Is Hiring a Property Manager Right for You?

September 20, 2021

How Much Does It Cost to Hire a Property Manager?

Rental property ownership and management is a big commitment that involves time and effort if you want to be successful. Despite the fact that landlords can manage their properties on their own, there are times when they require professional assistance and must employ a property manager.

What are the Functions and Duties of Property Managers?

If you’re still unsure whether or not you need a property manager, consider which responsibilities you currently lack the time or expertise to handle. Hire a property manager if you’re new to real estate investing or live far away from your rental property. Tenant placement and rental management are two of the most common responsibilities of property managers. The task of acquiring tenants, including advertising and marketing, property viewings, applicant assessment, and move-in examinations, is referred to as tenant placement.

How Much Will It Cost Me to Hire a Property Manager?

Because of the numerous variables, hiring a property manager has a wide range of prices. The price is determined by the amount of work you want the property manager to complete, as well as any associated fees. Others tend to assign specific responsibilities to property managers, such as advertising and tenant assessment, while some choose to be as hands-off as possible. Below is a rundown of typical property management service charges and what they cost on average.

1. Recurring Monthly Fees

In addition to the fees listed below, property management companies will charge a monthly management fee. The monthly management fee is typically 8-12 percent of gross rent or a fixed flat rate. A 10% management fee on a $1,300 rent would be $130. A property’s square footage, type, and other characteristics all play a role in how much a manager charges up front.
The management fee pays for the costs of daily management of the rental property. This entails keeping in touch with tenants, compiling rent, and taking care of repairs and unexpected maintenance needs. Some companies charge a flat fee for all services, while others charge on a per-service basis when the landlord intends more help. Because of this, a company offering a la carte assistance may charge less per month for services like rent collection and upkeep.
Despite of the management fee structure, it’s important to know what services are included so you know how much you’ll be paying each month.

2. Onboarding Fee

This is a one-time payment ranging from $250 to $500 per unit and is also known as a setup fee or sign-up fee. Others charge the same as one month’s worth of rent. The sign-up fee can be used to pay for any of the following expenses:
  • Charge of opening an account with the property management company for bookkeeping purposes.
  • Creating an account in your name, if applicable
  • Initial property inspection to determine the state of the property
  • Support with submitting tax or business license applications
  • Resources to help tenants get to know a new property manager, such as a welcome package or letter.

3. Tenant Placement Fee

Upon signing a lease with a new tenant, the property manager is required to charge this fee. A tenant placement fee, which is also known as a leasing or vacant unit fee, can range from 25 to 75 percent of the first month’s rent, but it can also be a flat rate. This fee covers the costs of advertising, testing, viewing the unit, drafting leases, and conducting move-in audits. This fee is sometimes used by businesses to pay a commission to a real estate agent for bringing in a new tenant. If a tenant defaults on their rent or is evicted, some property managers offer a prorated or full refund.
If a rental home is unoccupied, the property manager may charge a fixed fee or one month’s rent until a new tenant assumes the property. Since empty rental properties are riskier, they necessitate more effort on the part of the manager. For instance, if a manager wants to avoid break-ins and intruders, he or she should inspect the property every week.

4. Lease Renewal Fee

This fee is tacked on to the end of a lease renewal agreement with an existing tenant. The fee is applied to patch up the time it takes to create adjustments to the lease, such as an increase in rent or concessions, and to get the tenant’s signature.
Depending on the manager, you may or may not have to pay this fee. Renewal fees, whether percentage-based or flat-rate, are common for leases. In either case, expect to pay no more than $200 for this service.

5. Upkeep Fees

Some property management firms will employ their own full-time maintenance personnel, while others will rely on a reliable network of professional contractors. Because property managers offer contractors with repeat business, they will make deals or acquire discounts, so the cost of maintenance should be significantly smaller than what you search on your own.

Property managers should not generate income from property maintenance only if they monitor and control a full restoration to guarantee everything is done correctly. Some firms will charge a 10% project management fee if the manager is in charge of renovations. Be wary of managers who charge markup fees of more than 20%. You should only pay to replace or repair damaged items and the costs of handing over the property to a new tenant.

Regardless of the cost of maintenance, you should expect to receive photos of the damage, a detailed cost estimation of the repair, and an exhaustive receipt after the work is complete.

6. Eviction and Collection Costs

Managing evictions and collecting past-due rent can cost a fee for some property management companies. They may be able to handle the eviction on their own. Alternatively, a law firm will be contacted by the organization for assistance. An eviction usually costs between $200 and $500, plus any legal expenses.

7. Late Payment Charges

The money collected from charging late fees for past due rent is a common industry practice, but it does not always correspond to additional income. Some property managers keep 20% to 50% of the late fees they collect as a way to recoup the costs of collecting unpaid rent.

8. Contract Termination Fee

There may be repercussions for terminating a contract with a property management company early, just as there would be for a tenant breaking their lease. You may be billed an early termination fee if you break the agreement without reason, such as the property manager failing to perform the duties outlined in the agreement. These fees are not all the same price. Some businesses will only ask for one month’s worth of lost revenue, while others will sue the property owner for contract breach.

9. Routine Inspection Costs

A rental property should be thoroughly checked every three to six months to catch any small maintenance problems or damages before they turn into greater, more complex and costly issues. The monthly management fee charged by some property managers is lower because they charge for each inspection. On the other hand, some property managers offer a free semi-annual inspection rather than charging for each one. Do not be afraid to ask the property manager for an inspection report that includes photos and videos, regardless of whether they charge you for it or not.

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