Matthew Whitaker - Tuesday, June 21, 2016
How much does a property manager charge?
In this post we’re going to discuss the 5 most common fees property managers charge.
One of the three biggest questions we get from a potential client is, “How much are you going to charge me for your property management services?” This article will attempt to help you better understand what the possibilities are and so it will help you make a more informed decision about which property manager is right for you.
There are as many fee structures as there are property managers. Most property managers will not charge ALL of these fees. Let’s take a look at the most commonly charged fees from property managers . . .
1. Monthly management fee – This is pretty much the fee EVERY property manager charges. It can be based on a percentage of the monthly rent (i.e. 10%) or a flat fee regardless of the amount of rent. Most managers charge this fee when the home is occupied and you are receiving rent. Some managers will charge this fee when the property is vacant as well. This fee goes to cover the costs the manager incurs when the property is being marketed. This will typically be in lieu of the next fee.
2. Leasing fee – Depending on the demand of the market, some managers charge a leasing fee. We’ve seen markets with high renter demand, where the leasing fee is less or non-existent, but in a normal market to low renter demand market, a leasing fee is very typical. How much can depend on the manager. Some range from $250 to one month’s rent.
3. Lease renewal fee – Property managers spend quite a bit of time attempting to renew the leases of current tenants. In exchange for this increased time and effort, some managers charge a lease renewal fee. This fee can range from a percentage of the rent through a flat fee.
4. Maintenance up-charge – When something breaks, a property manager goes into action. The maintenance up-charge is typically for taking on the liability of having the work performed correctly. Some states, including Alabama and Tennessee, the property manager also takes on the liability of paying worker’s compensation if the vendor does not have any. This may also go to reimburse the property manager for that added liability.
5. Property evaluation fees – Many property management companies include this in their management fee, but some break it out. Typically those that break it out are providing a more valuable service – probably a report with pictures.
If property management feels like you are being “nickeled and dimed”, you’re right! Unlike the traditional real estate transaction of a sale (which has a huge windfall for the agent at the end), the property management business makes money little bits and pieces at a time.
So why should you hire a manager? I’m glad you asked . . .
1. Hire a manager for expert opinions about tenants. A professional manager has screened thousands of tenants and has heard twice that many excuses for bad credit or why they didn’t pay their last landlord. Homeowners without this experience can get suckered into sob stories and allow people to move into their home that shouldn’t be there.
2. Hire a manager for their expert opinion on Landlord Tenant Law. The last 15 years have seen a marked increase in the law that governs how the relationship between landlord and tenant is handled. If you aren’t up to date on these laws, then you could make decisions that could have a negative impact if you and your tenant get sideways on an issue – like paying rent.
3. Hire a manager to insulate you from emotion. One of the most underrated benefits a professional manager offers is insulation from the emotion of situations. Anytime you are dealing with someone’s house and money, they tend to get emotional – on both sides. A property manager will help you objectively look at the situation and make an informed decision without the decision killer of emotion involved. This could save you thousands.
As a property manager myself, I can tell you that the managers in our industry earn our fees. I highly suggest hiring one, whether it is us or someone else. If you are wondering about how to hire a manager, take a look at this blog post on questions to ask a manager before you hire them.
If you have any questions for us about what fees we charge, then please feel free to reach out to us.