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Property Management Fees

Jun 08, 2022
Photo by Tierra Mallorca on Unsplash

(Photo by Freepik)

Property managers shouldn't be hired solely based on their fees compared to their competitors. These vendors are in charge of one of your most significant assets, and you don't want to make the wrong decision by hiring a company that charges the lowest fees.

Are Cheap Property Managers Better?

There could be several negative reasons why a property manager's fees might be so low:

  • They may not provide top-tier service.
  • They may be attempting to gain business by undercutting the competition.
  • They may be overloading their managers with too many properties to handle.

So, price should be the last thing you consider when hiring a property manager. This doesn't mean it's the least important factor, but you should mainly decide based on the quality of their services.

Also, remember that all fees are negotiable and that the property management's monthly fee isn't the only cost you may incur. If property managers fail to address their responsibilities, they may pose more losses to you and your property!

What Is The Average Management Fee?

The average management fee ranges between 4-12% of the monthly rent. For single-family homes, it's expected to be around 10%. 

This fee is based on the number of properties, units in each property, their location, and the included services.

What Other Fees Do Property Managers Charge?

Vacancy Fee

Not all management companies require a vacancy fee. Some companies charge a monthly vacancy fee of $50 that is prorated when a tenant is landed. Other companies expect to collect the full monthly property management fee even if there's no rent coming in.

Pay close attention to what language is used in contracts. Look out for "Collected rent" or "Rent collected" as opposed to "Scheduled rent" or "Rent due." This will also prevent paying management fees if a tenant stops paying rent.

Set-up Fee

This fee is for the time invested in setting up a new account. It ranges from 0$-300$ and may be per unit, per property, or possibly based on whether the unit is occupied.

Leasing Fee

The leasing fee compensates the manager for the time, effort, and cost of finding a new tenant. It's a typical fee, but some owners prefer it to be included with the management fee to incentivize management companies to find long-term tenants.

A good management company doesn't view the leasing fee but the management fee as the primary profit center. This is why leasing fees as a stand-alone service are typically higher.

A transparent fee structure is laid out to hurt rather than reward the management company if there are high turnover rates.

Important Questions to ask

Here are some critical questions to ask yourself before hiring a property management company:

  • How much is the leasing fee?
  • Does their leasing fee decrease or get waived if it takes an unreasonable amount of time to find a tenant?
  • Is the leasing fee structured to incentivize the firm to hire reliable tenants?
  • Do they use leasing agents? If so, what will have to be paid if they find you a tenant?
  • Do they require exclusivity in advertising, or can you also advertise the units? If you find a tenant, do you still pay the fee?
  • Are there any restrictions or extra charges for showing

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