Buying Gulf Shores & Orange Beach Condos 101: Property Management and Rental Management….What’s the difference?
In this blog we cover the differences between a property management company and a rental management company and what you might expect when dealing with each.
Property Management Companies
Property Management companies for condo complexes generally handle the day to day items relative to property upkeep and maintenance as dictated by the Condo/Home Owners Association boards which hire them. Since the majority of the board members on the Alabama Gulf coast do not live locally and have their own careers there is a strong need to have a local property management company to handle the day to day operational items associated with managing a condo complex. Some of the items that property management companies are responsible for are:
- Establishing and managing the budget for the owners association
- Overseeing common element projects associated with regular building maintenance and upkeep as well as more expensive capitalized projects. These types’ projects range from regular landscaping, pool maintenance, and complex janitorial agreements to repainting the building, replacing roofs, repaving parking lots, and so on. The property management company will solicit bids from vendors for the various OPEX and CAPEX projects, present the bids to the board for approval, and then oversee execution of the projects.
- Receiving and processing HOA/COA payments
- Attend all board and annual owners meetings
- Oversee parking passes for a complex
In the larger complexes you will often see an onsite property management presence. This can include the property management company having a HOA/COA representative on-staff and available as well. For vacation homes a property management will handle the same basic role of property upkeep and maintenance on behalf of an owner but will also tend to oversee the rental management aspect as well. Many times you will see a property management company handling large complexes, individual homes, and duplexes. A complex can also have a self-managed HOA/COA. These tend to be complexes where many of the owners live full-time. The number of complexes that have this along Alabama Gulf coast is low.
Property Management companies work very closely with mortgage companies because they need to ensure the mortgage company has all the HOA/COA documents required as well as financial reports that a mortgage processor or underwriter will need to process a loan.
Rental Management Companies
Rental management companies can be a stand-alone company or a separate line of business within a property management company. The rental management company is responsible handling all aspects of renting your condo. This includes:
- Setting up and managing the internet websites for your property. This often includes creating and maintaining a webpage on their own site but also on sites like VRBO, HomeAway, and similar web based rental sites
- Handling reservations, down payments, and cancellations
- Cleaning and re-stocking your property in between rentals
- Ensuring that the city rental taxes are paid
- Working problems that arise during a rental. As an example they will work with local vendors if your a/c unit decides not work in the middle of the night or your refrigerator stops working.
- Working with the property management to coordinate parking passes for renters
Rental Management commissions can vary dramatically so it’s always a good idea to ensure you talk to several vendors before deciding. The average commission usually falls between 15% – 30% across the various rental management companies. This percentage is their take of your gross rental amount which is very important to know because it will affect your investment ROI. When talking with rental management companies it’s always important to understand these items when selecting a vendor:
- What is the rental commission percentage? Is it the same regardless of number of days rented or gross amount of the rental? Some companies charge different commissions on a 2 day rental vs. 3 or more day rental or if the rate falls below a certain $ amount they will charge a higher commission rate.
- What is their cancellation policy? These can vary from month to month contracts to 60-90 cancellation notices to 1 year commitments with no cancellation allowed. The norm in our area is a 60-90 day cancellation policy.
- Do they charge the owner a credit card processing fee for rentals booked with credit cards? If they do it will range from 1% – 3% of the gross rental and should only cover the actual rental itself. It should not cover additional items like dolphin tours, etc. that might be booked through them.
- Do they require monthly maintenance agreements? If they do it might run $25 – $50 / month
- How do they price your condo vs. other condos in the same complex?
- How will the market your condo and what internet sites do they use?
- What housekeeping items are covered as part of your basic agreement and what are additional costs that you will incur. Some companies items will not charge for items like replacing batteries in remote controls, etc. while others will.
- How are linens handled and what are their charges?
- Do they supply combo locks like a KABA lock or does the owner have to supply their own.
Baldwin County Condominium Property and Rental Management information provided by Mike Bates, Alabama Gulf Coast Condominium Specialist with the Jason Will Real Estate Team 214-274-6860.