If you’re looking into whether or not you should hire a property manager, one important question will be what the property management fee structure will look like. With regard to single unit dwellings like houses, I would boil the fees down to 3 main areas:
1. Property Management Fees Before Leasing
Often, management companies will have a fee structure for the initial advertising and contract procurement. The fees could be charged by the number of hours worked, a flat monthly charge, or a simple passing on of whatever advertising costs are incurred by the property management company.
2. Override on the Rent
This is the fee most often associated with what folks think about when they are looking for a property management company. Typical fees might be anywhere from 6-10% or more of the rental price. So on an $1,400 per month home with a 10% management fee, you would be paying the management company $140 per month, and ending up $1,260 in your pocket.
3. Fees for Repairs
Sometimes, there are management companies that charge additionally for any fees they incur while dealing with repairs on the property. It may be a simple as the same override style fee they charge on the rent. So if the repair was $250 and you were paying a repair override of 10%, that would be an additional $25, pushing your repair cost up to $300.
My personal opinion is to find property managers that charge a flat percentage fee. This is how I operate as a property manager, and it makes it really simple for the owner to understand what to expect when receiving a bill. My typical fee is 10%, and that includes all marketing, repairs and contract management. So this makes it really easy for my owners to know exactly what to expect from me.
If I could give you any advice about shopping for property managers, it would be to look for a company with a good reputation in the community, up front and full disclosure of all fees, and ask questions! Now that you know the basics of how property managers charge their customers, you can ask the detailed questions about their particular fee structure. And asking questions will do more than just give you answers about their fee structure, it will probably give you a sense of how well the property manager knows their stuff, and what to expect from them.
Getting to know your property manager personally is a good thing. This is the person that will have access to your home, and who you are entrusting a very valuable asset to. Getting mixed up and under contract with a bad can be more than a headache – it can cost you thousands of dollars. So do your homework, ask questions, and don’t put too much emphasis on fees, a good property manager is worth paying!