Free Resources for Property Managers

How Much Should Property Managers Charge?

105 views March 2, 2024 Karina Jugo 2

How much should property managers charge? Being a property manager is hard work. Flipping a property acquisition into a worthwhile investment is a skill most of us only dream of having. Setting a price for such an important skill set can be difficult.

When calculating your worth as a professional, there are a few things to consider. First, your individual level of expertise should be quantified. Second, all relevant aspects should be considered. These aspects should include schooling, degrees, certifications, work experience, and personal achievements. Third, your record should speak for itself when pitching yourself to property owners looking for a manager. Finally, you need to have data on how growth and increased profits were achieved under your management and to what degree that change could be measured.

Say you aren’t as experienced as you want to be. That’s ok for now. You’ve got to start somewhere. The best time to establish your reputation as a capable property manager is now.

Factors Influencing Property Management Fees

While expertise, experience and track record have a significant impact on property management rates, there are other factors that affect how much property owners have to pay to have their rental properties managed by the professionals.

Residential property managers play a vital role in the real estate industry by overseeing the day-to-day operations and maintenance of rental properties on behalf of property owners. While their services are valuable, several factors can influence the fees they charge. It is important to consider these factors to gain a comprehensive understanding of the costs involved.

Property Type and Location

The location and type of property can significantly impact property management fees. Properties located in highly desirable areas or those with unique features may attract higher fees due to the potential for increased demand and rental income. Additionally, factors such as property size, number of units, and property condition can influence the complexity of management, thereby affecting the fees charged.

Services Provided

The range of services offered by residential property managers can vary. Typical services include marketing and advertising vacancies, tenant screening, lease administration, rent collection, property maintenance and repairs, accounting and financial reporting, and handling tenant disputes or evictions. The more comprehensive the services provided, the higher the management fees are likely to be.

Experience and Expertise

The level of experience and expertise of a residential property manager can influence the fees charged. Property managers with a proven track record, extensive knowledge of local regulations, and a wide network of industry contacts may command higher fees due to their ability to provide efficient and effective management services.

Local Market Conditions

Local market conditions play a significant role in determining property management fees. In areas with high demand for rental properties, property managers may charge higher fees due to the competitive nature of the market. Conversely, in areas with lower demand or an oversupply of rental properties, property managers may offer more competitive pricing to attract clients.

Property Management Fee Payment Options

Before asking how much property managers should charge for their services, it is important to note that they could be at the mercy of the property owners especially when they are just starting out in this particular field of real estate. They may need to remain in this position until they prove themselves worthy of setting their own rates.

A possible payment method most property owners might insist on is a commission-based payment system. Probably not a pure commission, but enough to encourage the property manager to run an efficient operation. Depending on the type of property being managed, the calculation of a commission-based payment could carry significantly. For example, a property manager might be given a commission for every vacancy filled in a residential property in addition to a fixed monthly percentage.

Let’s look into the three most common ways property management fees are typically structured:

  1. Percentage of Monthly Rent: Many property managers charge a percentage of the monthly rent as their fee. The average range is generally between 8% and 12% of the monthly rent. For example, if a property generates $2,000 in monthly rent and the property manager charges a 10% fee, the management fee would amount to $200 per month.
  2. Flat Fee: Some property managers charge a flat fee, regardless of the monthly rental amount. This approach is often used for properties with higher rental values or for clients who prefer a predictable cost structure. Flat fees can range from a few hundred dollars to several thousand dollars per month, depending on the complexity and size of the property.
  3. Combination Fee: In certain cases, property managers may employ a combination of a percentage-based fee and a flat fee. For example, they may charge a lower percentage fee (e.g., 5%) for properties with higher rental values while applying a flat fee for properties below a certain rental threshold.

 

Setting Prices on Your Own

Say you are as experienced as you want to be and have an established track record of being an excellent property manager. Then, if you are the miracle worker your property owner is looking for, you very well may be inclined to set your own rates on your own terms.

Even though you might be calling more of the shots, there are still some things to consider. You may be a great property manager, but it’s unlikely that you will accomplish everything entirely on your own. If you bring along your own team to assist you with property management, their compensation is something to be considered when determining how much you will charge.

The size and complexity of the property being managed will also essentially play into how much property managers should charge. For example, apartments and hotels require constant maintenance and oversight. Imaginably, these properties are quite demanding to manage for even the most skilled property manager, so the rates charged should reflect the inherent effort that will be involved.

The Bottom Line

Ultimately, how much property managers should charge will vary from manager to manager. PMs should know how much their skills are worth and be able to convey that to property owners. Property managers’ pay rates must also reflect their performance while managing properties.

Property owners are looking to their managers to make sure their investments have been worthwhile and eventually begin to turn in some profit. When a property manager has accomplished that, I feel they can start to set their own rates and answer the question of how much property managers should charge.

From the property owners’ end, they should carefully evaluate their specific requirements and consider the value and benefits offered by professional property management services when assessing the associated costs. By doing so, property owners can make informed decisions and select a property manager who aligns with their needs and budget, ensuring the smooth and efficient management of their residential properties.

Authors

  • Karina Jugo

    Karina Jugo is a content administrator at RentPost who works directly with real estate and property management experts to create resources and guides for property managers. She has more than 15 years of experience in content research and writing for various industries.

  • Jacob Thomason

    Jacob Thomason is the CEO and co-founder of RentPost, software platform providing property managers, landlord or owners with the tools necessary for property management. Jacob is a software entrepreneur with with a vast array of expertise ranging from business concept design to software architecture and development. He is running RentPost for more than 14 years and helping property managers and property owners.

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