Property Management Fees

When I first examined property management fees, I thought that they seemed to be a little high for the work involved. But, over the course of time that I have been in property management, I have seen many different types of tenants and found that overall, the money charged to the owner is well worth it, probably too cheap. Consider the following costs and efforts expended by the property manager:

  1. Advertising Costs
    Advertising is expensive. Just running an ad in the paper over the course of a month could run up a 3 digit bill. But further, many realtors have websites, with incur monthly costs as well as time and effort to gain exposure on the web. And what about the costs of signs and fliers? Truly, advertising carries a high cost.
  2. Communication Costs
    In today’s world, a realtor almost has to have phone, internet, and email connectivity to be able to make a living. Most realtors go a step further and maintain their own website, in order to generate more exposure for their properties. So just the costs alone of these services tend to be high, and the time it takes to accept phone calls, check emails and voice mails can pile up quickly.
  3. Office Costs
    Many realtors do not own their own office, however they pay an office rental fee to their broker for use of an office inside the realty. These costs tend not to be cheap, either.
  4. Gasoline and Automotive Repair
    In times past this wasn’t as much of a problem as it is today. Today, many realtors are just getting scalped at the gas pump, and driving back and forth to your property and waiting for the no-call, no-show prospective tenant is extremely expensive. I have begun to call contacts just before I spend the time and gas to get to the property.
  5. Ongoing License and Dues Costs
    All realtors have to pay for license renewals, and most realtors are members of a local board of realtors. Of these, many are also paying dues to have access to their local MLS (multiple listing service). Combined, these costs can add up to 4 digit per year expenses.
  6. Tenant Maintenance
    This is the most costly for property managers. No matter how much screening is done to a perspective tenant, there is still no guarantee that the tenant will pay, or will take care of the property. As I have begun to manage more and more tenants, I find that a small percentage of the tenants costs me a ridiculous amount of time and money just getting the rent from them every month, not to mention the costs associated with cleaning up their messes.

So now that you are aware of some the costs that property managers incur, let’s look at the fees they charge. Typically, the property manager is going to charge 10% of the rent every month for maintenance of the tenant. You may think that is a high costs, but again, consider the costs above that the property manager is paying for. Also, property managers are moving towards charging additional money to handle repairs. Again, having to manage a contractor and checking up on the work to make sure it is done correctly is worth the additional money. Another fee that managers are charging these days in an up front fee of a fixed amount to cover initial costs, particularly in advertising and setup costs.

So the bottom line is, do you want to hassle with everything mentioned above, or would it be easier to just let the management company handle it? Obviously it is up to you, but you should be a little more informed about what it takes to manage properties now.

4 thoughts on “Property Management Fees

  1. Jeffry,
    Great article – answered a lot of my questions but also brought up a few – Do most property management companies charge a set-up fee. If so what does it include? When do you look at the actual property, review the books, etc to determine if you want to manage the specific property?

    Thanks and keep up the good work!

    • Georgia:

      Property management companies often charge up front fees. Usually something like have the first month’s rent. There may be additional fees.

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