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What Kinds of Fees do Property Managers Charge?

When looking for a property management company, many people pay attention to the company that offers its services for the lowest price. However, property management companies that offer their services for an excessively low price are typically not able to provide their customers with high-quality services, and often include hidden fees to make up for inexpensive base fees. You’re most likely to see these extra costs occur in the areas of administration fees, cancellation fees, maintenance fees, and increased sales tax. (More: What Do Property Managers Do?)

When searching for the right property management company, it’s important to consider what services will be included in your initial quote to avoid paying hidden fees later. Listed below are some of the most common services that property management companies charge for so you can have an idea of the kinds of fees you’re likely to encounter.

Management Fees

If you chose to hire a property management company, the primary fee you’ll pay will be a monthly management fee. This typically takes care of the everyday management of the property and includes tasks such as obtaining and processing monthly rent, overseeing inspections, responding to emergency maintenance needs, and corresponding with current tenants. These fees differ vastly from company to company as different companies have different pricing structures. Some companies charge a flat rate for their services; others might charge a percentage of monthly rental rates. When comparing two companies, it’s important to be sure you are making an apples-to-apples comparison. What appears on the surface to be a lower monthly fee, may end up costing you more because so many things are not included. Additionally, property rental companies that charge a flat rate might also continue charging this fee even when the property is uninhabited. For more information, read: How Much Does Property Management Cost? Is It Worth It?

Ask yourself, does the pricing structure align the property manager’s goals with your goals as a landlord? A management fee based on a percentage of the rent incentivizes the property manager to get you the highest rent possible and keep it rented. A property manager who receives a flat rate whether your property is rented or not, may not be as highly motivated to keep your property occupied.

Leasing Fees

Leasing fees compensate the property manager for marketing the property, showing the property to prospective tenants, screening prospective tenants, negotiating on your behalf, and writing up the lease.

Most leasing fees are a percentage of the property’s monthly rent. Firm’s that are charging a flat rate, so keep that in mind when comparing flat-rate fees to percentage-of-rent fees. It’s important to know that leasing is one of the most important services a property management company offers, as it provides security that you will be getting a great tenant who is less likely to cause problems down the road. If the leasing fee seems incredibly low, it’s likely that the property manager is looking to fill the unit as quickly as possible, and he or she might not be administering a thorough vetting process to ensure you get a reliable tenant. Poor screening procedures can cause serious issues, especially when it leads to eviction.

Be suspicious of low leasing fees. A firm may be cutting corners to offer that price. Ask if their leasing includes listing your home in the MLS. Ask how much compensation they are offering other brokers who may have qualified tenants for your property. Ask whether they pay for premium listings on multiple real estate websites. You are likely to learn that they are not doing everything possible to advertise your property.

You likely want your property to rent for the highest rent in the shortest possible time. If the company with the lowest leasing fee takes a long time to fill your vacancy and/or doesn’t get you the highest possible rent, the little you saved on the lower leasing fee will be more than offset by lost rental income.

Inspection and/or Maintenance Fees

Some companies include inspection fees and others charge extra for them. Similarly, some property managers charge extra for maintaining your property and others don’t. Make sure you ask questions about repair rates as well as what routine maintenance will happen on your property. When it comes to repair and maintenance work, it’s a good idea for you to decide how involved you wish to be in the process. Some property owners wish to be very hands-on and feel more comfortable setting a limit for repairs, where if maintenance work exceeds this limit the rental company will notify the owner. Other property owners wish to let the rental company handle all repairs regardless of cost.

Lease Renewal Fees

A lease renewable fee occurs when a current tenant wishes to renew their lease, as your property rental company will need to complete some additional work. Although additional work is necessary, the effort required to renew a current tenant’s lease is much less than the work required to acquire the tenant in the first place. A good property manager should charge you less than the amount charged when starting the lease initially.

Advertising Fees

Marketing and advertising fees are charged by some property management companies, but not all will charge extra for such services. Additionally, some property managers will group advertising fees under the umbrella of leasing or management fees. Some companies will charge by the week while others will set an agreed-upon limit for expenses and have the owner pay any costs that exceed the limit. (Thinking about marketing your property yourself? Read: How To Market Your Rental Property.)

Eviction Fees

Unfortunately, not all tenants work out, and reasons such as loss of a job or inappropriate behavior can result in a tenant eviction. (Read: What If I Need To Evict A Tenant?) Eviction is an incredibly expensive and time-consuming process, for which a property rental company will charge accordingly. Eviction charges typically include fees for dealing with attorneys, appearing in court, and serving papers, which can cost thousands of dollars per eviction.

Other Miscellaneous Fees

Check the fine print to make sure the property manager doesn’t have additional fees that will cost you down the road. For example, some companies have a cancellation or early termination penalty. Ask if there are fees for paying outside vendors such as homeowner’s association fees, utilities or mortgage payments.

Whichever property management firm you choose, they should be transparent and straightforward with you regarding the services included in their fees. As with any other purchase, you get what you pay for. The true measure of a property management firm is high quality at a fair price. (Read: Top 10 Questions to ask a Property Management Company). Contact us if you would like to learn more about management fees. We are happy to provide all the details you require.

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