Property Management Fees

Management fee

Management fees can range anywhere from 4-12%. It is typical for a single family home to pay 10% in rental property management fees. Factors that can effect this are things like what services are included, location and condition of the property, and number of properties you want managed. Locations in major cities may play a large factor contributing to higher fees. Some property managers will use a flat rate for this fee or a hybrid of the two. These fees are typically deducted from the collected rent payment from the tenant before the property manager pays the owner monthly. Agent by Offer allows you to create a listing and receive competitive offers from multiple property managers in one place.

Vacancy fee

This fee is not always required. It is however important to understand it if they do. This means that even if there is no tenant paying the owner pays this fee to the property manager. This fee can range from $50 to the full monthly management fee. Ensuring that the contract language indicates management fees are to be paid out of "Rent collected" as opposed to "Rent due". Ensuring this language is in place will also protect you from having to pay management fees in the event that a tenant stops paying rent.

Set-up fee

This fee can depend on whether or not the property is occupied already, numbers of properties, or units on properties. This fee may be assessed for the time invested in setting-up a new account. This fee ranges from 0$-400$. It is likely that with multiple units you can receive a reduced rate.

Leasing fee

Leasing fees are the primary compensation for the manager's time, effort and cost associated with getting you a new tenant. This is a common fee, but some owners prefer a larger management fee to introduce an incentive for finding longer term lease clients. A good management company views the management fee as the primary profit not the leasing fee so be weary of continuous short term lease turnovers.

Advertising fee

A vacancy is money lost for both the owner and property management company. Advertising can be made through many free sources but likely being less effective. These include listings on craigslist, signs, and networking. Verify with your management company who pays for these fees and how much. It is also important to ask what sources they will be using to advertise your property. This fee can range from $100-200.

Lease renewals

Property managers may charge a fee to draft new lease documents when a new tenant is found. This fee can be between $0-$200. Drafting new lease documents off of templates isn't a difficult or time consuming task, so avoid large renewal fees. Verify whether or not the current tenant lease will become month to month once the initial term expires.

Reserve fund fee

These funds are used to pay day-to-day operating expenses, quick repairs, unforeseen circumstances that may require immediate funding. This "fee" is what allows your property manager to pay for contractors, parts, and services without having to bother you as the owner. This was the goal of using a property manager in the first place. Make sure that whatever the amount of reserve funding you agree to has conditions with it. These conditions may include "up to $100 without owners approval". A circuit breaker that costs $90 to replace will be done immediately and you as the owner will be notified. Reserve funds of $200-$500 are normal for single family properties.

Maintenance fees

It is important to understand the maintenance fee structure your property manager uses. They will likely have their own handyman, electrician, plumber, etc. It is good to know if the rates are negotiable. These fees tie into the reserve fund. If the repair is over the amount you agreed to pre-approve then you should be notified. The property manager will need to notify you, provide an estimate, and provide a timeline for repairs or upgrades. Remember that you hired a property manager to take care of these issues but if the price of maintenance seems steep then you are always able to find your own repair company to do the work. Some property management companies do not offer their own services because for ethical reasons to avoid perception of price gouging. Connect your property manager with the company you want to conduct the repairs and they will handle it from there. Some states have laws that require emergency repairs for tenants like A/C and Heat. Find out how your property manager will address these situations.

Eviction fee

These fees cover for serving notices, dealing with attorneys, court appearances, evictions, etc. A flat fee for the whole eviction process usually comes in between $500-$600, not including court fees. Hourly rates can typically range from $25-$50 if you choose to not agree on a flat rate. Find out if they typically use an attorney for evictions and what the attorneys rates are.

Bill payment fee

Payments that need to be made on the owners behalf can include the mortgage, insurance, home owners association (HOA), etc. Some property management companies include this fee into their management fee while some do not even provide the service.

Sales commission if property is sold

Commission if the property is sold is a long term consideration. Life changes and you may want to sell your property during or in a reasonable time frame afterwards. This generally applies to selling the property to the tenant. This is something to negotiate during the management agreement even if you do not think you will sell the home. The amount of time and brokerage rate are the two components to the sales commission if the property is sold.

Extra duties fee

Contracts can include a list of extra services not included on standard property management services. Verify the list and the rates at which they charge. Many property management companies do not include this clause you should know it exists.

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