Even though a rental property is certainly a lucrative investment, being a hands-on landlord is no child’s play either. Here’s where property managers come in handy. They market your rental, screen-out problematic tenants, handle upkeep, and generally take the hassle out of property management.
Quality property managers will even help improve your property’s resale value. But at what cost? Here’s a detailed breakdown of how much property managers charge and the factors that influence the cost.
How Much Do Property Managers Typically Charge?
Property management costs vary widely but are typically billed as a percentage of the monthly rent or a fixed flat fee. Most property management companies often set their rates as percentages, usually between 8%-12% of rent collected.
Property managers typically expect about $100 per month when using a fixed flat fee structure. Whether billed as a percentage, or a fixed amount, this charge is considered the management fee and typically covers daily property supervision tasks such as:
- Rent collection and processing
- Coordinating daily property cleanups and the occasional repairs
- Responding to emergency maintenance tasks
- Communicating with clients on your behalf
- Handling tenant complaints and issues
When reviewing how much do property managers charge, be wary of companies that bill their monthly management fee as rent due. Opt for rent collected instead, as it means you’ll only be paying the property manager when receiving rental income, which is a win for everyone. Other than the management fee, here’s a breakdown of additional costs to anticipate when considering property management for your income property:
Also known as contract setup or onboarding fee, this is a one-time fee, usually about $250-$300, that goes into setting up your account with the management company. It also covers the initial paperwork, property inspection, tax license registration, coordinating smooth tenant transition to the new management, and, if necessary, opening a bank account for monthly rental deposits.
Sometimes known as the new tenant placement fee, the leasing fee is usually about 25%-75% or equivalent to a month’s rent. It covers all the work that goes into finding new tenants, such as advertising, property showing, tenant screening, move-in inspections, to lease drafting. Not every management charges a leasing fee, but those who do, make it worth your while, as they’ll often go above and beyond to find quality tenants. Also, some managers will even offer a whole or partial refund should the tenant break the lease or is evicted.
Vacant Unit Management
Managing vacant units is much more work, from finding new tenants to handling maintenance and utilities until the unit is occupied again. That is why some property management companies charge a vacancy fee. It could be a one-time monthly commission or per unit. But before you sign the contract with a property manager charging a vacancy fee, determine whether it’s necessary first. Some property managers will often charge this fee to recoup their lost monthly commission when a unit is empty. So, read through the fine print to assess how the property manager plans on using it to help fill the vacancy and unit maintenance offered before a new tenant moves in.
Early Cancellation or Contract Termination Charge
This is the money you pay when you break your contract with the property management company earlier than formally agreed. For instance, if you had a two-year contract and terminate it at 15 months, you’ll be charged a contract termination fee. As with most property management costs, the contract-termination price could be a month’s rent or a fixed amount.
Repairs and Maintenance
The beauty of working with property managers is that you won’t have to worry about maintenance tasks. Most reputable managers often have an in-house team or a great network of service providers such as plumbers and electricians who they’ll commission to handle routine and emergency property repairs and maintenance. In return, they’ll charge a 10% markup of the maintenance project’s value or, they might come to you for authorization of repairs and maintenance project payments.
Besides the above, other costs to be on the lookout for include:
- Maintenance fee
- Late service/rent payment
- Lease renewal
Factors That Influence Cost of Property Management
Now that you have a rough idea of how much do property managers typically charge, checkout what influences the overall costs below:
- Property size: managing a five-story high-rise is more taxing than a standard, one-floor property meaning the monthly management fee will be higher
- Property condition: a newer or recently-renovated rental property has little to no maintenance issues, which results in lower property management costs
- Property location: expect to pay more in monthly management fee if your property is in a high-end or a high-demand area
How Much Will Property Management Cost You
Property managers make your life as a landlord incredibly easier. They handle daily maintenance tasks, screen tenants, deal with problematic tenants on your behalf, and most importantly, market your rental property, so it never stays vacant for long. How much that will cost you varies based on the factors listed above and whether all highlighted charges are in the contract.