Property Managers - How Do You Figure Out What to Charge Clients Each Month?

Question

Hi - Any third party property managers are to weigh in here?

I’m a newer property manager and trying to wrap my head around how to bill back expenses properly each month. I know some things are straightforward, like utilities that are metered, but for other costs especially labor and overhead (including those that work in the office), how do you decide what gets charged to which properties?

Do you use a specific formula? A spreadsheet? Some kind of software? I saw one post where someone mentioned using AppFolio’s bulk upload with a custom spreadsheet, but I imagine there are a lot of different ways people do this.

I feel like I might be overcomplicating things, so I’d love to hear how others handle it. Any tips or insights would be much appreciated!

Adam Bartomeo · Answer

Sounds like you may want to partner with somebody that’s more experienced or find a mentor. Most property managers do not run the way you’re explaining. There isn’t a per hour or per job cost to bill out. You charge the owners a percentage and mostly everything is included.

Drew Sygit · Answer

@Stephen Schroeder it would be fantastic for PMCs to be able to charge owners as you describe, as owners might then truly appreciate everything their PMC does for them.

Unfortunately, no one has yet devised how to practically do this.

So, PMCs' absorb most office & admin expenses and are compensated for them via the monthly fees they charge their clients.

Bill B. · Answer

Call some local competitors. It doesn’t matter what you want to charge or think you should charge if they’re charging 25% less.

Personally I pay $300 commission to get the new tenant, 8% of rent collected, and $150 for renewals. That’s total cost. No charges for admin or managing repairs.(The vendors give a quote, usually discounted for being a PM client and if I approve I pay amount, no extra fees/surcharges/etc.)

For this I get GREAT and immediate service. So if a competitor came to me today they probably couldn’t steal me as a client for free management. If I was new and comparing 2 services not knowing either. This is what you would have to compete with. If I see nickel and diming like admin charges, repair supervision charges, vendor add-ons, or large placement fees you wouldn’t even get a call. I have enough unknowns, knowing exactly what the PM service will cost is a plus.

Theresa Harris · Answer

I agree with Bill B-that also keeps it really simple. One of the reasons I went with the PM I did was because they posted what they charged on their website, so it was transparent and everyone gets charged the same.

Andrew Kubik · Answer

Hi, and welcome to property management! Keeping expense allocation consistent and transparent is key. Here’s how most PMs handle it:

1) Direct vs. Indirect Expenses

✅ Direct Expenses (Easy to Bill Back): Utilities, repairs, maintenance, vendor services (pest control, lawn care, etc.).✅ Indirect Expenses (Office Overhead, Admin, & Labor): Harder to allocate, but common methods include:

2) Common Billing Methods

🔹 % of Gross Rents – Many PMs charge 3-5% for admin overhead.🔹 Per-Unit Fee – Flat $10-$20 per unit/month for shared costs.🔹 Time Tracking – Track staff hours and bill properties proportionally.🔹 Software Tools – AppFolio, Buildium, Rent Manager allow bulk allocations.

3) Best Practices

✔ Use a Spreadsheet or Software – Track expenses by property before invoicing owners.✔ Be Transparent – Define billable vs. included costs in your PM agreement.✔ Avoid Surprises – Owners expect clarity on additional charges.

Bill B. · Answer

Drew has a good idea. I would MUCH rather pay hourly for my pm instead of a % of rent. I’m obviously getting hosed paying 8% of $3,000 / mo for the same service the land lord paying 8% of $500/mo is getting. In fact they are probably using more labor hours. So I’m stuck subsidizing them. With today’s automation I would love to get a bill for $40, or zero some months. A percent of rent for pm’s makes even less sense than for realtors. Since the high rent properties usually involve less work. Then we could get rid of that $150 renewal fee that involves sending a 1 page form email saying pick an option. That fee bothers me more than the 8%. $600/hr seems a little stiff and is certainly a task I would take on myself. Especially since I’m already the one choosing rates/terms.

It’s pretty easy to figure out when I’m basically paying for a full time employee. I’m not saying they aren’t doing a hard job. I’m just saying I’m paying a VERY high hourly rate for it. Especially compared to what they are paid.

Property Managers - How Do You Figure Out What to Charge Clients Each Month?

Property Managers - How Do You Figure Out What to Charge Clients Each Month?

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6 Replies

1) Direct vs. Indirect Expenses

2) Common Billing Methods

3) Best Practices