Property management is a service that’s often overlooked but can significantly impact your rental property’s success. Property managers are responsible for managing everything from tenant selection to maintenance and evictions, ensuring tenants are happy and the property is kept in good condition. But, how much do property managers charge?
If you’re considering whether or not it’s worth it to learn how to manage a rental property and are curious about the fees associated with common property management services, this guide will help you understand how much it costs to hire a qualified professional to manage your rental home.
How Much Do Property Managers Typically Charge?
On average, the best property management companies charge a monthly fee of 8% – 12% of monthly rent. This means if you have a rental property that brings in $2,500 per month, you could be paying $200 – $300 per month in property management fees. If your rental property is a short-term rental, this fee could jump all the way up to 30% of your monthly rent!
How Property Management Fees Work
Property management fees are charged as a percentage of rent paid by the tenant. The amount a property manager charges depends on how much work it is to manage the property—and if there are other expenses involved.
For example: if there’s an apartment building with five units and with varying rent amounts, then each unit would have its own set of bills that need paying. In a vacation rental, Airbnb arbitrageWhether you’re new to owning real estate or just curious about what goes into property management, this guide will help you understand how much it costs to hire a qualified professional to manage your rental home., or short-term rental property, constant guest turnover requires more property manager oversight, which results in higher fees.
Tip: If you are going the short-term rental route and are curious about short-term rental property management, check out our comprehensive guide to getting started.
9 Common Property Management Fees
While property managers often charge one variable fee for the entire month’s services, anytime a tenant enters or exits a lease or you get a new property manager, you’ll most likely be charged some of the below fees:
NOTE: Many of these fees overlap, and your property manager will most likely charge a few of these, NOT all of them.
Onboarding Fee
An onboarding fee is an upfront charge that property managers charge to help get you started. This can be a one-time, flat fee or a percentage of the first month’s rent and deposit. The latter is often called an “introductory rate” and may apply if your property has been vacant for some time.
Advertising Fee
An advertising fee covers the cost of placing your home on the market, including any fees associated with listing your property on major real estate websites or local newspapers. This fee can also apply when property managers use Facebook ads or other types of paid advertising to boost your unit’s visibility.
Management Fee
A management fee covers the cost of managing your property, including collecting rent and paying any bills associated with operating it. The size of this fee varies widely depending on whether you want a full-service property management company or someone to check on your unit occasionally. It also depends on whether you’re renting out just one or several units at the same time.
Maintenance Fee
A maintenance fee covers the cost of any repairs that need to be made. This can include fixing plumbing leaks, painting walls, and repairing appliances. Some property managers will also use this fee to pay for lawn care, trash removal, and pool cleaning if you have one.
Vacancy Fee
The vacancy fee is not always applicable, but by no means is it uncommon. Some property managers still charge a small fee even if your unit remains vacant. This fee helps keep them around in case maintenance is needed on the unit.
Lease Renewal Fee
The lease renewal fee is a standard fee property managers charge for updating leases for tenants and ensuring the right tenants stay in the property. Property managers must make certain that new leases are legally up to code and have all the current and correct information in them to keep you, the landlord, in the clear.
Leasing Fee
The leasing fee is a common fee property managers charge for finding new tenants and ensuring the property is rented. This can include advertising on websites, paying for credit checks and background checks, setting up showings, and more. The time the property manager has to spend to find a tenant will often determine how much this fee is.
Eviction Fee
The eviction fee is what property managers charge for the time they spend evicting tenants who have violated their lease or are late on rent. This can include filing legal documents, making court appearances, and paying any legal fees required to start the process.
Inspection Fee
The inspection fee is a common fee property managers charge for the time they spend inspecting the property to make sure it meets their standards. This can include checking for damages, making repairs, and ensuring all appliances are working properly. A good property manager will also check for safety hazards like faulty wiring or broken smoke detectors.
Factors That May Affect Property Management Fees
Several factors can affect the cost of your property management fees. These include:
Size of the Property: The size of your property will affect the management cost. For example, if you have a small home with no yard to maintain, your fees will likely be lower than if you have a large home with a yard that needs to be mowed every week or so.
Location: The location of your property will also affect the cost of management. For example, if you live on an expensive street with high-end homes that need to be maintained in pristine condition, your fees will likely be higher than if you lived in an area where most people rent rather than own homes.
Property Types: Single-family homes can cost far more per unit than a multi-unit apartment complex. Both of these will differ greatly compared to the management fees of a commercial property, a vacation rental, or a mixed-use property.
Market Conditions: The market conditions in your area will also affect the cost of property management. For example, if there’s a lot of local renter competition and finding a property manager is difficult, your fees may be higher than in an area where there is less competition among management companies.
Services Offered: The type of property management services offered will significantly affect the cost of property management. For example, suppose a property manager offers 24/7 emergency service, robust tenant screening, and monthly inspections. In that case, their fees may be higher than the competition (but this could be a sign of a great property manager).
Benefits of Hiring a Property Manager
Hiring a property manager can reduce your workload and stress while increasing the rental income you earn from your investment property.
Increased Occupancy Rates
A property manager can help you find tenants faster and keep them longer. They can also ensure that your rental property is always occupied and tenants are ready for renewals, which means more revenue for you.
Legal Compliance
A property manager will ensure you follow all local and state laws, so you don’t have to worry about being fined or sued for violations. They will also be able to help you navigate through difficult situations such as evictions and tenant disputes.
Lower Repairs and Maintenance Costs
A property manager will be able to keep an eye on your rental property and ensure that any repairs or maintenance issues are handled promptly. Many property managers will also perform inspections throughout the lease period to ensure all systems are working correctly and aren’t at risk of failing. They can even help you find qualified professionals willing to work at competitive prices.
Financial Oversight
A property manager will also be able to help you track your expenses and make sure that they are in line with the rental income. Some may even perform monthly financial analysis reports so that you know exactly where your money is going. This can be especially helpful when determining whether or not expanding your rental property portfolio is feasible.
Less Stress
A property manager can take the burden off of your shoulders so that you don’t have to constantly worry about your properties. They’ll handle all the day-to-day tasks like making repairs, collecting rent, and more so that you don’t have to worry about it. This will allow you to focus on other aspects of your business or personal life.
Is Hiring a Property Manager Worth the Cost?
The short answer is maybe. The long answer is yes, but it depends on your situation. If you are a landlord with multiple properties, it’s definitely worth the cost to hire a property manager so you can focus on growing your portfolio larger. You can be confident that your properties are being properly managed and will continue to bring in income while focusing on other aspects of your portfolio that require your input.
Whether hiring third-party property management companies, a single property manager or training your own in-house property manager, as time goes on and your portfolio grows, you’ll NEED on-the-ground help to keep your units rented and cash flow coming in!
If you’re still on the fence about property management costs and are thinking of self-managing, check out our best rental property management software list!
