How Much Are Property Management Fees?
How much is a property manager going to expect in fees? Fees are based on the roles and responsibilities you, the property owner, expect them to take on. Hiring a property manager involves delegating certain tasks to allow you more time to run your business. The fee will depend on the responsibilities, as well as the property management company’s policies, the location, and the type of property.
What Is the Average Property Manager's Fee?
Property management companies typically have two methods for structuring their fees. Either the fee is a percentage of the collected rent, or it’s a flat monthly rate.
Percentage of Monthly Rent
The average percentage of the rent collected that property management companies will charge as a monthly fee is usually between 8-12%. For example, if you were paying $2,000 a month in rent, you can expect the property management fee to be about $200, assuming an average fee of 10%.
In the case of a vacant property, the property management company will charge a percentage of the monthly rent they anticipate the property will be leased for in the future. Vacant properties might have a higher percentage charged because they require more inspections to check for squatters or break-ins.
Fixed Property Management Fee
Rather than collecting a monthly fee based on the paid rent, some property management companies choose to simply offer a fixed fee structure. The fixed fee will be based on a number of factors, including the type of property, the property’s square footage, and the property management services that have been requested and provided.
In the case of the type of property and its size, the fee will vary greatly. A single-family home might cost about $100 monthly, while a larger building will be more expensive. It’s important to consider the differences in price and the quality of service when deciding which fee structure and company will be best.
Breakdown of Property Management Fees
Property management companies charge a one-time, flat fee to cover the cost of onboarding and setting up your account, as well as an initial property inspection and the required business and tax license applications.
Vacant Property Fee
Property management companies charge this fee to cover the cost of managing the vacant property, including inspections, as the risk of break-ins and vandalism increases when a property is empty. This weekly inspection isn’t just to check for crimes, but also to ensure that the property is ready for any showings. This fee can also cover the costs of advertising, showings, and preparing leasing agreements.
Late Payment Fee
Landlords charge their tenants a late fee if the rent is not paid in the agreed-upon time. Most property management companies will take anywhere between 75% and 100% of that late fee.
Repairs and Maintenance Fee
High-quality property management companies hire high-quality vendors. In order to afford maintenance crews, your property management company will charge for repair and maintenance. This fee will still be lower than if you were to hire your own vendors, as property management companies get special deals.
If the property needs a lot of work, then repairs might be necessary and your fee will be higher. The property management company will charge a fee of about 10% of the project in order to make sure that any repairs are being done properly and to code.
The maintenance fee and amount of monthly maintenance required can be agreed upon by hiring the property management company, so you won’t be caught off guard with any charges.
Generally, every residential property requires a certain number of inspections, usually between 2 and 4 per year. These routine inspections allow the property manager to check that the tenant is not damaging any of the property or to catch and repair any small problems that arise before they can become bigger and more expensive.
Sometimes, property management companies do not charge an inspection fee at all, while other companies do charge a fee in order to cover the cost of the inspection, but in exchange, they offer a lower monthly fee.
If a tenant needs to be evicted from the property for not paying rent or damaging the property, a property management company might charge an eviction fee of a few hundred dollars, as well as an additional charge for any legal fees.
Contract Termination Fee
Prematurely breaking the contract with the property management company can result in a contract termination fee.
Factors Affecting Property Management Costs
As previously mentioned, there are a number of factors that affect how much time and effort is required to properly manage the property, and thus are used to determine the property management fee.
- Property type: Prices differ for single-family homes vs. short-term rentals vs. apartment complexes and any other type of property.
- Property size: This can be based on the total square footage, the number of bedrooms, or the number of units. Larger properties require more work and thus cost more to manage.
- Property condition: Older properties will have more maintenance and management costs than new or newly renovated properties will.
- Location: Some cities are more expensive than others and some neighborhoods have a higher rating due to school districts or low crime rates. Location will affect the rent and therefore the property management fees.
- Market competition: Fees will differ depending on the market competition and choice of landlords.
Property management companies are all different, with differing fee structures and services. Knowing the factors that will affect the monthly fees will help you better understand your options and plan your budget accordingly.
Looking for a Midwest Property Management Company? Contact 33 Realty! We have extensive experience and knowledge in the management of both commercial and residential property.