Charlie Munger, the late investing legend and long-time partner to Warren Buffett, famously said: “Show me the incentive, and I’ll show you the outcome.” In the world of property management, most owners focus on the monthly management fee, usually around 6% to 12% depending on your market. But if you really want to know how your manager is incentivized to treat your investment, you have to look at the Junk Fees. Believe it or not, many management contracts are written so that the management company actually makes more money when your property is struggling, than when it’s succeeding. Let’s talk about why that happens and how we do things differently at Dave’s Property Solutions.
The Dark Incentive of the "Leasing Fee"
The most common junk fee in our industry is the Leasing Fee. This is when a management company charges you 50%, 75%, or even 100% of the first month's rent just to find a new tenant.
At first glance, it seems fair. Marketing and vetting take time. But look at the incentive it creates:
The Turnover Cycle: If a manager makes a $1,500 payday every time a tenant moves out, do they really want that tenant to sign a three-year lease?
The Vetting Gap: If the manager gets paid the same leasing fee whether the tenant stays for six months or six years, there is a subtle incentive to "fill the unit fast" rather than "fill the unit right."
If your manager makes more money on turnover than they do on stability, your interests are no longer aligned.
You want a long-term, quiet tenant, yet they get a bonus every time a tenant leaves.
Death by a Thousand "Nickels and Dimes"
Beyond leasing fees, many companies layer on "Administrative Fees" that penalize the owner for the property's problems:
Court Appearance Fees: Does the manager make $200 every time they have to file an eviction and represent you in magistrate court?
Maintenance Markups without Caps: Do they make more money the more expensive the repair is?
Paperwork Fees: Charges for 1099s, monthly statements, or even "direct deposit fees" to send you your own money.
Management Fees on Vacant Properties: Don’t get us started on this one.
When these fees pile up, the "10% management fee" you signed up for can quickly balloon into 15% or 20% of your gross income.
The Dave’s Property Solutions Difference: Alignment First
Our philosophy is simple: We should only succeed when you succeed. That’s why we have eliminated the "Turnover Trap" entirely.
NO Leasing Fees: We believe finding a high-quality, long-term tenant is part of the job you’re already paying us for. We want your tenants to stay forever because that means we’re doing our job right.
NO Eviction Surcharges: We don't profit off your property's legal headaches.
NO Paperwork Fees: We don’t charge you to send you your money or your tax documents.
NO Management Fees on Vacant Properties: We don’t get paid unless you’re getting paid.
By removing these "junk fees," our incentive is perfectly aligned with yours: Keep the property occupied with a great tenant and keep the maintenance handled efficiently.
Choosing the Right "Math" for Your Property
While we don't believe in junk fees, we do offer two distinct ways to handle your base management. Neither is "better", they are simply different tools for different situations:
1. The 10/10 Model (Low Overhead)
10% of rent + 10% of maintenance (capped at $150). This is the "lean" model. It keeps your monthly costs as low as possible during quiet months. The 10% maintenance fee simply covers the administrative man-hours required to vet contractors and oversee repairs. Because we cap that fee at $150, we have zero incentive to "up-sell" you on a more expensive roof or furnace.
2. The 12% Flat Rate
12% of rent, no matter what. This is perfect for "Works-in-Progress" or older homes with a lot of moving parts. You get total budget certainty. No matter how many repairs we coordinate or how much "heavy lifting" we do, your bill stays exactly the same.
The Bottom Line
At the end of the day, you shouldn't need a magnifying glass to read your property management statement. Whether you choose our flat-rate or our percentage-based model, you can rest easy knowing that Dave’s Property Solutions doesn't have hidden incentives to see your property fail.
