Are you considering hiring a property manager but are worried about the associated costs? While hiring a property manager will cut into your profits, it can significantly help lessen your workload as a landlord, allowing you to spend more time on other essential aspects of your property investments.
How much money does a property manager cost? Read this guide to learn about the costs of hiring a property manager.
Monthly Management Fees
Most property management companies charge monthly management fees. This fee is usually a fixed flat rate, or it’s equal to 8-12% of the rent.
For example, if the rent costs $1000 and the property management company charges a 10% monthly management fee, you’ll need to pay the property management company $100 each month. The fee typically covers daily property management tasks related to tenant communication, rent collection, emergency maintenance, and repairs.
Some property management companies charge an all-inclusive fee and offer a full suite of services, while others will allow you to choose which services you’d like to pay for from an a la carte menu. Regardless of how they charge, ensure you understand what’s included in the monthly management fee before signing on.
Tenant Placement Fees
Tenant placement fees are also common with property management companies. The company will charge this fee any time they get a new tenant to sign a lease.
Sometimes referred to as a vacant unit or leasing fee, the tenant placement fee often costs between 25-75% of the first month’s rent. While this is a good chunk of change, keep in mind that the fee is just for the first month. If the tenant breaks the lease or gets evicted, the property management company may provide a full or partial refund on this fee.
Sign-Up Fee
Also known as onboarding fees, sign-up fees usually range from $250-$500. This fee typically covers the following:
- The cost of bookkeeping setup
- The cost of opening a bank account, if applicable
- The initial inspection to evaluate the property’s condition
- Help with applying for business or tax licenses
- Introductory materials to establish communication
Sometimes, the sign-up fee is equivalent to a full month’s rent.
Other Fees
Other applicable fees charged by property maintenance companies may include:
- Lease renewal fees: Covers the time it takes the property manager to update lease changes
- Maintenance fees: Covers time property managers spend researching and negotiating with repair contractors
- Eviction and collection fee: Covers the time it takes to handle an eviction
- Late payment fees: Some property management companies keep a percentage of collected late payments
- Routine inspection fee: Covers costs of inspecting properties (should be done every 3-6 months)
Should you fire your property management company, you may also be charged a contract termination fee.
Property Manager Cost: Time to Pay Up
While there are various fees associated with hiring a property management company, you can rest assured knowing most of the rental income will still go into your pockets.
It may feel like a waste of money to pay all of these fees, but the help you get from a property management company is invaluable. Check back in with our blog for more property investment tips!
