15% Property Management Fees Reasonable?

Managing Your Property

15% Property Management Fees Reasonable?

Mitchell Hammack

Investor · Tampa · Member since 2023 · 13 posts · 3 votes

I've always heard that you can expect to be anywhere from 8%-12% of rent for professional property management. I'm finding PMs who charge that as the base fee... but what I didn't expect is to see a high cost for finding new tenants (often 75% or 100%) and for renewing leases, (25%). Perhaps that's just the Tampa area but can anyone tell me if that's expected?

On a LTR property you expect to see $2000 a month in rent:

10% base fee: $200 / month ( $2400 / yr )

100% one month rent for finding new tenants: $2000

25% of one monthly rent lease renewal fee: $500

Total rental income: $24,000 / yr

I'm not privy to how often a tenant renews vs you have to find a new one but at assuming its every other year:

( 0.5 * $500 + 0.5 * 2000 = $1250 /yr)

That works out to $3650 per year in PM costs for a property that's bringing in $24,000 a year (also assuming no vacancy) or 15%.

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Property Manager · Las Vegas, NV · Member since 2023 · 13 posts · 9 votes

2y

It may also depend on the type of property that you are having managed. We charge our multifamily clients 15% but we are able to do less than that for our single family rentals as they are a lot LESS work than any multifamily property.

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y
that's pretty standard
1 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
Quote from @Mitchell Hammack:

I've always heard that you can expect to be anywhere from 8%-12% of rent for professional property management. I'm finding PMs who charge that as the base fee... but what I didn't expect is to see a high cost for finding new tenants (often 75% or 100%) and for renewing leases, (25%). Perhaps that's just the Tampa area but can anyone tell me if that's expected?
On a LTR property you expect to see $2000 a month in rent:

10% base fee: $200 / month ( $2400 / yr )
100% one month rent for finding new tenants: $2000
25% of one monthly rent lease renewal fee: $500
Total rental income:   $24,000 / yr
I'm not privy to how often a tenant renews vs you have to find a new one but at assuming its every other year:
  ( 0.5 * $500 + 0.5 * 2000 = $1250 /yr)

That works out to $3650 per year in PM costs for a property that's bringing in $24,000 a year (also assuming no vacancy) or 15%.

Is there a question?  Also its not yearly, my avg tenant is 5 years.
0 Reply
Brad LarsenPro Member
Property Manager · San Antonio and Austin, TX · Member since 2016 · 377 posts · 380 votes
2y
Quote from @Mitchell Hammack:

I've always heard that you can expect to be anywhere from 8%-12% of rent for professional property management. I'm finding PMs who charge that as the base fee... but what I didn't expect is to see a high cost for finding new tenants (often 75% or 100%) and for renewing leases, (25%). Perhaps that's just the Tampa area but can anyone tell me if that's expected?
On a LTR property you expect to see $2000 a month in rent:

10% base fee: $200 / month ( $2400 / yr )
100% one month rent for finding new tenants: $2000
25% of one monthly rent lease renewal fee: $500
Total rental income:   $24,000 / yr
I'm not privy to how often a tenant renews vs you have to find a new one but at assuming its every other year:
  ( 0.5 * $500 + 0.5 * 2000 = $1250 /yr)

That works out to $3650 per year in PM costs for a property that's bringing in $24,000 a year (also assuming no vacancy) or 15%.

I would say around 10% is pretty standard, but I think you are missing the big picture here! There are so many more ways to make more income outside of the above mentioned. Here are a few that are industry standard:
Application fees (where states allow to charge a premium)
Lease prep fee (tenant)
If owner wants more than 1 annual inspection per year, charge a fee
Late fees (tenant)
Pet fees (They have no issues paying for thier babies)
Maintenance fees....the list goes on and on
There's a guy based out of GA that will coach you. You can check him out here  https://www.propertymanagerassist.com/
Give yourself a raise! Problem is, people learn these new ways to make more money, but they are afraid of implementing.
Best,
Brad
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
2y
It’s all market dependent….

I pay 8% plus $300 for new tenant and $150 for renewals. But these are A&B class SFR. They stay 4-8 years on average.

So I’d have $180/mo ($2,250 times 8%) for 48 months is $8640 plus $300 once and $450 for 3 renewals. So $9,390 in fees (disregarding rent increases.) out of $108k in rent or 8.7%.

