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%.
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.
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
2y
@Mitchell Hammack different companies have different fees. Our retail rates are 10% + a % mark ip on vendors and we charge a flat leasing fee. We like the flat fee because it incentivizes owners into better investments. The higher rent roll you go after the lower our fees are as a % of income.
We were chatting a full months rent and our best properties rented in a day and we were billing $2500. Our worst properties took 59 screenings and we billed $800, it was not a great system.
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.
PM companies don't make their money from a subscription service at $35-50/mo. The costs associated with that are usually very high. Remember these are 3rd parties who PMs partner with to provide the subscription package. A PM may get $1-5/mo per door. Most of the profit goes to the 3rd party
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.
PM companies don't make their money from a subscription service at $35-50/mo. The costs associated with that are usually very high. Remember these are 3rd parties who PMs partner with to provide the subscription package. A PM may get $1-5/mo per door. Most of the profit goes to the 3rd party
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.
When one hires a PMc, there is no magic circle where grand wizards of tenancy meet, chant an incantation for 20 minute's and *POOF* a quality tenant is born.
It's called math Terri, math.
Most PMc's operate on a razor's edge of profitability, and that is those with >5yrs in the biz. The vast majority of the "cheaper" people are <5yrs and guess what, the vast majority will never survive as time will show what operating net-loss there pacing.
If you have everything "dialed-in" as a PMc, and this varies based upon asset's compilation under management, but on average it's 2.25 labor hrs monthly per file. Much like an insurance carrier, we average things out across the whole, to effect a "group" pricing. If individually it would be like attorneys and landlords would really flip out over the 90hrs billed some month's as that is what can happen in some cases.
Now as an employer we don't JUST pay wages that an employee get's, on average I have 17, SEVENTEEN tax's related to an employee, 17! $20hr does NOT cost me nowhere close to $20hr.
So at 2.25 labor hrs per file per month, that can be "as-cheap-as" $146.25 per month. THAN we have our infrastructure, the physical offices, computers, software, electricity, heating, rent, cleaning, cost of hiring staff as recruitment is not free, than compliance staff who do not actively run files but keep our leases up to date TO PROTECT YOU, communicate with the dozens of local regulations, vendor management, vendor recruitment, accounting staff, on and on and on and on.
Do you really think on a $250mnth PM fee we make even $100? Try something closer to $15.00.
Yes, the reality of running a PMc is that more than 50% of time your running at net-LOSS, and all year but is puckering hoping and praying to end on some kind, ANY kind of a net-profit.
On tenant placement's, it isnt much different. We have countless trips by leasing agent out to site, fuel isn't free or cheap in case havn't noticed. We have many MANY labor hours on that whole process, not to mention the marketing expense and, if done right, a constant major marketing expense by having a beast of a marketing machine built driving constant tenant traffic, which is how we BEST lease your property for the MOST, quickest, to highest quality tenant.
On average this requires syndication agreement's with dozens, DOZENS of listing "partners". No, mono-channel is not how things get done.
To put it in terms, if you think the life of owning/operating a restaurant is just too lucrative, rich, simple and easy with those "huge" 8% profit margins, you may be a good fit to come run a PMc business to add some significant challenges to your life.
And if as a landlord you think 10% PMc fee and 1mnths rent on tenant placement will "eat all your profits", GET-OUT! Your NOT profitable and NOT ready to be a landlord.
Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
2y
In 2015 , I've had 11 rental properties, properties worth about a hundred grand, renting for a grand a month. I was paying 10% plus the first month's rent as costs.
Now, if you're banking on the occasional vacancy or eviction, say every couple of years (three if you're lucky with good renters), that 15% cost doesn't seem too far out there. And if you're dealing with the tougher, less lucrative properties, hitting that 15% is pretty standard because its less revenue, think 700 dollars a month than 1000 top line rents.
We play in the class B asset arena, 100-200+ units, we're looking at costs around 3-4%. But keep in mind, we're also covering salaries, which is part of the dance when you step into commercial territory.
Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
2y
@Mitchell Hammack yes those numbers are accurate. If you pay less in monthly fees you no doubt pay more in any “extra” work they have to do throughout the term of the lease.
