Property Management Costs

7 Replies

Sorry if this has been asked before, but I didn't see the answer previously posted.

So it appears that property management costs are roughly 10% monthly rent in most places. What potential costs might NOT be covered by this payment, which could impact my ROI? In other words, what costs COULD I get hit with from my property management company that would go above and beyond the 10% rent fee? I want to make sure I ask the right questions of my property management company before I hire them so I know what I am and am not responsible for paying.

An added cost could be if a water heater breaks and they hire someone to fix it or have it replaced. You will then be billed with the cost of the water heater or repair.

Thanks, @Charles Fella.  This is what I'm talking about.  I would expect there to be some notification and discussion with me prior to significant expenditure on repair/replacement of large ticket items.  I'm trying to figure out all the questions I need to ask.

Any costs for labor and equipment in your units will most likely not be covered by  property manager. Make sure to sign a written contract with them. This should spell out everyone's rights and responsibilities. Some of them will not collect rent for you. Obviously you want to negotiate the price down if this is the case.

Thanks,@Alberto Artasanchez  

Good to know.  I think most I've seen collect rent.  I just want to make sure that when I receive my deposit, it's pretty much in line with what I expect, and that there are no fees I expected to be part of the 10% management fee, but are then separated out.

Incompetence could be a hidden cost.... The property manager might suck compared to others in the area and could take longer to get your place rented. Then they might even feel entitled to a procurement fee anywhere from 100-half a month rent to a whole month's rent or more in some areas. 

Property neglect could be another hidden cost if they're not performing property inspections. Also, if you aren't in the area for tenant turnover, they may not do that thorough of a unit turnover inspection. Think about it.... the people who show properties to tenants and do walkthroughs upon move outs may not be maintenance inclined people who are going to look for cracking caulk in moisture areas or other things of that nature.

@Steve Perkins   the ultimate answer to your question can be found by reviewing the property management agreement you will need to sign before the PM takes you on as a client. Typically you pay 1 month rent to the PM company for placing a new tenant,  sometimes you pay half month rent if the same tenant renews the lease, there is typically a repair reserve you need to place in escrow for emergency repairs and a maximum repair amount for which the PM would require your approval before proceeding to make repairs. PM companies typically markup repairs that is how they make their money.

Some PMs charge a lot to find and place a tenant, like 1/2 to one full month's rent, so make certain all those costs are disclosed as well.  Once you've narrowed it down to several, ask them to email you a copy of their management agreement so you can read it thoroughly.   I had one company that sounded great but the actual contract required you hire their own blind cleaning company to clean each year, turnover or not, and it was expensive.  They wouldn't remove it from their contract, so I chose someone else.

It varies by area, but the one I chose charges a $150 admin fee per year, no charge to find and place tenants, and 8% of rents collected.  They call for any repair costing over $200 (if emergency, they try to call but will fix it if they cannot reach me).  The handyman fees are higher than I'd like, but they don't abuse it.   I can do my own turnovers or they will quote me what they will charge, and they are good about scheduling inspections for me to come down and fix all the small items once a year or so to save on the service calls for little things.  They direct deposit my rents into my account for free (one company charged me $4 each time...I really disliked that), and email my statements each month.     

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