What are typical property management fees?

Question

Hey BP community,

Apologies if this question has been asked before, but what should I be expecting to pay for typical property management fees?  I am currently in the process of vetting different PMs, and I’ve found there to be quite a range of prices for all-inclusive service.

I’ve come across a few PMs that charge a full month’s rent for placement of the tenant, and 10% thereafter.  Is this uncommon?

What would you pay all-in, for quality property management?

Kenny Dahill · Answer

@Justin Dao, this varies on market and asset.  However, you can expect a 14-18% of gross income which will include your monthly management fees and leasing bonuses.

The real concern should be the hidden fees.  Make sure you understand ANY and EVERY way your PM will earn a fee, and have them point it out in their management agreement.  It should be very black-and-white.

How much do they charge for coordinating maintenance?

What is their minimum trip charge for their handyman?

What is their handyman hourly rate?

Will you get a copy of the vendors invoice or do they simply put it on their own form?

What is their tenant placement guarantee?

Are evictions or late notices extra cost?

Who keeps the late fees?

Unfortunately 'monthly management fee' is the neon marketing sign to get you in the door, then they commonly charge you excessive fees in other ways.

Mark Ainley · Answer

@Justin Dao A well rounded/seasoned property manager firm should be able to provide you a list with scope of services. What do you get for the management fee?  What is included in the lease fee?  This helps you understand what is included and what is not.

You can also ask the question of outside monthly management fee, leasing fee, renewal fee, and maintenance what other charges can I potentially experience from your firm over the next 3 years.

I am happy to share our scope of services with you as a baseline of what you should be expecting. I know we try to lay it all out up front to avoid tough conversations later.

Also I tell investors to keep in mind the size of a company or where that company is in their life cycle.  When a property management company hits 300-400 doors they now have to run a small business. Manage people now, not just property.  That is difficult for most entrepreneurs as it was for us back in the day.  Up until 300 doors the owner does 50% of the work and has little resources to invest in the right people and tools.  I tell people to go with smaller companies if they intend on staying small or go with a larger company that hopefully is over the hump of the 400-600 door range. Nothing against those sized companies but as an owner you could experience a management companies growing pains.

Maya Roberts · Answer

Good morning @Justin Dao, back when we had a property manager it really varied based on whether the unit was a new lease or a renewal.  Our PM was 8% monthly fee and a 100% of first months rent or $250 per renewal.

We eventually grew tired of the smaller maintenance fees and decided to self-manage.  Our PM in particular would not share the vendor invoices.  We didn't feel comfortable with the lack of transparency.

Peter Tverdov · Answer

You're not going to get one unified answer on here unfortunately. My advice would be to tally up any hidden fees that are included and come up with what your effective rate is. Some people charge 5% but want first month rent, some do 10% and first month rent. Some charge fees for changing a faucet, some don't, etc.

We like the KISS method. My company covers Central New Jersey and we charge a flat fee of gross rents with a $100 Leasing Fee per apartment. That's it. The fee drops as the client adds properties under our care.

Alex Smith · Answer

You'll want to interview a few and ask for a copy of the agreement. It should be outlined in there or on their website. You should expect to pay between 8-10% with between a 1/2 month-month leasing fee. It depends on the area, what properties you'll be bringing to them and on the company itself. Shop around!

Jermell Shavers · Answer

@Justin Dao Me I pay a 7% on one of my rentals and 8% for my other I negotiate and they only take half if you talk to them and make them understand your situation then some will work with you especially if you’re trying to get your portfolio rolling. It never hurts to ask but 10% and full first months rent is the norm. But not my norm.

TIm Harstead · Answer

It's completely area specific, even in Chicago the difference between the average north side property percent and south side percent can vary by 3 or 4 percent due to the rents on the north side being 3 to 4 times higher

Justin Dao · Answer

I appreciate the responses folks.  Thanks!

What are typical property management fees?

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