Turns out, as rents increase the fees as a percent of rent are often lower. It’s often as easy or easier to manage a $3,000/mo home than a $500/mo apartment.
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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
2y
The average is 10% (with the exception of onsite property management for large apartments, where it is typically 4% plus all expenses including staff). But most property management companies also charge all of the first month's rent and all of late fees (or sometimes half of each). If they waive the first month/late fees charge, I would say 15% is a bit high but reasonable. If they are still charging those fees, then it's too high IMO
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Ran Fridman
Property Manager · Illinois, Indiana & Wisconsin but call center all 50 states · Member since 2020 · 92 posts · 32 votes
2y
Hello, my friend, as a Property Management Company, here, in Chicago, we charge 10% per month. I think it's the ideal rate for both sides to cover expenses and so on.
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Johanna Kok
Property Manager · Las Vegas, NV · Member since 2023 · 13 posts · 9 votes
2y
It may also depend on the type of property that you are having managed. We charge our multifamily clients 15% but we are able to do less than that for our single family rentals as they are a lot LESS work than any multifamily property.
0 Reply
Johanna Kok
Property Manager · Las Vegas, NV · Member since 2023 · 13 posts · 9 votes
2y
It may also depend on the type of property that you are having managed. We charge our multifamily clients 15% but we are able to do less than that for our single family rentals as they are a lot LESS work than any multifamily property.
1 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
2y
@Mitchell Hammack you're mixing things up here, hence the confusion.
You're talking 3 separate services/function here.
When it's said that Property Management is, on average, 8%-12%, it is being specific in that, of Property Management alone.
Tenant Placement is a separate service. With most places one can be hiring a PMc to just do a Tenant Placement, and the owner self-manages. Or, far more rare, vice-versa. Point is, these are 2 separate services, actions and functions.
So someone who only does say 1yr lease, and keep's flipping tenant's every time, yeah it's gonna cut deep into overall revenues vs one who averages say 3yr per tenant placed. Not to mention impact of unit vacancy.
And a renewal, again, is a separate service/action item too PM.
Think of it this way, like with airlines, tenant placement is the whole ground work of getting the flight set, and there is a ton involved. Not to mention the quality of the "flight" will be greatly impacted upon what's done on the ground before "take-off". Tenant's all set, move-in is take-off and from their, your up and running, and time that things should be on "cruise-control". Actions to keep happy placid passengers, but for most part we want "cruise-control", until time to prep for landing, to rinse-and-repeat the whole process again.
This is why we have, int he industry, a distinct difference in Property Managers vs Leasing Agents. 2 Different "crews" to do 2 very different job's, that those 2 job's/crews are inter-related for the overall success of the "flight".
1 Reply
Tim JacobPro Member
Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
2y
That seems reasonable. Personally I think a little less for management than add a percentage to manage contractors but I could see a larger company not using any subs at all so 10 is fair. Maybe a little less on a renewal. Pretty much where it needs to be. Maybe a little higher than a small company for overhead but a decent pm won't charge much less even if they are smaller.
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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
2y
what's the cost of NOT hiring a PMC and dealing with vacancies, lawsuits from mistakes, etc.?
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Noah Benson
Property Manager · Northern Colorado · Member since 2023 · 12 posts · 2 votes
2y
This is pretty standard in property management. For example, we do 10% of each month's rent for management and a one-time 50% of one month's rent as our leasing fee. The leasing fee includes finding new tenets as we have a 21-day Guarantee that states if we DO NOT fill your property within 21 days of it being on the market, you get two months of management ON US.
So
10% base fee: $200 / month ( $2400 / yr )

100% one month rent for finding new tenants: $2000 (if it takes a month to find you a tenet, then you get 400$ off your yearly price)
50% of one monthly rent lease renewal fee: $1000

Total rental income: $24,000 / yr
$3,400/$24,000 = About 14% a year.
If your property was to sit longer than 21 days...
$3,000/$24,000 = About 12.5% the first year

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William Gerald
Member since 2017 · 5 posts · 1 vote
2y
As mentioned you're combining things. The management fee is 10%. Placing them is a fee and renewing them is a fee. You didn't mention any maintenance fee or inspection fees, are they not charging or did you not ask? More than likely you'll have at least one maintenance issue, you need to know how that is charged. It is best to inspect the property at some point, how much is that? I have mine treated with a pest control company, how much will that be for the PM to let them in? FYI, quarterly pest control treatments are a great way to see the inside during the lease. While in have them look under sinks, washer hookups, etc. I have had the same tenant in a rental for going on 8 years, I found a small leak under a sink this year by doing that.
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Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
Quote from @Mitchell Hammack:

I've always heard that you can expect to be anywhere from 8%-12% of rent for professional property management. I'm finding PMs who charge that as the base fee... but what I didn't expect is to see a high cost for finding new tenants (often 75% or 100%) and for renewing leases, (25%). Perhaps that's just the Tampa area but can anyone tell me if that's expected?
On a LTR property you expect to see $2000 a month in rent:

10% base fee: $200 / month ( $2400 / yr )
100% one month rent for finding new tenants: $2000
25% of one monthly rent lease renewal fee: $500
Total rental income: $24,000 / yr
I'm not privy to how often a tenant renews vs you have to find a new one but at assuming its every other year:
( 0.5 * $500 + 0.5 * 2000 = $1250 /yr)

That works out to $3650 per year in PM costs for a property that's bringing in $24,000 a year (also assuming no vacancy) or 15%.

