Property Management Fee Negotiation as Portfolio Increases

[Keith A.]

I have been using the same property management company now for about 4 years and have an 8% management fee on rents and there is also a lease renewal fee of 50% of one months rent.  The lease renewal fee after researching some seems excessive.  I am close to 30 units that consist of SFHs and small 2-4 unit MFHs.  I wanted to get some advice on the rate and this renewal fee based on an increasing portfolio size.  I have no complaints other than wanting to pay fair rates based on the portfolio size.  Any input is appreciated.

[Kenny Dahill]

@Keith A., we typically see $100-$500 for lease renewal fees.  It depends on the market and average rent though.

However, that depends on your rental rates and whether it's applicable.  If it's a $500 rental property then I can understand why they charge 50%.  If it's a $2k rental property then they should offer a flat rate.  Typically they just want to cover their cost and time it takes.

The best advice is simply ask them why they charge 50% and then purpose an alternative option to them.  Perhaps they lower the percentage or make it a flat rate.  Make sure you have them explain why they charge their rate first though.  As @Nathan Gesner indicated, it's what services you get and cost that equals value.