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Investment Strategy

Property Management Fees: How Much Do Property Managers Charge? 

In order to maximize profits and run a successful rental business, you need to thoroughly understand the costs and time implications involved. Property management fees can take a big chunk out of your cash flow, however, by leveraging the expertise of a good property management company you will be able to run a professional operation, minimize vacancies, and save time to allow you to scale your business.

We take a look at how much property management companies charge, as well as how you can utilize software like Landlord Studio to reduce your management costs.

Property management fee structures

There are two ways that property management companies generally structure their fees. Either percentage of the rent collected, or a flat monthly fee.

Percentage of Monthly Rent

Most property management companies use this fee structure. They charge a monthly fee equal to about 8-12% of the rent collected. For example, if your property’s rent is $1,000 per month, you can expect to pay about $100 per month.

If a property is empty the property management will often charge a fixed fee equal to what they atici[ate the rent amount to be. Vacant properties can mean more work for property management companies as they will need to conduct viewings, screen applicants etc. Because of this, they may charge a separate fee for finding tenants and filling the property.

Fixed Property Management Fee

Some property management companies offer a fixed fee structure. Generally, you can expect this to cost about $100 per month. The exact fee though will likely depend on the property type, square footage, and the services that are required. While a flat fee may look like a good deal at first glance, a management company that does collect a fixed fee may not be motivated to maximize the rental revenue.

Additional property management fees

Contract Setup Fee

Getting set up to manage your rentals properly and professionally is an important part of running a rental. It needs to be done properly and legally. Ost property management companies will charge extra for this setup. On average this one-time charge is around $250-$350. This fee covers:

  • Opening a separate bank account
  • Assisting in applying for any required business or tax licenses.
  • Initial property inspection
  • Transitioning from the current property management company.
  • Getting legal documents set up

Filling and Overseeing Vacant Property

Managing and filling a vacant property can come with quite a bit of work for a property management company. The vacant property will need to be routinely checked. Plus, the management company will need to create rental listing ads, conduct viewings,  manage tenant applicants, run tenant screening reports, and get lease agreements drawn up and signed.

While some property management companies don’t charge a fee to lease a vacant property, most will collect a leasing fee equity to one-half to one month of rent.

Related: 12 Free Rental Listings Sites To Advertise Your Property

Late Payment Service Charges

It’s common for landlords to write into the lease agreement a small late fee to encourage on-time rent payments and recoup any costs associated with chasing the rent. Many property management companies will keep up to 50% of the late fee charged as compensation.

Repairs and Maintenance

Property management companies should have an established network of trusted vendors or even an in-house maintenance crew. As such, managing small repairs and maintenance shouldn’t be much work for them at all. However, if more significant work is needed the property management company might charge a fee (often about 10% of the value of the project) to ensure the work is carried out properly.

Routine Inspection Fees

Some will conduct semi-annual inspections at no charge. However, others might ask you to pay for every inspection – usually in exchange for a lower monthly property management fee. Either way, make sure your property management company is recording their inspections thoroughly and always ask for the inspection report along with photos or videos when relevant.

Evictions and Collections

Evictions, thankfully are not common. However, they do occur. Evicting a tenant for non-payment of rent or due to damage caused to the property is a time-consuming and costly process.

Having a property management company on your team in the event of an eviction is a great way to ease your mind. However, you can expect to pay upwards of $500 for them to manage proceedings plus any applicable legal fees.

When the eviction case goes to court and you’re awarded a judgment, collections agencies and attorneys generally charge a collections fee of about 50% of the money collected.

Contract Termination Fee

Normally property management companies will have an early termination fee written into their contract. Should the landlord attempt to end the contract early (unless “for reasonable”, such as the manager breaking the agreement in some way) they will need to pay this early termination fee.

What factors affect how much a property management company charges

The end amount of a property management fee is, in one way or another, determined by how much work the property management company has to put in. As such, factors that may affect how much you end up paying a property management company include:

  • Type of property: single-family home, multi-unit, short-term rental
  • Size of the property: bigger properties take more work, as do properties with more tenants.
  • Property condition/ age: a run down or older property will likely require more maintenance work than one that is newly renovated.
  • Neighborhood: better, more expensive neighorhoods attract better tenants often with fewer problems.
  • Full service or custom: you might only need someone to manage maintenance requests but are quite happy finding tenants, collecting rent etc. In which case you might be able to reduce property management fees with an a la carte service.
  • Market: as always the market will determine exactly how much a company is likely to charge you. Look to pay more in more competitive markets.

Self-managing your properties with Landlord Studio

The more you do yourself the less you’ll have to pay others. A property management company might cost you upwards of $1500 per unit in any given year. These costs quickly stack and after maintenance expenses, mortgage payments, and taxes this might not leave very much. By taking some or all of the management costs on yourself you can dramatically reduce your overheads and increase cash flow. However, you need good systems and the right tools in order to minimize your time requirements.

Landlord Studio offers several essential accounting and property management features which can be paired with an a la carte property management service or used independently to allow you to run an efficient rental business.

Property management features

  • Rental Listings and Applications
  • Tenant Screening
  • Collect rent online
  • Automate rent reminder emails and late fees
  • Manage your leases and track occupancy
  • Store important documents in one place

Accounting features

  • Accountant approved income and expense tracking
  • Connect your bank account
  • Digitize receipts
  • Instantly generate over 15 advanced reports

Additional services

These are just a few of our key features that can save you time and money. Plus, we’re constantly adding new features, improving existing ones and collecting user feedback.

Finding a Property Management Company

Ask for referrals from other real estate investors, lenders, inspectors, and real estate agents who belong to the same investment groups you do, such as BiggerPockets Forums, the Landlord Studio Community, or other Facebook real estate groups.

Alternatively, you can search for property managers online, tailoring your searches to your local area, or use sites such as the National Association of Residential Property Managers (NARPM).

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Ben Luxon

Ben is the editor and lead writer for Landlord Studio. He has worked with real estate professionals all over the world and written educational articles on tech, real estate, and financial growth for sites such as Forbes, TechBullion, and Business Magazine.

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