How much do rental management companies charge? If you own a rental property, whether it’s a single family home, an apartment complex, or a commercial property, you probably want to know how much property management companies charge so you can decide if hiring one would be a good business decision.
How much does rental property management cost?
In truth, there is no single answer to this question, since the cost can vary widely depending on several factors. This includes the property type (residential vs. commercial, single family home vs. apartment vs. condo vs. townhouse, etc.), location, and the pricing structure of individual companies.
Moreover, the industry is known for its lack of transparency and hidden charges, so if you’re looking for the cost of a given company’s services, you will need to exert some effort to get the information you need. Be prepared though, since it might not be easy.
That’s why we, at Tenant Planet, Inc., wanted to settle this issue once and for all. How much does it really cost to hire a property manager and why should you even consider it? Let’s start answering these questions right here, right now!
How much do property management companies charge?
When you decide to hire a property manager, with most companies, you can expect to pay anywhere between 8% and 10% of the monthly rent. In some cases, it may even be as high as 12% if there are additional fees included in the contract.
How will you be billed?
Standard property management fees can be billed as a percentage of the monthly rent, at a flat fee, or a combination of the two. Some property management companies also charge on a per-project basis, meaning the total amount will depend on the services performed during a particular billing period.
What property management fees should you expect?
If this is your first time hiring a property manager, you might be intimidated and confused by the terms of your contract and the fees you have to pay. While it is perfectly normal to feel that way, you need to understand what you’re getting yourself into to avoid any unpleasant surprises. You want to make a healthy profit from your investment, not to be someone else’s milking cow.
Here are the standard property management fees you should expect when you outsource the work to a property manager.
Leasing fee. Most property managers charge a leasing fee (also called a new tenant placement fee) which may range between 25% and 75% of a month’s rent, while some property managers may even charge up to a month’s rent.
The leasing fee typically covers the costs of signing a new tenant (e.g., marketing and advertising the property, showing it to prospective tenants, performing background checks on applicants, lease preparation, getting the unit rent-ready, etc.). This fee is refundable (in full or in part) if the tenant breaks the terms of the lease or is evicted before the end of the one-year term.
Late payment fee. You will be charged a late payment fee if you don’t pay property manager any applicable fees on time.
Reserve fund fee. The reserve fund is typically used to pay for emergency repair or replacement services. This allows property managers to immediately address the issue without keeping the tenant waiting. The key to having a long-term tenant is to keep them happy – and this is one sure way to do it.
Maintenance fee. If your property manager has a maintenance crew on retainer, you’ll be charged a monthly maintenance fee. While this may be an added expense, having a dedicated maintenance team gives you the assurance that all emergency issues will be immediately addressed by a qualified person, even when the demand for their services is high (e.g., during the holidays or after an extreme weather event).
Bill payment fee. Your property manager may pay your bills for you for a small fee.
Early cancellation fee. Some property management firms may charge you a fee for canceling their services before the date stated in your contract.
Eviction fee. Evictions can be a messy and time-consuming affair, and you don’t want to get yourself involved in one if you can help it. Thankfully, you don’t have to. Your property manager will deal with the attorneys, file the paperwork, serve the eviction notice, and do all the work involved. All you have to do is to pay their fee, which may either range from $25 to $50 per hour or another specified flat fee.
Some property managers also charge additional fees, which may include the following:
- Setup fee
- Vacancy fee
- Tenant late payment fees
- Leave violation fees
- Lease renewal fee
- Commission for selling your property
Avoid property managers that charge for these items, since they can easily add up and cut your profits short.
Is hiring a property management company worth the money?
Absolutely! Even though you need to pay for their services, hiring a property manager comes with a lot of benefits. Unless you’re a full-time landlord with lots of experience managing your own properties and enjoy what you do, there are several reasons why you should consider outsourcing the work to a credible property management firm. Read more about this in our previous blog, “What Does a Property Manager Do?”.
Which property management company should you choose?
Traditional property managers will charge you anywhere between $200 and $250 per month for managing a rental unit that commands a $2,500 monthly rental. Compare it to Tenant Planet, Inc.’s RentalWatchTM ongoing property management, which only costs you $79 per month and you’ll immediately see the difference.
Why do we charge so low? Do we offer a sloppy service or recoup the cost by charging for every little thing we do for you? The answer is “no,” of course! We offer a better service at a better price because we were founded differently. We believe in transparency, quality execution, and fair compensation. We offer two different packages so you only pay for the services you need.