Subscribe to our Blog via Email!
March 9, 2016 | No Comments YetTags: paying a property manager, property management, property manager fees
When residential real estate investors call us to research property management, they always ask the same first question: how much do you charge?
As much as we wish they’d say “Tell me about your company” first, we understand the cut to the chase. Investors want to know how much property management will affect the bottom line. Here are the quick and dirty answers on the primary property management fees you’ll pay as an investor-owner.
Management Fee: Every investor-owner pays a standard management fee on every unit the manager controls as the landlord. This fee is usually 6-10% of gross monthly rent and any late fees on the unit and varies depending upon factors such as location and age of the property (these percentages are standard in the industry). For example, if a unit rents for $800 per month at an 8% management fee, you’ll pay your manager $64.00 monthly. This fee pays for administrative issues regarding tenants (i.e. landlording!) such as fielding phone calls for rent balances and work orders and utility questions, collecting rent by the due date and chasing down rent that’s overdue, and running frequent site visits to scan for visible outside issues.
Rental Fee: Investor-owners also pay a “rental” fee, which is just what it sounds like: a fee to rent your property to a tenant. This is the fee that’s sometimes harder for an investor to swallow, because it’s usually one month’s full rent or some portion thereof. We take a rental fee on a tiered scale depending on the rent amount (prices drop at $1000 and $2000 rent levels), and we take it each time a unit is vacant and needs refilled.
There’s a lot involved in renting a unit to tenant, and the fee covers that. It covers all vacant unit advertising and marketing, showing units to potential tenants (which we do individually and not in an “open house” format), extensive tenant screening, application processing, and lease signings with chosen tenants.
Contrary to what some folks think when they meet with us, we don’t just take a month’s rental fee with minimal tenant screening and put in the first person we can so we can collect our fee and move on. We work hard to screen tenants, show properties, and get the exact right person in the unit so that they will stay. We don’t complete this process in two days. We complete it when we find a good tenant who passes our rigorous screening process and seems to be the right fit. When good tenants stay long term, everyone’s happy.
We don’t charge the investor-owner any additional advertising or leasing fees, but we do charge the applicant a fee that covers all background checks we perform, including criminal and credit reporting, rental and employment/income verifications, and screening for previous evictions, money owed to landlords, bankruptcies, criminal activity, and collection efforts against the applicant.
Maintenance Fees: Other standard fees that investor-owners incur are property maintenance fees when our maintenance team goes out to remedy issues related to normal wear and tear of the property. We always charge tenants for damage they cause.