[ad_1]
Becoming a landlord is stressful enough without getting nickeled and dimed by property managers.
When you hire a property manager, you delegate the labor of advertising vacant rentals, screening tenants, signing lease agreements, and collecting rent to them. For the cost of property management fees.
Are typical property management fees worth it? It depends on your priorities — and the average property management fees you can negotiate.
Property Management Fees: Key Takeaways
-
- Property managers charge both ongoing monthly fees and one-off fees for specific tasks, such as placing a new tenant in a rental unit.
- Some property managers nickel and dime landlords with many incidental fees, which are often buried in legalese in the property management contract.
- Look for a property manager who offers simple, transparent pricing.
How Do Property Management Fees Work?
Property management companies charge two types of fees: ongoing monthly fees and one-time fees for specific actions or tasks.
Monthly property management fees can in turn take two different forms: a percentage of income collected or a fixed monthly fee.
Percentage of Collected Income
Monthly management fees, sometimes referred to as rent collection fees, come as a percentage of rent collected. The average property management fee ranges from 8-12% of collected rent, or in some cases of the total income collected (including late fees, utilities, and so forth). For example, if the tenant pays $1,500 in rent plus $100 in back late fees for a total of $1,600, the property manager might charge you $160 as a 10% management fee.
This fee covers activities such as communication with existing tenants, collecting rent and late rent fees, and usually housing inspections and coordinating maintenance and emergency repairs.
During vacancies, many property managers charge a fixed monthly vacant unit fee.
Fixed Monthly Fees
Alternatively, some property management companies charge fixed monthly fees for each unit.
For instance, say you own an apartment building with a mix of studio, one-bedroom, and two-bedroom apartments. These range in rent from $800 – $1,400. The property manager could charge you a flat fee of $100 per unit per month, for the building as a whole.
This model may seem like a bargain at first glance, but bear in mind that it doesn’t incentivize property managers to fill vacancies quickly, maximize rents, or pursue rent collection as aggressively as possible.
Other Property Management Fees
While property management companies can make your life easier, they charge accordingly. Keep an eye out for these typical property management fees as you evaluate prospective managers.
The fee structure for property management often depends on the type of properties under management. For single-family homes and small (2-4 unit) multifamily properties, managers typically charge only the monthly management fee and a new tenant placement fee. Owners of apartment buildings may pay additional fees however.
Landlords hiring a management company should expect to pay all or a combination of the following fees.
New Tenant Leasing Fee
All property managers charge a leasing fee, to advertise and fill a vacant unit with a new tenant. Property managers typically charge between half a month and one month’s rent to sign a new lease agreement with a renter. It should include the cost of screening tenants.
Rental unit turnovers are where 90% of the work of managing rentals lie. Between coordinating the old tenant’s move-out, cleaning up the unit, advertising, soliciting, screening tenants, and signing a new lease agreement, most of the work involved in managing rentals comes from turnovers. So, property managers typically charge one-half or a full month’s rent to place new renters.
Lease Renewal Fees
Turnovers and filling vacant units require plenty of time-consuming work.
But some property management companies also charge a fee simply to renew an existing lease agreement. As renewing an existing rental agreement requires virtually no work on the part of the property manager, you should negotiate to eliminate this fee.
Specify in the property management contract that they only charge this leasing fee when placing new tenants, not when the manager simply renews a lease agreement with an existing tenant.
If you don’t mind managing your property while occupied, but don’t want to hassle with filling vacant units, consider simply hiring a leasing agent to advertise and fill vacancies only.
Onboarding Fee/Setup Fee
Some property managers charge an onboarding fee, also known as a setup fee. This is a one-time fee, usually around $300, that covers the cost of paperwork, initial inspections, and reviewing your portfolio’s books.
Like everything else in real estate investing, it’s negotiable. Aim to eliminate this fee entirely.
Maintenance Fees
Some property managers also charge whenever they have to oversee maintenance of your property such as property inspections, repairs, cleaning, and so forth.
In other words, they try to charge for something that’s already part of their job. Don’t allow it.
Also, watch out for contractor kickback fees to property managers. Unscrupulous property managers sometimes take kickbacks from contractors when they send them out to work on your rentals — and you know the contractors aren’t coming out of their own pockets for those fees. They’re passing them on to you in the form of higher invoices.
Insist that your property manager collect at least three quotes for every significant repair, and build your own network of contractors to have them sent out to your rental units. Consider negotiating prices with contractors yourself for the best possible deal.
[ad_2]
Source link