Standard Property Management Fees
Initial Setup Fee
A property management company may charge an initial setup fee to establish your account with their company. However, not all companies charge an initial setup fee, but if they do, it is usually $500 or less. This fee could also include costs to inspect the condition of the property, as well as costs to notify tenants that they will be managing the property.
Monthly Management Fee
Almost every property manager will charge you a fee to manage your property on a monthly basis. The contract you sign with the property manager will specify how this fee is calculated and what services the fee includes. Some companies charge a higher monthly management fee, but it may be more inclusive, so do not be put off by a higher initial fee until you understand what is included. A property manager may charge a flat fee to manage your property or a percentage fee: Flat Fee A flat fee is a specific dollar amount you pay the property manager each month. The exact number is determined based on the size or square footage of the property and the services provided. For example, a flat fee might be $100 per month for a single-family home. Percentage of Rent More commonly, a property manager will collect a percentage of the monthly rent as a property management fee. The percentage collected will vary but is traditionally between 8% and 12% of the gross monthly rent. Managers will often charge a lower percentage, between 4% and 7%, for properties with ten units or more or commercial properties. However, a higher percentage fee of 10% or more is typical for smaller or residential properties. For example, a 5% monthly fee for a property with $50,000 in monthly rent would be $2,500, while a 5% fee for a property with $2,000 in monthly rent would be $100, which might not even cover the cost of business for the management company. A 10% fee for the property with $2,000 monthly rent would allow them to collect $200 instead. Rent Due vs. Rent Collected Make sure your contract with the property manager states that the fee is for rent collected rather than rent due. Otherwise, the property manager will be collecting money even if the tenants are not paying their rent.
Maintenance Fee
Maintenance fees are generally included as part of the monthly management fee. This could include keeping common areas clean, taking out garbage and snow, and leaf removal. If a specific repair must be made, the cost of the repair will be deducted from the reserve repair fund, which is a separate account where the landlord holds money for property repairs. There are a few ways to manage the account and handle the repair process.
The landlord can choose to authorize every repair deduction from the account.The landlord can choose to only be notified for repairs over a certain dollar amount.The landlord can allow the property manager to use the account at their discretion.
A minimum amount must be kept in this account, such as the equivalent of one month’s rent.
Additional Property Management Fees
Tenant Placement Fee
A property manager may charge a separate fee for placing tenants in your property. Again, this could be a flat fee or a percentage of the rent. Half a month’s rent to a full month’s rent is common. The tenant placement fee can include advertising costs to find a tenant, tenant screening, move-in procedures, and preparing the lease agreement. Depending on contract terms, this fee may be refunded to the property manager if the tenant breaks their lease early or is evicted.
Vacancy Fee
A property management contract could include a fee for vacancies. This could be a one-time fee of one month’s rent upfront, or it could be a fee per vacant unit, such as $50 per unit.
Eviction Fee
If you want a property manager to handle tenant evictions, you will have to pay for it. Expect to pay a few hundred dollars for each eviction, plus any associated court costs.
Early Termination Fee
If you break the property management contract early, you will often have to pay an early termination fee. This fee will vary greatly based on the terms of the contract. You may only be responsible for paying one month of additional management fees or you could be taken to court for breach of contract.
Factors That Influence Property Management Cost
There is no set price that a property management company will charge to manage your property. The fees will depend on a number of factors, including the level of services that are needed from the property manager.
What Property Managers Do
Property managers are helpful since they manage the property and handle tenant issues on behalf of the landlord. A property manager’s responsibilities include booking new rentals, collecting rent, maintenance, and repairs, as well as eviction of tenants. An effective property manager can help save landlords time and headaches by responding to tenants promptly and handling the property’s ongoing day-to-day operations.
Size of Rental Property
One of the key factors that influence the cost of a property manager is the size of the rental property. Managing a larger property involves more work than managing a smaller rental property, so the fee collected will be larger.
Type of Property
Property managers can manage all types of investment properties, including single-family homes, multi-family properties, commercial properties, and even vacant properties.
Condition of Property
Newer properties, or older properties that have been renovated, may have fewer maintenance issues than older properties.
Location of Rental Property
Property managers may charge more to manage properties that are in areas that command higher rents and lower fees to manage properties in areas that command lower rents.
Extent of Services
The services that the property management company provides play a large role in how much they charge. If you are only hiring a property manager to collect rent, you will pay much less than someone who wants a manager to collect rent, fill vacancies, handle repairs, handle tenant evictions and keep financial records for your taxes.