Normal, try going it alone, see what that costs :) I see so many I will do it on my own, well most get crushed. I am referring to long distance PM.
0 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
I'd ask what you get for that 15%. to me that is high if they are also charging 1 month's rent to place a new tenant. I know mine doesn't charge that, where they make their money is charging tenants a $30 fee each month (which they can opt out of). Mine also charges a flat fee (plus advertizing costs) to find a tenant-not a percent of the rent which makes more sense to me.
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Colleen F.Pro Member
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
2y
@Mitchell Hammack Regardless of people saying leasing and management are two different things what you really want to know is what are they going to cost you. That is a combination of what they charge for basic fees, how much they upcharge for management of any repairs AND how good they are at getting tenants in and out of your property. Vacancy and non-paying tenants or bad tenants will cost you alot.
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William Gerald
Member since 2017 · 5 posts · 1 vote
2y
Quote from @Theresa Harris:

I'd ask what you get for that 15%. to me that is high if they are also charging 1 month's rent to place a new tenant. I know mine doesn't charge that, where they make their money is charging tenants a $30 fee each month (which they can opt out of). Mine also charges a flat fee (plus advertizing costs) to find a tenant-not a percent of the rent which makes more sense to me.

What is the $30 a month for?
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John K.
Lender · West Palm Beach, FL · Member since 2017 · 306 posts · 122 votes
2y
What you've mentioned is pretty standard. I've found that property management is usually cheaper when the fee structure is a flat fee per property rather than a percent of the rent. The best I've found is $99 per unit per month and 75% of the 1st month's rent every time there is a vacancy. The average is between 7-10% of rent collected and 75-100% of the first month's rent per vacancy. Make sure that if they are charging you for the vacancy, that they are listing the property on the MLS listings (not just zillow rental network), as in theory this is what the fee is for--paying the buyer's agent's commission.

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Dillon Cook
Realtor · Greater Tampa Bay · Member since 2014 · 218 posts · 130 votes
2y
@Michael Smythe
9% is the average in Tampa. I've worked at multiple PMs in the area for the last decade. Any local questions you have, hit me up.
75-100% first months rent is average. I've worked with some PMs who don't even charge a renewal fee. You DO get what you pay for, but also recognize that some people aren't worth what they charge.
1 Reply
Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
2y
@Dillon Cook we just said "no" to a potential client last week, that told us they wouldn't pay a Placement Fee of any type on Class C rentals.
Claimed they weren't paying for their portfolios in Florida and St Louis.
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Dillon Cook
Realtor · Greater Tampa Bay · Member since 2014 · 218 posts · 130 votes
2y
Well that's definitely not normal. Either they have a massive portfolio to make such a demand, or they'll quickly find the worst PM or not one at all. @Michael Smythe @Mitchell Hammack

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Ned J.Pro Member
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
2y
Seems pretty standard. If you are paying less than 10%, you are usually getting the bottom of the barrel PM, and/or are going to get screwed on other fees and services.
Don't hunt for the lowest cost....focus on the best service for the $$. What you want is VALUE..... not cheapest cost.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
Quote from @William Gerald:

Quote from @Theresa Harris:

I'd ask what you get for that 15%. to me that is high if they are also charging 1 month's rent to place a new tenant. I know mine doesn't charge that, where they make their money is charging tenants a $30 fee each month (which they can opt out of). Mine also charges a flat fee (plus advertizing costs) to find a tenant-not a percent of the rent which makes more sense to me.

What is the $30 a month for?

Looks like they increased it to $40 a month for:
- Online Resident Portal for making payments, reporting repairs, etc.

- HVAC filter delivery every six months. (if required)

- 24/7/365 maintenance & repair hotline.

- Free recurring e-payments.

- Lockout service to cover discount the cost of one tenant lockout every six months by 50%
They normally get access to report repairs or maintenance, so guessing this gives them the option to do it online and the filters for HVAC.
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Terri B.Pro Member
Realtor · Bellevue, Detroit · Member since 2023 · 63 posts · 14 votes
2y
Thanks for this question. I have the exact same situation. Rent is 2k and they want 1 month to book a tenant plus 10% and a 1,500 reserve for repairs and incidentals. How are we supposed to make a profit at these rates? Make this make sense.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
2y
My pm is all inclusive at STR: 25%, MTR 15%, LTR 8%.
No tenant placement charge, no lease signing charge, no inspection charge, no up charge on repairs. The only additional charges I see on my monthly statements are actual reasonable repair and replacement costs and the percentage. Also his fee comes from rent collected. If tenant does not pay, we are both screwed.
However, I am unsure he will do a LTR if you do not have an MTR/STR under his mgmt.
I will say 8% at my rent points may exceed 15% at OP’s rent.
If you want to determine what is going rate in your market, call other PM's and determine what they charged. ~1.5 years ago I fired my STR PM. I interviewed over a dozen STR PM candidates. The prevailing rate was 25% in my market. Those that were significantly below 25% had obvious deficiencies such as no owners portal or repair staff were not employees.
I suspect what OP is paying is market rate in his market. If OP thinks it is too much, they can try to self manage but managing residential RE is not passive.
Good luck

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