A Guide to Property Management Company Fees
“How much are the property management company fees I am going to pay?”. This might just be the first question that comes to your mind when you’re trying to determine if property management is for you or not.
And we’re glad you’re thinking this way! You deserve to know exactly what you’re paying for and why.
Every property management company that’s looking out for your financial growth is going to be straightforward about their property management company fees and let you know exactly how much they’re charging you in your monthly statements.
As per the norm, there are 3 main types of fees that you’ll have to pay a property manager (and 2 which aren’t applied by every company):
- The monthly management fee
- The property management leasing fee
- The lease renewal fee
- Maintenance fees (might be included in monthly management fees)
- Eviction fee (not always included)
After we’ve discussed the types of fees that exist, we’ll briefly go over how much property management companies charge to manage a rental, so you’ll have a rough idea of what you could end up paying for these services.
As always, we’re going to jump straight into the meat of the matter. Let’s start dismantling how much do property managers charge and what that means for you!
Property Management Company Fees Explained
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First off, keep in mind that your property management company fees are going to depend heavily on where your rental property is located. Your fees will also vary based on which property manager you choose because fees charged by property management companies may differ depending on the services they may offer. Property management companies also usually provide different price plans, which could affect how much you end up paying.
Here’s a small breakdown of the types of property manager fees and why they’re necessary.
Monthly Management Fees
This is your property manager’s bread and butter.
They’ll charge a monthly fee, and there’s no set pattern as to how they’ll go about it. Every property management company has a different fee structure.
Some will charge a percentage of your monthly rental income keep in mind that this percentage will be much lower than a leasing fee.
Other property managers will instead offer a flat fee that they charge you every month, regardless of how much your property is netting you. Some might even go for a hybrid model, in which you’ll pay a fixed fee, but also a percentage of the rental income.
There’s really no such thing as a typical property management fee structure.
Why is A Monthly Management Fee Charged?
The monthly management fee is what keeps the property management company going. Most property managers have large teams that work to fulfill you and your tenants, and those need a steady source of revenue to keep going.
However, what you probably want to focus on is what this fee gets you directly … and we have the answer.
Rental fees help your property managers perform routine inspections on your property to keep it damage-free and also to ensure the safety of your tenants.
It also enables your property manager to keep their operations going so they can respond to any maintenance requests by your tenant immediately. It also pays for your property manager’s ability to collect your rental income for you on time.
This is just the basic gist — you’ll have to look at your property management agreement in more detail to extract exactly what they’re offering you for what they’re charging.
Leasing fees only take place once during a tenancy.
What I mean is that whenever you get a new tenant, your property manager will charge you a fee for that.
This fee can differ greatly depending on which property manager you’ve chosen to work with. Usually, you may expect to pay around 25-75% of the monthly rent of your property as a leasing fee. Some property managers even charge a full month’s worth of rent as their leasing fee.
Property managers tend to have different pricing plans which dictate exactly how much you’ll pay. You might not pay any leasing fees at all!.
This is a large amount among the rental property management fees you’ll have to pay, but it certainly has its uses and is — simply put — a necessity.
Why Is A Leasing Fee Charged?
It takes time, resources, and effort to get your rental property on a lease.
This fee includes all the advertisements that your property manager will do for your property, of course. Photos and videos of your property are professionally taken and displayed on multiple websites and social media, which allows it to be seen by as many potential tenants as possible. (Some of these websites charge a fee per listing per week, per month that the property company needs to cover like Zillow)
Next, showing the property is a project in itself. You’ve got multiple candidates coming in and they all want to see what’s so great about your rental. Some companies use self-showing systems, with a proven track record to be very efficient, especially lately, and those come with a monthly charge that the company needs to cover
Then comes the tenant screening we’ve got a detailed blog about what tenant screening is and how you can do it yourself. This is a grueling process and doing it right takes a ton of time and resources. Applications have to be read, background checks have to be made, and your property manager finally selects the right candidate.
Finally, the lease agreement is signed and your tenant is provided with a welcome package (HomeVault gives one, at least) to make them nice and comfortable. So, while giving out a large chunk of your first month’s rental income may seem like a downer, it’s actually a neat idea since this fee covers so many different facets that would have been a nightmare to deal with yourself.
If you’re a DIY landlord looking for a simple way to keep track of your income and expenses and plan your monthly or yearly budget accordingly, the HomeVault Rental Income Calculator is your go-to tool!Download
Lease Renewal Fee
This is the third common type of fee that’s part of any given property management fee structure. Your property manager will charge you a lease renewal fee whenever your tenant renews their lease. This won’t be coming your way often — expect to face a lease renewal fee yearly or so, depending on what your lease agreement looks like.
Why Is A Lease Renewal Fee Charged?
A lease renewal fee is typically less than a leasing fee because it involves renewing your current tenant’s lease agreement after reviewing tenant payment history and other criteria, like reviewing inspections of the unit to make sure they are taking good care of the property.
