Various fees come with hiring a property manager. These fees include:
- Fixed management fees
- Maintenance fees
- Initial setup fees
- Leasing vacant property fees
- Overseeing vacant property fees
One way to make money is to invest. Real estate is one of the best ways to invest money since people will always need houses. On paper, it sounds simple to run a real estate business. You buy a house, get tenants, and start collecting money. However, that’s not always the case.
A rental property needs a lot of time and maintenance, regardless of the size of the unit or the structure. Property owners need to manage general upkeep, publicize the listing to locate renters, and maintain communication with the tenants to ensure that they are content throughout the duration of their lease. This could be a particularly inefficient use of time for someone who already has numerous rental properties or works full-time. That’s where property management comes in. Property management businesses supervise and manage the day-to-day commercial activities of real estate, which an independent third party often carries out.
Many real estate investors cannot manage one or more properties simultaneously and instead rely on property management businesses. When you employ a property manager, you are relieved of some heavy lifting. A property manager handles various responsibilities for a property owner, including following the owner’s laws and regulations, handling maintenance requests, showing vacant units, and collecting deposits and rent. They also make sure the property is clean and conducive for everyone. You might be asking yourself, what is the average property management fee for rental properties? Here is what to expect.
How Much Does Property Management Cost?
In most cases, the fees charged by property management businesses are structured in one of two primary ways: either as a percentage of the rent or as a flat monthly cost. The monthly fee charged by most property management businesses ranges from 8 to 12% of the monthly rent received. If your property’s monthly rent is $1,500, the property management cost would be $150, based on a 10% average fee.
Property management companies typically charge a flat fee or a fee equal to the expected monthly rent once the property is leased to a prospective tenant. Vacant homes necessitate additional labor from the management business, such as weekly inspections for suspected break-ins and squatters. Therefore, a property company is likely to charge more.
A Guide to Property Management Fees
The cost of property management will vary from one property to another. The potential costs associated with hiring a property manager are outlined below.
Initial Setup Fee
Some property management companies require a one-time start-up fee; if they do, it’s typically no more than $500. The charge may also cover the price of conducting an inspection of the property and sending out notices to renters. Still, some companies will be happy to help you without an initial fee.
Fixed Property Management Fee
Some companies provide a fixed fee structure instead of charging a fee based on a percentage of a month’s rent. The fixed cost is determined by the type of property, the floor space, and the services rendered. Generally, the fixed property management charge for a single-family home may be approximately $100 per month; however, management prices vary from market to market. At first look, a flat fee structure may appear to be a good deal, but management companies that receive a flat amount may not be as driven to optimize your property’s rental income.
Maintenance Fee
Maintenance fees are often included in the monthly management fee. This may include keeping shared spaces clean, removing trash and snow, and raking leaves. If a specific repair is required, the amount will be withdrawn from the reserve repair fund, a separate fund where the property owner keeps the money for property repairs. There are multiple options for managing the account and handling the repair procedure. They include:
- The property owner holds power to authorize the transaction or not.
- The property owner gives the property manager the account details.
- The property owner requests notification whenever there is a need for repair and makes decisions at that time.
A minimum amount must always be kept in the account to ensure no inconvenience for all parties involved.
Overseeing a Vacant Property
Property management can be more labor-intensive when managing a vacant property than when a renter occupies your home. This is because more potential issues could develop when your home is vacant. Unforeseen events such as water leaks or light security failures could take place. Even in the safest of communities, the length of time a rental property is unoccupied increases the likelihood that it will be broken into or vandalized. At least once each week, the property manager should go to the location to check on things. This will help reduce the potential dangers.
Leasing a Vacant Property
You can reach millions of potential renters every month by posting your unoccupied property on a rental listing website like Zillow, Zumper, Rentberry, or Rentals.com, all of which provide free listings. Still, if you’re an out-of-town property owner, you’ll need a local contact to show prospective tenants through your empty property.
Property management companies typically take a leasing fee equal to half a month’s rent for re-renting an empty unit. However, some do not charge any fee at all. Property owners might save money at renewal time by offering discounts to long-term tenants. If the tenant’s lease renewal doesn’t need extensive negotiations with the management company, the management company may charge a small fee or even waive the fee entirely.
Common Problems You Are Likely to Face Managing a Property
Property management fees are likely to increase if you don’t curb the problems that arise from the word go. Here are a few problems you will likely face when running your property.
- Tenant antisocial behaviors
- Problems at the property
- Untrustworthy managers
- Tenants trashing the property
- Unexpected maintenance issues
If you stop these problems before it is too late, you could save a few bucks.
Get Help From Professionals Today
You’re busy, and managing your rental property cannot be easy. Hiring a property management company can ease the burden. The company will manage your property properly and ensure it has tenants. At Nomadic Real Estate, we provide top-notch property management services, and you can count on us.