Property Manager Fees

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Property Manager Fees

Michael SepePro Member
Member since 2019 · 7 posts · 6 votes

Finally purchased our first rental property! 

Being a newbie, I just wanted to reach out to the BP community and ask if these fees are usual or customery?

100% of the first months rent.

10% of the montly rental.

3% of a yearly lease renewal.  ex. 1100/mo x 12 = 13,200 x 3% = $396. 

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Dave SpoonerPro Member
Rental Property Investor · Cincinnati, OH · Member since 2020 · 869 posts · 823 votes
6y

@Michael Sepe Industry standard is charging a flat fee (see below) or a percentage (8-10%). If you don't feel like paying 8-10% you can always try to manage the properties on your own

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  • Brandon Penn
    Rental Property Investor · Erie, PA · Member since 2018 · 84 posts · 462 votes
    6y

    It all depends on your market. That is about right in my market. 10% monthly, 1 month rent to lease out an apartment, and $100 to do lease renewals. If you are not going to manage yourself then try to find one of the best managers in your area. Even if they are more expensive than others, they can save you a lot of money in the long run.

    0Reply
  • Chris Rowland
    Destin, FL · Member since 2020 · 31 posts · 10 votes
    6y

    @Andy Camarda

    Good questions! I second those...

    0Reply
  • Ryan DenmanPro Member
    Erie, CO · Member since 2018 · 44 posts · 14 votes
    6y

    @Michael Sepe

    Fees do depend on the area, but also he PM company. Generally, you get what you pay for. I had a flat rate $85 per month company and they did squat except collect the rent and yearly inspections. I changed to a 10% per month company and they were much more involved with the management of the property.

    Check out Steve Rozenberg on BP Podcast episode 343 for some ideas about how how a property manager should operate and questions you can ask a PM company when shopping around for the best for your needs.

    0Reply
  • Sam Abazari
    Lender · Chicago, IL · Member since 2020 · 53 posts · 30 votes
    6y

    Hi @Michael Sepe! I'd say a 8-10% is the most common, with the specific number based on the area. What I'd say is most important is to establish what's actually covered by the fee though - in the end if both parties are aligned from the onset and you feel the value is there for the services performed, then it could be worth it.

    0Reply
  • Trevor Greene
    Property Manager · Boise · Member since 2019 · 24 posts · 21 votes
    6y

    I would add in here that you should look into what the PM is charging the tenants. We just took over a 4Plex and even though rents in that neighborhood were up 20% that year, they had just signed some tenants well below the other units and below market (800 when they easily could have done 950). Why? Because they don't care about the 8% of that $150 difference, they were making money charging ludicrous move in fees. Not only might they have been chasing away the best tenants who might have been scared off by those fees, but they were incentivized to get somebody in at any rate - not the best rate for their clients. 

    1Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Michael Sepe:

    Finally purchased our first rental property! 

    Being a newbie, I just wanted to reach out to the BP community and ask if these fees are usual or customery?

    100% of the first months rent.

    10% of the montly rental.

    3% of a yearly lease renewal.  ex. 1100/mo x 12 = 13,200 x 3% = $396. 

    That sounds about right to me. As your portfolio grows you'll be able to negotiate better rates. For example- With a large enough portfolio you can reduce the 10% of the monthly rental & get rid of the 3% yearly lease renewal. Regarding the 100% of the first months rent: that exists not just as $ for the Property Management Company but it allows the property management company to leverage realtors who work with tenants by offering a cooperation fee if a realtor brings the management company a qualified tenant. 

    312-681-7487
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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    6y

    @Don O'Grady politely disagree with your statement, "I’d caution “cost plus” contracts since there isn’t any incentive for the manager to look for lower rates."

    Logically, the opposite is actually true. If a PMC is NOT charging a maintenance markup, then they have zero incentive to shop for a better maintenance price. They get $0 no matter what they do, so why would they spend more time trying to find a better price? If a PMC is charging a markup, then that shows they value their time and will invest it to get a better price.

