Property Management Fees
As a property owner, hiring a property manager can take a massive weight off your shoulders. You no longer have to handle maintenance issues, rent collection, advertising vacancies, or dealing with tenants directly. But how much should you expect to pay for this convenience? As with most services, property management fees vary widely depending on your needs and what’s included. Property portfolio management software like Stessa can help you keep track of your properties, tenants, and related fees. This article will analyze the typical costs to determine if the expense makes sense for your rental property.
Monthly Management Fees
The primary ongoing cost for property management services is the monthly management fee. This service charge fee is usually a percentage of the collected monthly rent. Typical rates range from 8-12%, with 10% being most common.
So, for example, if your rental property brings in $1,500 monthly rent, you would pay your property manager around $150 each month. This monthly fee remains the same regardless of whether the property is occupied or vacant.
While a lower percentage fee might initially seem attractive, it may indicate a less thorough level of service. Be sure to understand exactly what tasks are covered under the monthly charge.
Additional Common Fees
In addition to the regular monthly management fee, some other standard fees to expect include:
Set Up Fee
A one-time fee to establish your account, review your rental contract, and get your property listed and advertised. Usually $200-$500.
Lease Renewal Fee
Charged each time an existing tenant renews their lease. Covers the fee for updating paperwork, typically around $100-$200 per renewal.
Lease Termination Fee
Some companies charge fees if tenants break a lease early. Covers administrative costs. Generally $100-$300.
10-15% markup on any maintenance and repair bills paid through the property manager. Covers coordination efforts.
If not included in the monthly fee, advertising vacancies incur a separate charge. Print, digital, and signage ads add up.
Carefully review what tasks are covered under the standard monthly management fee and which services incur additional charges. Some property managers offer an all-inclusive plan, while others nickel and dime you with many extras.
Factors That Impact Property Management Fees
Within a given geographic market, the fees charged by property management companies can still vary dramatically based on factors like:
Number of Properties
Companies typically offer discounted rates if you hire them to manage multiple properties. The more units you have, the lower the fees.
Level of Service
A property manager who handles tasks like HOA coordination, capital improvements, budget forecasting, and remote monitoring can justifiably charge more for their more significant effort and expertise.
It requires less effort to manage a single-family home than an entire apartment complex. Therefore, management fees are correlated to the size and complexity of the property under management.
Not surprisingly, property managers in more competitive and costly urban markets tend to charge higher rates. They pass their elevated business costs directly to clients.
By understanding these fee variables, property owners can more easily compare rates across different management companies within a region and property type.
Typical Service Offerings
Since fees vary widely, property owners should understand exactly what tasks are included under a management contract. Standard services often cover:
Thoroughly vets all applications and lets you improve tenant experiences
Handles monthly payments and chasing delinquencies
Coordinates all repairs using preferred vendor network
Regular property visits to identify emerging issues
Markets rental vacancies through appropriate channels
Ensures tenant compliance with rules
Maintains documentation needed for taxes
Available 24/7 for emergency response
Reputable property managers handle all communications, so owners don’t have to deal directly with tenants or contractors. They serve as helpful buffers.
Do the Benefits Outweigh the Fees?
While the monthly management fees definitely add up, for most property investors, the cost is well worth the benefits, including:
No more middle-of-the-night calls about clogged toilets!
Experienced managers keep your vacancy rates low.
Improved Cash Flow
Their systems help ensure rents are always collected on time.
All fees are deductible expenses that reduce your taxable income.
Regular maintenance keeps your assets in top shape.
Greater Free Time
Let them handle every hassle so you can relax!
Doing some projections in advance can determine if paying a property management company makes solid financial sense for your specific rental property. Crunch the numbers carefully when making this choice.
Hiring a property management company requires an investment, but the expense allows you to step away from the day-to-day grind of being a landlord. Just understand what tasks are covered under their fees and what additional charges may apply when deciding. Taking the time to find the right property manager for your needs provides long-term peace of mind and can optimize returns on your rental investment.
Property Management Fees FAQ
Can I negotiate the fees with property managers?
Yes, you can certainly try to negotiate the fees with potential property managers when getting quotes. Be upfront about your budget and expectations of services needed. Getting multiple quotes is essential to knowing a reasonable rate in your area.
What other services do property managers offer besides the basics?
Some property managers provide extra services for additional fees, like marketing your rental, creating financial reports, or even giving legal advice on landlord-tenant issues. Make sure you understand precisely what is included and what costs extra when comparing management companies.
What is the average cost for property management services?
An average cost is around $2,000-3,000 per rental property year for basic services like rent collection, maintenance coordination, etc. Costs could be higher if you have multiple properties or a large apartment building. Rates depend on your monthly rent amount and local prices.
What does “property management fees” mean generally?
This is an umbrella term for all the various costs management companies charge, including any monthly or one-time fees. It covers everything the company does to manage your property, like advertising, tenant screening, maintenance, legal issues, etc. Understanding the entire fee structure is essential.