Use a professional property manager to help you manage your investment properties without all the stress of coping with tenants, turnover and maintenance. Property management insets an extra layer of protection between you and the day to day responsibilities of running you properties. Learn what to expect from your property manager, and what fees you can expect to pay. This can help you manage your budget and your property, worry-free.
Like any service, property management fees can vary wildly – and the lowest price doesn’t not always reflect the best value. Lower pricing may look good on paper, but a property management firm that attempts to meet a very low profit margin by scrimping on costs is not the best option if you want to manage multiple properties without stress. Poor property management is worse than no property management at all: by neglecting your tenants and properties, a low quality management firm could cost you money and time in the long run. Here are some of the typical charges that you can expect to pay for property management – make sure any quote you get covers all the basics before deciding on your management service.
What do Property Management Fees Cover?
Monthly management fees can vary based on where your rental property is located, whether it is a residential or commercial building and how many homes you have managed by the same service. While every business is different, expect to pay between 4% and 12% of the monthly rent for each property you own. Be sure to ask any potential manager what they will charge for your units and how the bills are paid; will you get an invoice or will fees be deducted from an account?
Be sure to ask any company you are considering if they charge a vacancy fee for each property that is sitting empty. Not all property management companies will charge this, but those that do can charge anywhere from a nominal set fee of about $50 to the full monthly expected rent. Before you sign a contact, make sure you know the rules regarding vacant properties, and make sure that any fees are designed to come out of rental income that is paid. If your fees are charged when the rent is due, you could end up owing money, even if the tenant has refused to pay or moved out.
Is there a fee to set up your account? If there is, is it a nominal amount, or will you be paying per property? A $100 fee doesn’t sound like a lot if it is the total, but if it is $100 per property and you have 50 properties, this one-time fee can become significant.
A leasing fee is usually charged when the property manager finds and secures a tenant; fees are often a percentage of the first month’s rent. Since this could be a substantial amount, it should be clearly outlined for you so you know what to expect. Leasing fees could become prohibitively high if your properties have frequent tenant turnover rates. Be sure to ask how the fee is charged, what happens if the manager can’t find a tenant – and what happens if you find a tenant on your own.
Learning more about what to expect from a property management service and what costs you could encounter can help you make an informed decision about your properties. The right decision could save your time, your money and your mental health as you deal with multiple investment properties.