    ULTIMATELY, very few PMC's actually do NOT charge a maintenance markup - there are just many ways to hide it.

    [email protected]248-209-6824
    Logical Property Management4.9458 Reviews
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  • Michael SepePro Member
    OP
    Member since 2019 · 7 posts · 6 votes
    6y
    Originally posted by @Timmi Ryerson:

    I have a few rentals and use software to manage my properties. It costs me about $18.50 per month and it is automated.  There are many software companies out there but I use Smart Property Systems.  It automates most everything. But if you do use a property management company, I recommend that you ask about their software.  If they don't use software, you are going to have issues.

    Good point T,  I'll have to find out.

    0Reply
  • Michael SepePro Member
    OP
    Member since 2019 · 7 posts · 6 votes
    6y
    Originally posted by @Ryan Denman:

    @Michael Sepe

    Fees do depend on the area, but also he PM company. Generally, you get what you pay for. I had a flat rate $85 per month company and they did squat except collect the rent and yearly inspections. I changed to a 10% per month company and they were much more involved with the management of the property. 

    Ryan,  Great points.

    Check out Steve Rozenberg on BP Podcast episode 343 for some ideas about how how a property manager should operate and questions you can ask a PM company when shopping around for the best for your needs.

    Ryan, Great points. will watch/listen to PC 343

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    6y

    @Josh Weber - Tons of good software out there and a lot of them have nailed different pain points.

    A couple who have good rent collection platforms include cozy, avail, tenant cloud, & NestEgg.

    Few offer tenant finding and maintenance.....PM me and I can give you more details on our platform.

    [email protected]
    Quality Builders4.966 Reviews
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    1Reply
  • Michael SepePro Member
    OP
    Member since 2019 · 7 posts · 6 votes
    6y
    Originally posted by @Lien Vuong:

    Depends on the area - you should make this post area specific. You can also structure the agreement as you see fit with your PM, whether it's % of gross rents, flat fee, and filing units (typically one month's rent). A 10% PM fee in my market would be in a C area, is that what you have? Number of units dictates the price also - economies of scale can be beneficial to the PM so they only need to stop by once. 

    Yes, the property is located in the Daytona Beach, Florida area. 
    Thanks  

    0Reply
  • Michael SepePro Member
    OP
    Member since 2019 · 7 posts · 6 votes
    6y
    Originally posted by @Trevor Greene:

    I would add in here that you should look into what the PM is charging the tenants. We just took over a 4Plex and even though rents in that neighborhood were up 20% that year, they had just signed some tenants well below the other units and below market (800 when they easily could have done 950). Why? Because they don't care about the 8% of that $150 difference, they were making money charging ludicrous move in fees. Not only might they have been chasing away the best tenants who might have been scared off by those fees, but they were incentivized to get somebody in at any rate - not the best rate for their clients. 

    Trevor,  That's a great point. I didn't see any move in fees on my management contract, But; that doesn't mean their not charging one to the Tenants........ I'll look into that.

    Mike 

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y

    We are hiring our first PM ever on a new 11-unit acquisition after self-managing  3 dozen+ ourselves for 18 years. They were already in-place and the seller loved them so why not.

    With some scale we were able to get a 8.25% of gross rate with no placement or renewal fees.  

    As I reviewed their financials I found the largest costs to be licensed repairs.  The Maytag Man (electrician, plumber,  HVAC) had to come out a lot.  What would be a simple fix for me (bath exhaust fan swap or sink trap leak) required a licensed repair person for them.  

    I stipulated to be notified prior to them sending out a licensed vendor because mine are in my backyard.  Ask your PM what their service call process is.  Make sure they ask a few clarifying  questions when a tenant notifies them that their sink, stove, heat, a/c is 'broke'. The corrective action /repair is usually something simple for their handyman to handle if they'd just ask what exactly is wrong. 

    1Reply
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