Property Management Fee Negotiation as Portfolio Increases
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.
Most Popular Reply
@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.