There is no secret that it involves quite a lot of fees in every aspect when it comes to property management. There are so many fees that sometimes it can be hard to know if what you’re paying for is actually something you need to be paying for. In other situations, you may know you need to pay a fee, but you have no idea what it may be for. If you find yourself in this situation a lot, do not worry! A lot of new renters and managers are in the same spot you are in. In this article, we are going to go over everything you need to know about property management fees, including:
- How property management fees work
- The different types of fees to expect
- Any additional management fees that commonly show up
- The factors affecting property management fees
- Whether or not hiring a property manager is worth the cost
- How to find a property management company
How Property Management Fees Work
In general, you can expect property management companies to structure their fees in one of two main ways: percentage of rent collected or flat monthly fee.
Percentage of Rent Collected
On average, you can expect most property management companies to charge a fee every month. These fees will usually range between 8-12% of the monthly rent that you have collected. However, if the property is vacant, the management companies responsible will most likely charge a fixed fee tied to the anticipated monthly rent. It is important to remember that there is much more to the process in the case of vacant properties than just leaving the house alone. It must be checked and maintained structurally, as well as inspected for potential break-ins or squatters.
Flat Monthly Fee
The other way that most property management companies will structure their fees is by a flat monthly fee. Normally, this fixed fee will be based on the property type (i.e., rental, standalone property, townhouse), as well as the square footage of the house and the desired services of the employer.
In all, it is important to realize the difference in the services provided between these two styles. With the flat fee structure, there is not as much incentive to help you find a renter as there is when a percentage of the rent is collected. However, the trade-off is that the flat fee style will most likely be cheaper. In the end, it comes down to how you want the property managed.
The Different Types of Fees To Expect
As with any large business transaction, there will most likely be some other fees to expect when setting up a contract with a property management company. Here are some of the less significant yet common fees to expect throughout the process.
Contract Setup Fee
Most property management companies will charge a one-time setup fee. This contract setup fee will cover
- Account creation for bookkeeping purposes
- Opening a bank account in your need (only needed in some cases)
- Applying for any required tax licenses
- Property inspection fees
Overseeing Vacant Property Fee
Managing a vacant property can be a lot more labor-intensive than many realize, especially when it comes to higher-end properties because more potential problems could arise. Considering that the utilities need to be left on for showers, water leaks are a main source of concern. Another source of concern is light fixtures burning out. The point is that the longer the property sits vacant, the more factors that could potentially go wrong. Property managers often need to make visits to a property once a week to ensure everything is ok. As such, these fees can get quite expensive the longer the property sits.
Late Payment Service Charges
In general, it is a very good idea for a landlord to charge a tenant a late rental fee if it is not received by an agreed date. Even so, a late fee does not always represent additional profits. Some property management companies will keep a portion of the late fee as recompense for the extra effort of securing rent from a tenant.
Repair and Maintenance Charges
In almost every situation, a great property management company will have an established support system of repair companies to take care of almost anything that may be going wrong on the property. In return, these repair companies will often give a discount to the management company due to how much business they give them.
When interviewing property management companies, it is important to ask about any markups they may have in place. This is because of the fact that management companies will often charge a project management fee to ensure any work is done properly.
Is Hiring a Property Manager Worth the Cost?
Even with all the fees totaled up, we still think that it is worth the cost. While they are certainly not for everybody, property management companies fill the important role of being there for property managers who may not access a property. In other situations, they may be physically unable to manage the property themselves.
Whatever the situation, hiring a property manager will essentially turn any rental into passive income for you. Having the property manager means not having to worry about rent collection, eviction, or even maintenance. Instead, you will have a team of dedicated professionals working tirelessly to keep your property in the best shape possible.
We hope that this article has adequately outlined everything that you need to know about property management fees. Remember that these companies are an amazing source of information on how you can boost your revenue through upgrades to your house in the future. This is because in every case, what is beneficial to you is beneficial for them as well. In time, you can be confident that you will have an established and fruitful relationship with your rental company. If you are looking for a property management company in Apopka, Florida, make sure you reach out to our professionals at Russell Properties. We have a dedicated team of experienced managers to help you get your rental property off the market and full of renters!