Introducing “Hybrid” Pricing

 
 

Introducing “Hybrid” Pricing

A few months ago, we changed our pricing from a percent of the rent collected to a fixed monthly fee ($75) plus a percent of rent collected (2%).  Why did we change our pricing when we were adding owners with our previous pricing and it was comparable to all the other property management companies out there?  Because it just was not fair to all our clients.  Some clients paid too much and others paid too little.

Let’s look at the typical pricing options if you want to hire a professional property manager:

  • Fixed Monthly Rate – A company agrees to charge you a flat, fixed monthly amount for management services. This could be as low as $95 or as high as $195 depending on what services are included in the fee.  Companies offer a flat fee because it is easy for their clients to understand and calculate and can be an effective marketing tool.

    For cities and counties with a narrow range of rental prices, this plan might work well.  But if rents range from a low of $1,000 to a high of $4,000, as they do in Southern California, this plan might not please everyone.  Paying $95 for a $1,000 rental might seem steep, but paying the same fee for a $4,000 property might not be enough to make a profit as a company.

  • Fixed Monthly Percentage – The company agrees to charge you a fixed percentage of the monthly rents collected. This could be as low as 5% and as high as 10%.  Many property management companies offer this pricing because their income increases as rents in increase and it is easy for owners to compare pricing.

    Once again, the disparity of rents in our market make this pricing also problematic.  Paying 6% on a thousand-dollar rental equates to a $60 monthly fee, but for a $4,000 rental, that fee climbs to $240.  Is there four times the work on the higher priced rental?

At Progressive Property Management, Inc., we now offer a ‘hybrid’ pricing model, a pricing strategy that takes the best of the other pricing models to create a more equitable pricing structure for our owners.

  • Hybrid Pricing – For all single-family homes, condominiums and 2-4 unit buildings, regardless of the monthly rent, we charge $75 as a flat monthly fee and 2% of the collected monthly rents. The best way to show the differences with the other pricing models is with a table:
Monthly
Rent
Fixed Rate
($125)
Fixed Percentage

(6%)

Hybrid
($75 & 2%)
$1,200 $125 $72 $99
$1,500 $125 $90 $105
$1,750 $125 $105 $110
$2,000 $125 $120 $115
$2,500 $125 $150 $125
$3,000 $125 $180 $135
$3,500 $125 $210 $145
$4,000 $125 $240 $155

 

It may be different, but our owners now get the best of both worlds: a low monthly fee and a company motivated to obtain the highest rent possible.  More importantly, you enjoy a fair management fee no matter what your monthly rent.

 

We tested our pricing for a few months before committing to it completely.  Now, if you are on our website, you see our pricing front and center.  If you receive a direct mail piece from us, our pricing is on the front page.  If you call our company and ask our pricing, you receive the same quote no matter where your property is located and how much the rent: $75 a month plus 2% of the collected rent.  We call that Progressive.