Hiring a property management company to manage your rental property is a wise financial decision— if you understand the fees involved and hire the right firm. A property manager will ensure the day-to-day aspects of your investment run smoothly and will take the management burden off your plate. As with anything new, if you’re considering hiring a property manager, you probably want to know what to expect. Here’s a guide to the types of fees charged by property management companies.
- When people think of property management fees, this is the one that everyone thinks of and that every company collects. It is the monthly fee for managing the day-to-day aspects of a rental property, and it’s paid monthly out of the rents collected. It is most commonly calculated as a percentage of the gross rents collected, but some firms charge a flat rate each month. In either case, you want to make sure the contract stipulates that the fee is only collected when the rents are collected. Fees typically range from 7-12% of the gross rents collected. When fees start at the low end of that range, you need to pay special attention to the other fees charged, especially maintenance upcharges (more on this below). Nine to ten percent for a management fee tends to be good value.
- This fee is about securing the right tenant for your property. The fee is typically 30-50% of a month’s rent and includes everything needed to market and lease the property. This fee should cover professional photos of the property, advertising costs, coordinating showings of the property, the tenant application process, and the tenant screening process, including credit and background checks. Many times, this also includes a rental analysis.
- While the leasing fee is to secure a new tenant, the lease-renewal fee is to renew the lease of an existing tenant. This fee may include an updated market analysis and tenant screenings. It also includes new lease term negotiations, things like rent increases, and changes in the lease term, when needed.
- The setup fee sometimes referred to as an account initiation or onboarding fee, is a one-time, initial fee that some companies charge for setting up your account in their system. It may include a rental market analysis or an inspection. At All County® Heartland Property Management, we do not charge our property owners setup fees.
- Maintenance fees are an upcharge or additional fee added to each third-party invoice for the repair and maintenance work performed. This is ostensibly for the project manager’s coordination and project management efforts. Among property management companies that charge maintenance fees, an upcharge of 10-20% is common. These companies will often charge a trip charge to inspect potential problems. Obviously, these fees can add up quickly.
While there is going to be maintenance and you should budget for unexpected expenses, we at All County® Heartland Property Management feel maintenance fees can incentivize the wrong thing while negatively affecting our owner relationships. That’s why we never upcharge on maintenance.
- Some property management companies charge a fee for regular inspections. These can be yearly, bi-yearly, or quarterly inspections. We’ve seen instances where a company with a low management fee of 7% required $79 quarterly inspections on a property. The inspection fees drove the effective management fee up over 10%.
When you consider hiring a property manager for your rental property and when you are comparing property management companies, make sure you consider all the fees companies charge. All County® Heartland Property Management takes pride in our simple and transparent pricing. Of the fees mentioned above, we only charge a management fee, a leasing fee, and a lease-renewal feel. Call us at 405-444-8844 if you have any questions. We’re here to help!