Back before Phoenix property management companies were so prevalent, almost every property management contract had a clause for earlier termination and with it usually came a penalty fee. The penalty fee was in place because companies didn’t want to do all of the hard work to place a tenant just to have the owner cancel right after the tenant moved in. Additionally, some companies viewed the penalty fee as revenue to the management company. Over the past few years however, Phoenix property management has grown exponentially. As a result, companies are fighting for business by offering what appear to be very low monthly costs and property management contracts that can be terminated at any time with “no penalty”. As the consumer however you need to keep in mind that property management isn’t a non-profit industry and therefore the property management companies need to recoup the fees that they used to gain from the early termination of contracts. As a result, the companies without early termination fees you will notice have far greater marketing and leasing fees – this way they gain the revenue up front so they don’t care if terminate services and therefore have no incentive to keep your business.
We will look at the following example referring to the first property management company Phoenix property management and they don’t have an early termination fee and the second company we will refer to as Peoria property management with an early termination fee (both companies are actual property management companies in the Phoenix metro area but we are not using their real company name). Phoenix property management charges $199 marketing fee, $499 leasing fee and a $75 monthly fee. Peoria property management charges $0.00 marketing fee, $398 tenant placement fee and a $78 monthly fee. For the purpose of this example we will assume that you as the client stays with each company for six months. Your total cost with Phoenix property management is $1148.00 and you “save” the early termination fee. Your total cost with Peoria property management including the early termination fee is $1100.00 so you saved $48.00 WITH the early termination fee. Now let’s say you still with each company for 12 months so you then you do not have an early termination fee with either company. In this example your total cost with Phoenix property management is $1598 versus a total cost of $1334 with Peoria property management which equates to a total savings of $264.00 bu choosing Peoria property management.
In conclusion, be sure when shopping for a property management company that you review the contracts for the companies you are considering. Also be sure to take pencil, paper & calculator when looking at total costs to be sure that a company marketing technique doesn’t cloud your financial decision.