If you've recently invested in a rental property and want to hire a property manager to collect rents, screen tenants, and handle maintenance requests, knowing how much property managers charge should help you avoid overpaying. Keep in mind, however, that the answer to this question depends on the property manager or management firm you hire as well as the tasks they are being hired to perform. Here's a more detailed guide on how much property managers typically charge.
Property Management Fees by Type
There are two types of property management fees that can be charged, which include a fixed fee structure and a percentage of the monthly rent you collect.
Fixed Fee
The fixed fee structure is a flat monthly fee that you would be tasked with paying on a monthly basis. Some management companies will offer this structure instead of collecting fees based on a percentage of the month's rent. In most cases, the fixed fee is based on square footage, property type, and provided services.
If a property management company is managing a single-family home, flat fees can amount to $100-$120 per month on average. Even though the flat fee structure might seem like the better option, management companies aren't always motivated to improve a property's rental income if they aren't set to receive a portion of it.
Percentage of Rent
The majority of property management companies will charge a standard monthly fee that amounts to 8-12% of the total monthly rent that's collected. If a single-family home is being managed with rent of $1,200 per month, a 10% fee means that you would pay $120 per month. Whenever a property is vacant, it's common for management companies to charge a fixed fee.
Additional Fees to Consider
There are a range of additional fees that could add to the costs you pay to property managers. These fees include:
- A contract setup fee that typically amounts to around $200-$400
- Leasing vacant property fee
- Managing vacant property fees
- Repair and maintenance costs
- Late payment service fees
- Inspection fees
- Contract termination fees
- Evictions and collections
Factors that Determine Property Management Fees
The property management fees you pay depend on the total amount of work that the property management company performs when maintaining your rental property. For instance, fees will almost certainly be higher if the property management company is managing a multifamily building with several units as opposed to a single-family rental home.
The various factors that can alter property management fees that you'll be tasked with paying include:
- Property size - This is based on total square footage, number of bedrooms, or number of units.
- Property type - The property types that can be managed include short-term rental properties, single-family rental homes, and multifamily buildings.
- Property condition - Properties that are older tend to require extensive maintenance and repair work when compared to newer properties.
- Pricing structure - While some management companies offer full-service solutions, other companies charge a la carte, which means that additional fees might need to be paid for property inspections or lease renewals.
- Neighborhood rating - Neighborhoods that have higher ratings tend to bring in more qualified and reputable tenants.
- Current market competition - If the real estate market in your area is competitive, property management companies will be in high demand, which can lead to high costs.
Now that you have a better idea of how much property managers charge, you should be able to create an accurate price estimate for your rental property.
Sources: https://www.allpropertymanagement.com/resources/ask-a-pro/posts/how-much-property-managers-charge/
https://learn.roofstock.com/blog/how-much-do-property-managers-charge
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.
Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