Some property managers don’t have this fee at all. However, it brings you a clear advantage since it incentivizes your property manager to provide your tenants with a great experience so they keep renewing their lease agreements which in turn goes to save you from the costs of leasing fees, turnover repairs, and vacancies.
Maintenance fees tend to be between 10-20% of the total cost of the maintenance itself.
As we’ve said before, property managers tend to vary greatly when it comes to their fee structures. Some might choose not to keep a maintenance fee separately but to include it as a part of your management fee instead. On average, you can expect to pay around 150-200% of your monthly rent in maintenance costs per year (this includes the maintenance costs AND the fees that your property manager will charge for managing the maintenance process).
Why Is A Maintenance Fee Charged?
Your property manager orders maintenance in large volumes, so they can actually get you a nice discount while repairing any damages to your house. Costs could end up being lower than what you could come up with by yourself.
Even with a maintenance fee on the list, sometimes you may not need to pay one. At HomeVault, if we manage to troubleshoot the issue with the tenant and don’t involve a vendor, our clients do not need to pay any maintenance fee.
Keep in mind that you don’t want to work with a property manager who tries to profit off your maintenance. Fees for maintenance coordination shouldn’t exceed 20% of your maintenance costs, and should ideally be around the 10-15% margin.
Sometimes, your property manager’s costs might also include eviction fees. Not all property managers assist with or handle evictions, but those who do will charge for it.
You can expect to pay a few hundred dollars for the evictions that your property manager handles. On most premium plans, such as HomeVault’s Platinum plan, eviction costs are partially or completely covered depending on the legal representation.
Why Are Eviction Fees Charged?
Evictions are a huge hassle and most landlords want to have nothing to do with them. In this case, your property manager will step in and handle the entire process for you, saving you a lot of time and effort (this includes posting the notice to vacate the home and also attending hearings on your behalf).
What Is The Average Property Management Company Fee For Rental Properties?
There’s no clear average cost to property management. Typical property management fees range between 4-12% of the total monthly rental income. The exact number depends on your specific property manager depending on the plan.
A good company will have a property management price list which you can glance at and know what you’ll be paying them in the long term.
HomeVault offers affordable and robust property management and also has a pricing model (excluding additional fees). Check it out!
Property Management Company Fees — In Summary
When you’re looking for a property manager, there’s more to ask than “how much does property management cost?”.
You’ll need to look at every aspect of the property management company to see if they’re a good fit for you. We explain how in our blog post on why, when, and how to hire a property manager.
Imagine you went into a showroom to purchase a car. You wouldn’t automatically just go with the cheapest one. Nor would you assume that the best one is the most expensive. You’d first check out the cars’ features and then cross-examine them with your budget in mind.
That’s what you’ll have to do while getting a property manager, and while the average property management company fees might be somewhat elusive, you’ll do just fine when you know exactly what you’re looking for and how much you can afford to spend.
Here’s a quick summary of all the fees you’re likely to come in contact with:
- The property management leasing fee: Is paid when your property manager first introduces a tenant to your property. This covers the cost of marketing your property and screening the tenant along with signing the lease agreement with them.
- The monthly management fee: This fee covers the day-to-day operations of your property manager which include inspections, communications, and responding to maintenance requests.
- The lease renewal fee: Is paid whenever your existing tenant renews their lease agreement.
- Maintenance fees: Are paid when your property manager takes care of a maintenance issue for you.
- Eviction fees: Are paid when your property manager assists in or covers the eviction of your tenant.
At the end of the day, property managers ensure that all you have to worry about when it comes to your rental property is getting your monthly rental income. You shouldn’t have to deal with your tenant in any given way, and that’s what you pay a property manager for,…. to experience investing in a rental property without any stress.
It’s great that you talked about property managers and how they help people who lack time. Recently, my parents mentioned they want to rent their home while they travel. I think they’d be too busy to care about their property’s management, so I’ll be sure to share this article with them. Thanks for the advice on property management and the benefits of choosing a professional for it.
I like that this post shared that when choosing a property management service, it is important for us to consider their cost and fees. In doing so, we can ensure that it is within our budget. I will remember to have a budget ready before I survey for options.
I liked it when you shared that it is great to work with a reliable property management company that will handle the entire process for you, saving you a lot of time and effort. My mother just mentioned the other day that she is planning to lease the old apartment since no one is living there after my sister moved to another house last year. I will suggest to her working with a reliable property management service that can help handle everything about the leasing process.
Thanks for helping me understand that the usual cost of property management companies would range around 4-12% of the total monthly rental income. I can imagine how important it would be for property owners to know about this information to know if they can afford their services. However, in my opinion, I think it is worth it if it means that they will have long-term tenants staying in their property who are also good payers because of receiving good service from the managers.