are trying to determine how much he should charge. Our understanding is that most PMs charge 10% around here, but A. I'm sure he'd like to give his mom a discount and B. He will likely be doing most repairs himself. Should he have an additional hourly rate for making repairs?

These properties are Section 8 units in not-so-great areas of our town, and typically attract high maintenance tenants, which is why we aren't interested in buying them ourselves. (There is one we would possibly consider, but we would convert it to a SFR and I'm not sure the purchase price would be low enough to make the numbers work.) But dealing with all the headaches of managing them without actual ownership... I dunno. I feel like we need to strike a delicate balance between "Helping mom out/not fleecing her" and "Worth the hassle."

salmp01

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Re: How much to charge for managing family properties
« Reply #1 on: May 25, 2018, 02:58:10 PM »
My father owns a couple duplexes that he has managed himself for many years.  He turned 80 last year and I offered to manage one of them for free.  Eventually, they will come to me and I have several others that I own/manage so it wasn't too difficult to add.   He had talked about selling them but the tax hit he'd take would be very large so it really makes more sense for him to hold on to them until he dies (he's in great shape so I hope it's not too soon)! 

If your MIL and FIL did proper tax planning it's possible the properties could be now be in a trust and if so there may be no tax consequence to selling.  If this is the case I'd push to sell. 

Personally,  I'm not sure how excited I'd be about managing properties in a not so good area.  This can be a very time consuming  That said if you charged 10% I'm sure you'd do a better job than most property managers.  Not sure where you live but a good handman where I live will charge $50+/hour.   

Gronnie

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Re: How much to charge for managing family properties
« Reply #2 on: May 25, 2018, 03:07:20 PM »
I'd have her just hire a management company and not mix business with family.

MayDay

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Re: How much to charge for managing family properties
« Reply #3 on: May 26, 2018, 09:39:43 AM »
I'd have her just hire a management company and not mix business with family.

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Icecreamarsenal

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Re: How much to charge for managing family properties
« Reply #4 on: May 29, 2018, 09:03:01 AM »
Death divorce debt, the three Ds.  I'd encourage her to sell and maintain the properties at 10% until they are sold.

calimom

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Re: How much to charge for managing family properties
« Reply #5 on: May 30, 2018, 06:52:01 PM »
Sorry for your family's loss. Your MIL probably has a thousand details pin balling around her head right now. Since she's already thinking about selling, that seems like the best course of action. Hopefully she won't get in her way about perceived value; what they're worth is what they're worth. Be clear and honest with her about your hesitations for management, in a kind way since it sounds like you're just not feeling like this is something you don't want to take on. Hopefully the Realtor will work with her and find the right fit. Someone wil want these properties, an investor or in the case of the duplexes, potential buyers who want to live in one, rent one out.

Stachetastic

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Re: How much to charge for managing family properties
« Reply #6 on: May 31, 2018, 07:03:04 AM »
Thanks, all. If it were MY mom and I was the one primarily responsible for managing them, it would be an easy NO WAY. However, my husband is committed to doing this for her if they do not sell. I'm crossing my fingers she gets what she wants out of them. She has had a realtor do a market analysis on each one, so she is realistic with her asking price. Unfortunately, there is not much of a market for multi family properties in our neck of the woods, so we'll see how it goes.

Any suggestions for an hourly rate on handyman-type services for a family member in this type of situation? I'm guessing MIL will probably continue to handle tenant screening, etc. but will need DH to respond to service calls and coordinate repairs.

Villanelle

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Re: How much to charge for managing family properties
« Reply #7 on: May 31, 2018, 07:39:03 PM »
For the one you are semi-interested in, if she sells it to you without a realtor and thus discounts it by whatever % she would pay in realtor fees, does that make it worthwhile?  It's worth considering.  Also, in some states (CA, at least), if you by a house from direct family, your property taxes remain at their old value/basis, which can be a huge savings.  DH and I bought my grandmas house (technically from my dad who inherited it) and he tax basis was something like $79k.  We paid $330k, but our property taxes continued to be based on $79k.  Large savings for us.  Worth looking in to.

I agree that you should really try to talk your husband out of this, but if he's dead set, then I'd go with a small discount.  If 10% is the local going rate, charge 8% or 7.5%, plus $30/hr for labor. (That wouldn't include standard walk throughs, contacting repair people, and things like that, which a PM would typically do as part of their basic fee.)

Stachetastic

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Re: How much to charge for managing family properties
« Reply #8 on: June 01, 2018, 06:04:24 AM »
For the one you are semi-interested in, if she sells it to you without a realtor and thus discounts it by whatever % she would pay in realtor fees, does that make it worthwhile?  It's worth considering.  Also, in some states (CA, at least), if you by a house from direct family, your property taxes remain at their old value/basis, which can be a huge savings.  DH and I bought my grandmas house (technically from my dad who inherited it) and he tax basis was something like $79k.  We paid $330k, but our property taxes continued to be based on $79k.  Large savings for us.  Worth looking in to.

I agree that you should really try to talk your husband out of this, but if he's dead set, then I'd go with a small discount.  If 10% is the local going rate, charge 8% or 7.5%, plus $30/hr for labor. (That wouldn't include standard walk throughs, contacting repair people, and things like that, which a PM would typically do as part of their basic fee.)

You're right, it may be worth considering. The market value is 55-65k, and we would likely spend 10k to convert it to a single family home. It would rent for 800-850, so it would meet the 1% rule. It's in a good area of town, and just a few blocks from our other rentals, so it would be a solid rental. We just want NOTHING to do with another duplex, as we had one for 10 years before we converted it to SFR last year. They are such a pain in our area--no one wants to live in the upstairs unit, so it tends to attract less-than-stellar tenants.

We do not have that tax law here, but with such low property values and little appreciation, it wouldn't make much difference.