When you purchase rental property, one of the first things you should do is establish a property management company to help you manage your rentals. Doing so will allow you to continue earning income from the properties even when you’re not there. You’ll also want to take into account how much it costs to hire a rental property management company before deciding whether or not it’s in your best interest to do so, which means learning how much they charge.
On average, property management companies will charge between 8% and 12% of the monthly rent to manage a rental property. This fee can vary based on the size and location of the property, as well as the services required. Some property management companies may also charge a one-time setup fee.
Some businesses might charge a flat rate of $95 per month, for example. The majority of property managers will take a small percentage of the rent paid each month as their fee, regardless of whether or not this is a decent bargain for you.
Fees related to property management
Setup fee
A property management business will most likely want you to pay a one-time, flat cost known as a "setup fee" when you initially appoint them as your property manager. The purpose of this is to get you started with the firm and establish your account. It is also possible that an examination of the premises and/or introduction papers for the tenants will be included as part of this process. These documents will detail how communication will function moving forward.
Property Management fees
As was noted before, in most cases, the fees for general management services will be calculated as a proportion of the monthly rental revenue.
Upkeep fees
Problems with the property's maintenance are very certain to arise, so you should prepare yourself to pay maintenance fees well over the period of a particular year. These costs normally range from up to 1.5 times the amount of one month's rent. You have the option of requesting that the property management business come to you to obtain authorization for any expenditures associated with maintenance, or you may ask them to adopt a much more practical approach and manage repair work as it arises without requesting approval.
Vacancy fees
A property management business will charge a vacancy fee in the event that the property they are managing becomes unoccupied and they want to re-lease the space to new tenants. This cost is usually equivalent to one month's rent or a certain percentage of that amount.
Lease renewal fees
The fee for processing the renewal of a tenant's lease whenever the time comes, which is often once a year, is referred to as the lease renewal fee and is typically charged by property management companies.
Tenant placement fees
The expense of filling your property with renters is known as the "renter placement fee." This price is comparable to the vacancy fee in that it is charged. This price may include the costs of marketing the vacancies, tenant background screening services, and move-in preparatory fees, and it can be a fixed amount or a portion of the monthly rent.
Eviction fees
If your property management firm has to remove a renter, they will bill you an eviction fee. This amount, in addition to any court expenses that may arise during the process of the eviction, is likely to be several hundred dollars for every eviction.
Early termination fees
If you decide to discontinue your business relationship with the management company sooner than what is specified in the agreement, you may be required to pay a fee for early termination. The amount of this cost will be determined by the terms of the contract. Conclusion
What causes the difference in the fees charged by property management companies?
When it comes to managing your property, a property management company would not charge you a predetermined amount for their services. The costs will vary depending on a variety of factors, including the following:
The Size of the Rental Property
The amount of work required to manage a significantly bigger rental property is greater than the amount of work required to manage a smaller rental property; therefore, the fee acquired will be higher.
Type of Property
Management companies are capable of overseeing all types of rental homes, such as single-family residences, multi-family residences, investment buildings, or even empty homes. Vacant properties can be managed by property managers as well.
Services offered
The breadth and depth of the services offered by the property management firm is a significant factor in determining the fees that are charged by that business. If you are just hiring a property management company to charge rent, you will pay a significantly lower fee than a client who would want a manager to accumulate rent, fill vacancies, manage repairs, carry out tenant evictions, and keep accounting statements for your taxes. If you are just hiring a manager to charge rent, you might very well pay far less than somebody who wants a manager to do all of these things.
