Being a landlord is hard work. You need to cater to your tenants' whims, keep your property in great shape all year round, and manage awkward rent collections on your own. Sometimes, it might seem like the money you make from rental income isn't worth all the effort.
Hiring a property manager helps alleviate the stress and effort involved in managing your rental property, but how much does property management cost?
It's important to keep the cost-saving benefits of hiring a property manager in mind as you investigate this question. Hiring a property manager helps you secure good tenants, preserves the value of your property, and limits potential vacancies.
Read on to discover more about typical property management fees and extra charges.
Types of Property Management Fee Structures
There are two main ways that property managers structure their fees. These are listed below.
Percentage of Monthly Rent
Property managers who offer this pricing structure usually charge about 4-12% of the monthly rent collected. If your property becomes vacant, they may switch to a fixed fee until it's leased to someone new.
Pay attention to your contract if you agree to this fee structure. You must insist that the property management service charges you according to rent collected rather than rent due.
This motivates them to collect rent on time.
Fixed Property Management Fee
Fixed property management fees are most often based on the size and type of the property as well as the services provided by the property manager.
Full-service property management fees usually include most of the services you need and are more expensive than a-la-carte management services, where you choose only a few of the available services.
A flat-fee structure might seem like a good way to ensure predictable monthly expenses, but it does not motivate your property manager to maximize your rental income.
Other Costs Associated With Property Management
Most property management fees cover a range of basic services. These include the following:
- Rent collection
- Property inspections
- Maintenance coordination
- Tenant communications
You're likely to pay extra for once-off services, especially if these take a lot of extra time or effort. By charging extra for these incidents, property management services help keep their monthly fees lower.
Some common extra charges include:
Set-Up Fees
The one-time setup fee usually covers all the administration involved in setting up your account with the property management company. It includes things such as the following:
- The initial property inspection
- Setting up your account for bookkeeping
- Opening a new bank account, if necessary
- Assistance with acquiring any necessary licenses
Licensing requirements vary widely across the country; you should contact your local authorities to find out whether you need one to operate your rental business.
Tenant Placement Fee
You can expect to pay extra charges whenever your property manager finds a new tenant for your property. This fee covers the cost of cleaning the property and the administration involved in adding a new tenant to their property management system.
Vacancy Fee
Depending on your contract, your property manager might charge you an extra fee if you want them to oversee your property. Without tenants in place, properties are at risk of vandalism and unexpected maintenance issues.
For a fee, your property manager will inspect your vacant property regularly to ensure everything is in order.
Repairs and Maintenance
Routine preventive maintenance is vital for maintaining the appeal and value of your investment property. It's also an expensive undertaking.
The good news is that well-established property management companies have a network of trusted local contractors on call or employ an in-house maintenance team.
These relationships mean you'll always get the best prices and service for maintenance and repairs.
While interviewing prospective property management teams, be sure to ask about these services. You should also ask whether they charge an additional project management fee for overseeing the work.
Property Inspections
Bi-annual property inspections are vital for checking up on your property and ensuring your tenants are complying with their lease agreements. These inspections also provide an opportunity to check that your home still meets the expected levels of habitability in your state.
Many property managers do not charge extra for this service, but you should ask about these charges before signing up with a property management service.
Factors That Impact the Cost of Hiring a Property Manager
Property management fees vary widely from state to state and city to city. Numerous factors cause this, such as local market conditions or the dominant property types in an area.
These are the major things that can impact property management pricing:
Type and Size of Property
Property managers charge different fees based on whether you own a multifamily building, a single-family home, or a vacation rental property.
Property size also comes into play when determining pricing. It's common for property managers to adjust their prices depending on the number of bedrooms, the square footage of the home, or the number of units in a multi-family building.
The Condition of the Property
Older homes generally require more property maintenance and repairs than newly built ones, which creates more work for your property manager.
They may charge higher fees for these buildings or take a larger percentage of the rent.
The Location of the Property
Highly-rated neighborhoods have better schools and amenities, so you can charge more for them. In lower-rated places, your tenants will pay less rent, so your property manager might take a larger percentage to cover their costs.
Market competition in your area can also impact property management pricing. In less competitive markets, property managers can risk charging more for their services.
How Much Does Property Management Cost in My Area?
From all the variables mentioned above, it's clear that there's no easy answer to the question, "How much does property management cost?"
Despite all the available options, the two most important considerations when hiring a property manager are your budget and the value of your time. We can help you make the most of both.
PMI Property Management has over 20 years of experience in the property management industry. We operate the fastest-growing network of dedicated and experienced property managers across the country.
Reach out to one of our PMI property management specialists in your area to discuss your needs.
