Property Management fees

9 Replies

I am curious of property management and their fees. Anywhere from 5%-10% of monthly rent? Lawn or snow maintance is just charged to the owner or is included in the above %. Then come tenant screening time, is there a fee for each tenant screened or a flat rate... Just really curious about how all of it works, thanks!

Best,

Bryan

Single are usually 10%   Multi's you should get a better deal pending on how many units. Rent collecting and answering maintenance calls is usually only what is included

If the tenant is not responsible for cutting lawn or snow removal the land lord has to pay.

Tenant screening is included with the leasing which is normally 1 month rent..

@Bryan Cavellier most companies charge around 10% for management fees. However, the way they collect their management fees differs... Some collect only on rents collected, others charge it as flat fee and when the units are vacant as well... the best option here for you is to ensure that management fees are only applied to rents collected. If management fees are being charged while the units are vacant then a property management company really has no incentive to fill your unit in a timely manner. 

Most if not all good property management companies also charge a placement fee to find a tenant, screen, and place them and they typically charge anywhere from 50-100% of the 1st month's rent to do this, some go as low as 25% of 1st month's rent. The reason is because marketing (pictures, listing, etc.), showings (scheduling, meet & greets, etc.), lease signings (negotiation, collecting of move-in req., etc.) and move in days.... take a lot of time and effort to do correctly. If there is a placement fee (which most good companies will charge) then all of the above should be included, including all the marketing and screenings for each applicant. 

You need to keep in mind however, that it's really all about the services that are INCLUDED in your plan rather than the price that counts the most. For instance, a company may charge you 2% to manage a property but may charge you for any and every little thing they do i.e. inspections, leases, notices, late payments, maintenance, etc. and may actually be much, MUCH more expensive than finding a company that charges slightly more but includes all these services without charging extra fees. Most of the good and reputable property management companies out there will include most if not all of your necessary services within your plan without charging you many extra fees and price gouging you. So extra fees... very important to know what is and what is not included in their services. 

One thing most never talk about but which is a HUGE hidden fee to you is VACANCY. If you have a management company that is not proactive, no matter how cheap their fees are, you will loose a lot more in vacancy simply because they are not able to move fast enough to get your units ready and occupied again. If a company takes more than 24-72 hours to simply give you a make-ready estimate and then takes another week to draft up the listing... you will loose big time in vacancy costs... so this is super important. 

Guarantees, look so see what guarantees the company offers. Do they give you some type of guarantee on the type of tenant they place for you? Do they guarantee that they can find you a tenant within a certain amount of time? Do they offer any type of eviction protection? Do they allow you to easily cancel a contract without fees if you are not happy? 

Here is a link to a post on property management selection:
https://www.biggerpockets.com/member-blogs/12069/85208-top-14-questions-for-a-property-manager

Whether you or the tenant has to pay for lawn and snow has to do with what is common in your market and the property type and property manager in your area should be able to advise. Property management companies do not include mowing and snow removal in their fees, but a good company should be able to get you bids and coordinate and oversee those services free of charge, but the actual cost of the services would go to you or your tenant... if that makes sense. 

Lastly, I agree with @Hai Loc the more units you have the more likely you will receive a discounted management rate however, this all has to do with the unit type and location. 

I hope this helps. 





Every market has different standards and every PM has different fee structures. I'd avoid anyone charging on the low end of the market average. Typically the services they offer to owners and tenants are very poor. Honestly, property management is not a huge money maker and if you are making 6% of gross rents it's not worth your time to deal with issues from tenants and owners, so often the lower priced PMs just don't do that. We don't advertise our PM company, almost all of our clients come to us because they hired a discount PM and get zero service from them.

That said- a good PM should be transparent about their services and fees. Many have tons of fees that pop up- leasing fees, background check fees, inspection fees, furnace filter fees, etc etc. If you are interviewing a PM, make sure they are totally transparent about their fees and they give you a contract and lease to review, no questions asked. It's not uncommon for a PM to make most of their money on fees rather than the % of gross rents. Also, it's important that when you call the PM, you actually can get to a decision maker quickly an easily. If you have to leave a message with their assistant and wait three days for a call back, that's not a good sign. 

Best of luck!

I think the fees are as wide spread as the types of people that are on all these forums. I would say that it depends on their business model and what the goal of their company is. I would also say that it depends on your business model for your rentals and what the goal is for them. 

Definitely vet them out and make sure that you align with eachothers models and goals

It is very important that you make sure you take the time to interview and have candid conversations with a PM company. Let them know your strategy, your goals and what your business plan is to ensure that your business plan aligns with theirs and you can both work towards the same goal. If they are not aligned then simply keep looking till you find one that is.I would look up NARPM and start with them..Below are some questions I would think would be a good starting point for you to see who really treats their company like a business or a hobby.


My business partner is a regional VP for NARPM and I am happy to help if you need anything please reach outQuestions to Ask prospective management companies

  • What are your average days on market for vacant homes?
  • What is your average rent amount for all properties managed?
  • What is your average work order cost for the owner?
  • What is your average make ready cost for the owner?
  • Are all my invoices uploaded to my owner portal?
  • How do you advertise your vacant units?
  • Do I receive video of my pre and post make ready?
  • Do you have a setup fee?
  • Do you upcharge on maintenance?
  • When do you make owner payments? How often?
  • Are you a Certified Property Manager?
  • Are you a member of NARPM?
  • What is your Guarantee?
  • Do you provide move in and move out reports
  • How many pictures do you take of the property prior to tenant moves in and after the tenant moves out
  • Do you get weekly reports when the property is vacant what prospective tenants are saying about your home
  • Do you provide monthly newsletters to your tenants
  • Do you hold investor education classes to help me become a better investor
  • Do you have single point portfolio based management services?
  • How many properties do the owners actually own themselves?
  • What do you do to ensure that the tenant is responsible for security deposit disputes since that is the largest reason for owner lawsuits
  • How familiar are you with the newly changed laws that can affect you the owner if they are not used correctly?