Hiring a property management company can be a good investment for rental property owners. They can help you run properties more efficiently and take on most of the work. While it is a smart way to ensure good management, you must consider the fees. Property management companies charge various fees for their services. The fees can also vary depending on a range of factors. This post will cover what investors need to know about property management fees.
A Guide to Understanding Property Management Fees
Types of Fees
Property management fees encompass fixed and variable charges. Most fixed fees cover routine management tasks. Variable fees, on the other hand, are associated with specific services or additional work. You’ll need to look into the fee structure of each company to see the different types of fees.
Percentage-Based Fees
A common structure for property management fees is a percentage of the property’s rental income. Depending on a range of factors, it could be from 4% to 12% of the monthly rental income. The percentage can vary based on the property’s location, condition, and rental market dynamics.
Flat Fees
Some property management companies charge a fixed monthly fee instead of a percentage-based fee. It’s common for properties with lower rental incomes. Some owners might also negotiate flat fees to keep their costs predictable.
Leasing and Tenant Placement Fees
Property management companies may charge additional fees for finding and screening tenants, lease preparation, and tenant placement. Typically, these fees are calculated as a percentage of the first month’s rent or charged as a flat fee.
Vacancy or Marketing Fees
When a property is vacant, property management companies may charge marketing fees. These fees can vary depending on the advertising methods and marketing expenses incurred.
Maintenance and Repair Fees
Property managers may charge a fee for coordinating maintenance and repairs. One of the responsibilities is overseeing contractors and handling emergency repairs. They will also bill you for contractors that come to perform work.
Additional Fees
Property management companies may have additional costs for evictions, lease renewals, property inspections, or accounting and financial reporting. Owners should review the management agreement to understand all additional fees.
Compare Management Companies
Rental property owners should compare multiple management companies before signing an agreement. Review the services they offer and the fees they charge. You might also be able to negotiate different points to get more for your money.
Property management might be an expense, but it is usually worth it. These professionals can run your properties more efficiently and help you increase value. You’ll also have more time to focus on the big picture of your investing strategy.
