If you’re done managing your own property and doing a cash flow analysis, figuring out your area’s average property management fees is essential. Even though these fees vary from property manager to property manager and firm to firm, a few things remain consistent throughout the industry.
So you’re researching different property management companies trying to figure out who’s got the best deal. This can take a lot of time: requesting proposals, asking for references, and conducting interviews. Maybe your property is hours away, and you can’t even meet these people—you need someone who can take care of your property for a reasonable price.
Let’s dive into the property management cost analysis
Breakdown of property management fees breakdown
What should you know about property management fees? Here’s what to expect.
1. Setup Fees
Price range: Free to up to $300
This is the first kind of fee you’ll encounter if it’s your first time working with a property management company. Similar to a setup fee for a new account with a utility company, this is basically the cost for the property manager to set up your account. This usually isn’t too expensive, ranging from free to about $300.
This is a one-time fee, so 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’ll never know until you check.
2. Leasing Fees
Price range: ~50%
This very common fee 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.
A leasing fee also means added charges every time new tenants come in. Again, this may not be ideal for the property owner because it doesn’t incentivize the property manager to spend the time and energy to find decent tenants.
If a property management contract includes a leasing fee, it’s not a bad thing—just be sure your property manager has your best interest in mind. So before I disclose numbers, bear in mind that a good property management company won’t see leasing fees 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, and 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 figure is probably 50%, so don’t be surprised to see anything within that range.
To protect yourself, ensure the contract has a clause requiring the property management company to reimburse you for the leasing fee in specific scenarios. For example, if the tenant is evicted or breaks their own lease within 12 months, you can arrange for a leasing fee refund. Similarly, you can also ask that the fee be waived if tenants are not found in a reasonable amount of time. This gives property managers better incentives to do their due diligence early on and select only the best tenants.
3. Advertising Fees
Price range: $100 to $200
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 typically cost about $100 and shouldn’t be any more than $200.
4. Management Fees
Price range: 4 to 12%
The management fee is the most significant financial investment you’ll need to make on your rental property. Depending on your property type, this ranges from about 4 – 12% of the collected rent, with 10% being the most common. Some companies charge a flat fee, such as $100 per month.
This fee can also vary depending on the number of properties, units, location, condition of the property, and what services the company will provide you. 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.
Also, be clear on what the management fee includes. 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.
5. Vacancy Fees
Price range: $50
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.
You need to pay close attention to the vacancy fee with the contract. You don’t want 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 them their full fee!
Instead, a vacancy fee or a contract that states the property manager will be paid from “collected rent” is much better. Just make sure the vacancy fee is small enough that your property manager is genuinely incentivized to find another tenant.
6. Lease Renewal Fees
Price range: Free to up to $200
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!
If the lease renewal fee is significantly high, this is a red flag that you’re dealing with an unprofessional company. It takes very little work to draw up a renewal, and though it’s standard practice to charge a fee, it’s not common for it to be costly.
7. Eviction Fees
Price range: Depends on each property management
An eviction fee in property management is a charge incurred when a property management company needs to initiate and oversee the eviction process of a tenant from a rental property. Evictions are legal proceedings that arise due to tenant breaches of lease agreements, non-payment of rent, or other violations of rental terms. When such situations necessitate eviction, property management companies step in to handle the complex legal and administrative procedures involved.
The eviction fee covers the property management company’s services, which often include legal consultation, preparation of necessary notices, filing court documents, court representation, and coordination with law enforcement if required. This fee compensates the property management company for their time, effort, and expertise in ensuring that the eviction process adheres to local laws and regulations.
It’s important to note that an eviction fee is distinct from any legal fees or court costs that may arise during the eviction process. These additional expenses, such as court filing fees and attorney fees, are typically not included in the eviction fee and are billed separately.
Property owners benefit from the expertise of property management companies during evictions, as these professionals navigate the legal complexities and potential challenges of the process. While eviction is a regrettable scenario, having a property management company handle the eviction process can provide peace of mind to property owners, ensuring that the process is conducted efficiently and within legal boundaries.
How much do property managers charge per month?
The monthly fees charged by property managers depend on several factors such as:
- location of the property
- type of property
- range of services provided
- specific property management company
In general, property managers typically charge 4% to 12% of the monthly rent, with 10% being common. Some may opt for a flat fee, ranging from $50 to $300 or more per month.
Property management fees breakdown in 2023
|1. Setup Fees
|A one-time cost for setting up the property management account.
|Free to $300
|2. Leasing Fees
|Charged when finding a tenant. Typically 25% to 100% of one month’s rent. Ensure a clause for fee reimbursement in specific scenarios.
|3. Advertising Fees
|Separate fee for advertising services, breaking out financial costs. Around $100 to $200.
|Up to $200
|4. Management Fees
|Primary ongoing fee, ranging from 4% to 12% of collected rent. Most common: 10%. Negotiable based on factors like property type and services provided. Can also be a flat fee, e.g., $100 per month.
|4% – 12%, Common: 10%
|5. Vacancy Fees
|Small fee, e.g., $50, if the property is unoccupied. Check contract terms to ensure fair payment conditions.
|6. Lease Renewal Fees
|Fee for drafting lease renewal paperwork. Can be free or up to about $200. More affordable than leasing fees.
|Up to $200
|7. Eviction Fees
|Charged when initiating and overseeing eviction processes. Covers legal consultation, notice preparation, court representation, etc. Distinct from legal fees. Property management handles the complexities of the eviction process.
|Specific to each property management.
|Fees may vary based on the property management company, location, and specific services included. It’s advisable to negotiate fees and clarify what services are covered to ensure a fair and transparent agreement.
These are just a few of the more common fees associated with property management. They can vary widely, and while nothing is set in stone in this industry, knowing what to expect will give you good benchmarks to measure against.
Bear in mind that just because a property manager offers you a great price doesn’t mean it’s always a great deal. You may run into a company that charges a meager property management fee, and you may be tempted to hire them. But lower is not always better.
A property management fee should accurately reflect the work your company will put into your property. You want to be sure that the services you’re receiving will be what you need, especially if you won’t be able to check in on the property very often yourself.