How Much Do Property Managers Charge? Here’s What Fees to Expect

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Many landlords believe property management fees cut profit margins to a minimum in exchange for basic services to maintain your rental property. But the reality is that a property manager can simplify your life and smooth out the kinks in your investment properties—for a reasonable rate that maximizes profitability. A recent survey of landlords found that over 88% had experienced stress in renting out their properties, and over 44% had to evict a tenant.    

But before you hire a property manager, it’s important to know that not all property management costs are structured the same by every property management company. Ensure you understand how the property manager’s fees work; otherwise, you might sign a property management agreement that reduces your rental income profit more than necessary. Also, many property management companies will charge an early contract termination fee if you want to cancel, which can add even more costs to your bottom line.

What Do Property Managers Do?

Rental property managers oversee the daily tasks of managing a rental property for a property owner, including setting rates, tenant screening, rent collection and deposit, maintenance services, ensuring tenants comply with the lease agreement, and addressing tenants’ issues according to current housing regulations. Most property management companies also offer marketing and showing vacant rental property units to prospective tenants.

If also accredited as a real estate agent, other property management services they may oversee are finding the best vacant property for new real estate investments, initial property inspection, negotiating deals, financing, and finalizing purchase agreements.

To find the best property managers online, search for specialized experience managing residential versus commercial properties, customer ratings, and reviews. You may also get referrals for good property management companies from people you know. The best property management companies will protect your investment like their own rental property.

How Much Do Property Managers Charge?

Most real estate investors budget 8-10% of monthly rent for property managers. BiggerPockets Forum users report that 10% tends to be the norm—and additional fees may cause that number to increase. (Looking for a flat fee? Unfortunately, flat rates are pretty rare.)

Review your financials before signing on the dotted line to ensure hiring a property management company makes sense. Many landlords will find it does, but you may want to go alone if you have only one or two properties or your budget is tight.

9 Property Management Fees to Know

These are some of the most common “hidden” management fees, extra maintenance fees, and fee structure differences to watch for when comparing providers or finalizing a property management contract:

1. Rent due and rent collected

Many property managers charge monthly management fees as a percentage of the rent but watch the wording. There’s a difference between charging as a percentage of rent due and a percentage of rent collected.

• Rent due means your company will charge you based on how much a tenant owes you. You may pay for property management even when your property is vacant.
• Rent collected means you’ll be charged based on actual rental income. This is generally more favorable for the owner.

2. Early cancellation

You may incur an early cancellation fee if you break the property management contract early with your property manager before its outlined term ends. For example, if you agree to work with them for a year and want out after eight months, you might pay an additional few hundred dollars. Be especially wary of this early termination fee with untested property managers.

3. Setup fee

Many residential property managers will charge an initial flat fee at the start of your property management contract. This usually costs a few hundred dollars and is necessary to initiate your account.

4. Vacancy

If a company charges you based on collected rent, not rent due, there may be an additional vacancy fee, which acts much like a retainer.

5. Advertising

Some property management companies charge an additional advertising fee. This covers the cost of creating media, such as taking photos or videos and marketing the property.

6. Leasing fee

A tenant placement fee may apply when hunting for a new tenant. This covers the cost of drafting and securing a new lease agreement and tenant screening, including background checks. It’s generally low in cost. High leasing fees should raise red flags—especially if your resulting tenant turnover seems to increase.

7. Lease renewal fee

Lease renewal is a simpler process than the initial leasing, but it may still require a lease renewal fee. Property managers might draw up new paperwork or renegotiate terms with a tenant, and they may charge for that extra work.

8. Maintenance

Most property management fees cover basic maintenance and repairs that property owners wouldn’t want to handle themselves. Some property management firms may charge extra for big jobs or an inspection before placing new residential property tenants.

9. Eviction

Eviction can be messy, and you’ll be grateful to have a property management service in your corner. Most managers completely handle the rental property eviction on your behalf, but some will charge you an extra fee. Expect to pay at least a few hundred dollars for this process.

Comparing Property Management Fees

Property management companies charge different property management fees. But, if they’re offering similar services, you’ll likely find the bottom-line price of each to be competitive with one another. The big difference is how you plan to use your property management company. 

For example, if you’re looking for a long-term partnership, an early cancellation fee shouldn’t factor much into your decision about property management pricing. Consider all these factors and price points when comparing property management companies and hiring a property manager.

Conclusion

Property managers play a crucial role in simplifying landlords’ lives and ensuring the smooth management of rental properties. It’s important to understand the property management fee structure before you hire a property manager to avoid reducing your rental income unnecessarily. Landlords should carefully review each property management fee and assess their financial situation to determine if the property management agreement aligns with their needs.

Ultimately, comparing property managers should involve considering the services offered, long-term partnership potential, and overall pricing competitiveness among different property management companies. By considering these factors and thoroughly evaluating the various management fees, you can make an informed decision when hiring a property manager for your rental property.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.