If you’re a landlord asking about the cost of property management, you need to know that it’s not the most important question you should be asking. That’s because it’s often more costly for you to manage a rental property without a professional property manager.
Typically, management companies charge around 10 percent of the monthly rent. There are situations where that fee may go down to seven or eight percent if a particular landlord has a number of high quality properties. In those cases, you can expect a management fee of between eight and 10 percent.
It’s possible you’ll come across a property management company who seems to charge a much lower fee. Maybe you’ll talk to someone who charges nine percent when everyone else you’ve interviewed charges 10 percent. Just remember that there are probably other fees in addition to the management fee you’ll be responsible for paying.
The management fee is one cost. Another expense will be the placement fee, which covers marketing a property, showing the property, finding a tenant and signing the lease. Property managers tend to be all over the board when it comes to the cost of placement fees. The lowest will be around 50 percent of a month’s rent and the highest will be 100 percent of a month’s rent.
Look for a property management company with a tenant guarantee. If you have a tenant who moves out after four months, you shouldn’t have to pay a placement fee again. Property management companies should guarantee your tenant for the 12 month lease period. People are becoming more transient, so you never know when it’s going to happen. Owners get mad when they have to pay placement fees over and over again, and that’s understandable. Always look for a guarantee.
The last fee you can expect to pay is the renewal fee. Usually, that won’t be more than 50 percent of your monthly rent. Most property management companies charge between 10 and 50 percent. This fee is to cover the lease renewal when a property manager successfully keeps a good tenant in your property for another year.
You will also have maintenance costs for your rental property. Some companies mark up the cost of maintenance and hide it somewhere. Companies who employ two or three people in a maintenance department will need to mark up their maintenance costs in order to pay those salaries. Remember that professional property managers should be able to get your maintenance done for cheaper than if you were managing the property on your own. They will have access to licensed, insured contractors. You don’t want to hire anyone off the street to make repairs to your home. For example, a property owner who hires an unlicensed vendor to paint the exterior of a house might save a few hundred dollars in labor and supplies, but if that wood isn’t primed with oil based primer, you may be doing it again within five years and end up costing you more over the long run than if it was done correctly the first time. It is also possible to receive fines if Doingit could result in a fine from the city because lead safe practices aren’t being used. There’s also going to be some peeling paint within a few years because the work wasn’t done properly.
Saving money in the long term is more important than saving money today. That’s why it’s important to hire a professional property manager; it will put more money in your pocket over the next five or ten years. If you have any questions, please contact us at United Properties.