How Much Do Property Managers Charge for Their Services?

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.

Maintenance Oversight

10-15% markup on any maintenance and repair bills paid through the property manager. Covers coordination efforts.

Advertising Costs

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.

Property Type

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.

Location Impact

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:

Tenant Screening

Thoroughly vets all applications and lets you improve tenant experiences

Rent Collection

Handles monthly payments and chasing delinquencies

Maintenance

Coordinates all repairs using preferred vendor network

Inspections

Regular property visits to identify emerging issues

Advertising

Markets rental vacancies through appropriate channels

Lease Enforcement

Ensures tenant compliance with rules

Record Keeping

Maintains documentation needed for taxes

Critical Communications

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:

Less Stress

No more middle-of-the-night calls about clogged toilets!

Higher Occupancy

Experienced managers keep your vacancy rates low.

Improved Cash Flow

Their systems help ensure rents are always collected on time.

Tax Deductions

All fees are deductible expenses that reduce your taxable income.

Property Protection

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.

Key Takeaways

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