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How Much Does Property Management Companies Charge?

 

Interested in hiring property management?  Find yourself ask “how much do property management companies charge”?  Then you’ve come to the right blog!

Grasping the cost of property management is important when buying rental properties.  Yet, understanding the average cost of property manage is important when interviewing property managers.

There are a variety of fees that rental management firms charge.  Every company has its own set of terms and rates.  To help, Burbz built a property management calculator tool.

Before exploring different property management costs, know this blog is about the costs.  There is always a range.  We do our best to provide a low and high end to provide you context.

This article does not cover specific terms of the property management agreement.  To learn more, check out our previous articles covering management agreements.

SETUP FEES

When property managers take on a new landlord as a client, there are setup tasks.  This includes executing all agreements, coordinating tenant payments, integrating your portfolio into their Property Management Software.  Indeed, there is upfront work for property managers.

Landlords should expect to pay up to $250 for setup fees.  These can be negotiated between landlords and property managers.  Often the management company wants to redeem their client acquisition cost.  Setup fees help them do so.

                Low End: Free

                High End: $300 to $500

 

MONTHLY MANAGEMENT

Monthly management fees are the primary costs for property management.  This fee covers the day-to-day operations.  Which includes tenant coordination and collecting rent.

Property managers monthly fees are a flat rate or percentage of gross rent.  Most common is percentage of rent collected.

It is important to note that property management companies sometimes attract landlords with their low monthly management fee.  Yet they don’t openly disclose all the other fees. 

Before hiring a property manager, understand how to calculate all the property management fees.

Some property managers decide to have a higher monthly management fee and not charge fees for other services.  This is called an all-inclusive management fee.  However, those service fees are instead included in the monthly fee.

                Low End:  $75 per month

                High End: 8-10% of gross rent

 

MAINTENANCE COORDINATION CHARGES

Maintenance fees can be the most unique costs for every rental manager.  Unlike the other service fees, maintenance fees have multiple different structures they can come in.

All-inclusive management will absorb the maintenance coordination cost into their monthly fees.

On the other end of the spectrum, maintenance fees can be charged as a flat rate or percentage of the repair cost. 

Percentage is used less often.  For good reason, landlords do not like to pay for an incentive to not find affordable contractors.

Flat rates range from $25 to $50 per repair.  Flat rates and ‘all-inclusive’ are most common rates.

Make sure you understand reserve funds and minimum thresholds.  We wrote a blog addressing these

Low End: Free.  Included with all-inclusive management fees.

                High End: $25 to $50 per repair

 

 

LEASING FEES

A primary task for rental managers is leasing your rental property.  Property managers always charge a leasing fee. 

This includes listing the rental unit, coordinating showings, and screening applicants.  After an applicant has qualified, they coordinate the lease agreement.  The move-in and move-out inspections are included with the leasing fee.   However, they can be included with the monthly management fee instead.

Leasing fees are either a flat rate or percentage.  By far the most common amount is one full month of rent.  In fact, the management company takes the first rent payment as their leasing fee.

There are rental management companies that utilize a flat rate.  This flat rate ranges from $500 to $750.

Low End: Flat rate, $500 to $700

                High End:  Monthly Rent Amount

Side note: landlords can also use a Leasing Agent if they self-manage.  These leasing agents are realtors, property managers or leasing agents.  Regardless the type of agent, they all use this same fee structure.

LEASE RENEWAL FEES

Property managers usually charge a fee when tenants renew their lease.  These fees are for executing a new lease agreement and inspecting the rental unit.

                Low End:  Free.

                High End:  Half-month’s rent amount.

Property Management Fees Burbz

LATE FEES

When tenants pay rent late, the property manager must spend additional time collecting that rent.  This includes calling the tenants and sending all proper notifications.

Technically landlords do not pay fees to the rental management company.  If they ever charge you, run. Run far away from that management company! 

There is never an excuse why a property management company should charge the landlord for late fees.

We included late fees because this is revenue that landlords are forgoing.  Therefore, it is important to acknowledge the opportunity cost landlords accrue.

Most property management firms keep the late fees to themselves.  However, there are plenty that split late fees evenly with landlords.  Rare are the managers who give all the late fees to the landlord.

 

TERMINATION FEES

Perhaps the most under discussed cost of property management are the termination fees.  Every management agreement will include these terms.  Unfortunately, they always favor the property management company.

Every management company has the same clause in their management agreements.  Landlords who terminate the agreement owe the management company the full amount of the remaining fees.  Meaning the management company will earn the same amount of fees. 

Regardless if they manage for the full duration or get terminated mid-way through.

Sadly, it may be more cost effective to take over self-managing until the contract expires.  Rather than firing the property manager and paying a hefty termination fee.

                Low End:  There is no low end.

                High End:  Remainder of fees owed.

 

EVICTION FEES

Evictions will cost the landlord in fees.  Property management firms vary regarding their involvement.

Ask your property manager to define their eviction services.  Does the property manager handle all the eviction notice documentation?  Do they represent you at court?  Do you have to use their lawyer?        

Low End:  Free.  Included with monthly fees.  Includes all documentations and court representation.

               High End:  Landlord pays for all legal fees and pays for either the property manager or lawyer to represent them at court.

 

HOME SALE COMMISSION

Did you know the property manager earns a commission if you sell the home?  This hidden clause can cost the landlord a lot of money. 

Get this.  If you use a different agent, they earn a commission.  Unless you have written consent or excluded this clause from their agreement.

And yes, property management firms do take legal action to collect those commissions.  This is one of our evil property management agreement terms for good reason.

Low End:  Zero.  If excluded from management agreement.

               High End: 3% of sale price.  Regardless if they were the selling agent.

 

FIND AFFORDABLE PROPERTY MANAGEMENT

As you continue searching for property management, take advantage of Burbz platform!  We created an ecosystem for modern property management to connect landlords and managers.

Through Burbz, landlords request proposals from individual property managers.  These are individuals with smaller portfolio sizes.  This allows them to focus more on customer service.

Property managers on Burbz utilize our property management software.  This is free software for landlords and property managers.  Including online rent collection, screening reports and maintenance tracking.

Burbz created software to automate property management tasks.  Whether you self-manage or hire a manager, this leads to less management work.  Meaning more competitive rates for landlords.  And now that you know how much property management companies charge, you can interview and compare multiple property managers to find the best rates.

Landlords prefer using Burbz because of the full transparency.  Unlike traditional management companies and software providers, landlords have full access to rental properties.  Even if you change property managers, the property data stays with you.

Check out Burbz today to learn more.

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