Property Management Fee Breakdown
When deciding to self manage your investment properties, or go forward with paying a property manager, knowing what fees you may be subject to can not only help you make the decision, but also give you an idea of what type of return you can expect should you go forward with a professional property manager.
If it were as simple as paying a flat rate for a professional to manage your property, then weighing your options is a little easier. Note – There are management groups who offer flat rate management but it is important to understand what comes with the service. For other professional property managers, there may be a la carte services for you to consider, or they may charge various fees at each step of the way during the management process. For you, the property owner, understanding this fee schedule is imperative as you evaluate who to hire and whether or not to utilize the services of a property manager.
Here is the property management fee breakdown:
- Monthly Management Fee – This is the most obvious fee that is charged and can vary greatly depending the company. It is important to understand what the fee covers and what additional fees you may incur. A typical management fee can range from 5% to 10% of the monthly rent.
- Leasing Fee – Another possible fee, sometimes in lieu of a monthly management fee, is a Leasing Fee. This can vary as well but it is often 75% to 100% of the first months rent. There are services in which this is the only fee that is paid in that there is no post-lease management of the property.
- Lease Renewal Fee – A management group may charge to renew the lease regardless of whether or not there is tenant turnover.
- Maintenance Fee – It is not uncommon for a management group to charge a maintenance fee for any repairs that are done to the property. A good number of professional managers also have maintenance staff that they employ, or even their own maintenance companies in which they have their own fee schedule based on the work that is performed on your property. For many groups this makes sense as they can control maintenance costs and can reasonably rely on the work that is done since it is members of their own staff. However, it is important to understand how those fees are charged to you the homeowner.
- Vacancy Fee – Are you going to be charged a flat rate despite the property being vacant and/or a leasing fee to help fill a vacancy? There are groups who do not charge while the property is vacant and simply charge once they find a tenant.
- Setup Fees – Are there any setup fees associated with being a new customer and working with a management group? Some groups will charge for the time it takes to do the paperwork and inspect the property while others roll these fees into the management costs.
- Marketing Fees – Is the management group picking up the costs to advertise a vacant property, or is that included in any of the aforementioned fees. Make sure you know where your property is being advertised and if any of those sources are paid (paid rental sites or free sites). If it is only being advertised on free rental websites, are you being charged a marketing fee? Good questions to consider if this is on the fee schedule.
Each management group is going to run their business differently. It is important for you, the owner of the property to understand the fees that you are going to be charged when weighing the options of whether or not to hire a professional, or go at it alone.