If you’re done trying to manage your own property and doing a cash flow analysis, figuring out the average property management fees for your area is important. Even though these fees vary from PM to PM and firm to firm, there are a few things that tend to stay consistent throughout the industry.
Here’s what to expect.
Average Property Management Fees for Setup
This is the first kind of fee you’ll encounter. Similar to a setup fee for a new account with a utility company, this is basically the cost for the property manager to setup your account. This usually isn’t too expensive, ranging from free to about $300.
A one-time fee, make sure you ask whether this fee is per unit or property. Many times it may just be one fee regardless of how many properties they’ll be managing, but you never know until you check.
Average Property Management Fees for Leasing
This is a very common fee. This basically comes into play when you have a vacant property or unit and the property manager is trying to find a tenant. The property manager has to spend time (and sometimes money) marketing the property, so this is their way of being reimbursed for that effort.
Keep in mind before I disclose numbers that a good property management company won’t see this as the most profitable service. After all, if the company did a great job selecting tenants in the first place, the turnover won’t be too high, thus there won’t be repetitive leasing fees required.
But a leasing fee isn’t cheap. The average range to expect is 25% to 100% of one month’s rent! The most common number is probably 50%, but don’t be surprised to see anything within that range.
To protect yourself, make sure the contract has a clause that requires the property management company to reimburse you for the leasing fee in case of certain events. For example, if the tenant is evicted or breaks their own lease within 12 months. This helps give the property manager better incentives to do their due diligence early on and select only the best tenants.
Average Property Management Fees for Advertising
Depending on how your property manager markets your property – and how the contract is written- a separate advertising fee may be in place. This should mean you have a lower leasing fee, as it’s breaking out the financial costs of finding a new tenant from the time costs.
While there are many free advertising options, some property management companies like to use paid services. This will normally cost about $100, and shouldn’t be any more than $200.
Average Property Management Fees for Vacancies
Most property managers won’t require a vacancy fee, but some will. This is basically a small fee, such as $50, that you have to pay if the property is not occupied.
This is something else you need to pay close attention to with the contract. What you don’t want is a contract that says you have to pay the property manager out of “scheduled rent” or “rent due.” This implies that even if the property is empty, you have to pay the PM their full fee!
Instead, a vacancy fee or a contract that states the PM will be paid from “collected rent” is much better. Just make sure the vacancy fee is small enough that your property manager is truly incentivized to find another tenant.
Average Property Management Fees for Lease Renewals
Assuming you want your tenant to renew their lease after the first ends, this is a fee your property manager may charge to draft up the necessary paperwork. Sometimes this is a free service, or it can cost up to about $200. Either way, it shouldn’t break the bank and is much better than paying another leasing fee!
Average Property Management Fees for… Property Management
Finally, the biggest financial investment you’ll need to make is for the management fee. This fee ranges from about 4 – 12% of the collected rent, with 10% being the most common. Some companies also charge a flat fee, such as $100 per month.
Keep in mind that this fee should be negotiable. If they’re managing many properties for you, you may have the leverage to negotiate a discount. Likewise the condition of the property and the various services included for that fee also come into play.
For example, you may be able to find companies that only charge $100 a month to manage your properties. But it may be that they don’t include many services for that price.
While nothing is set in stone in this industry, these average property management fees give you good benchmarks to measure against. Good luck!