Some Things to Consider in Determining the Costs of Hiring a Property Management Company
Property management costs vary significantly depending on whether it is a commercial or residential property but generally speaking, they fall between 4-12% of the monthly rent. The typical rental property management cost for a single-family home is 10%. This charge will change depending on the number of properties handled, the number of units in each property, the location and state of the property, and most crucially, the services that are covered by that charge. Other pricing methods include flat fees or fees that set both a percentage and a flat cost and ask you to pay whichever is lesser or bigger.
A reputable management company primarily relies on the management fee as their source of income rather than the leasing fees. As a result, standalone leasing costs tend to be higher and do not include any additional property management services. A transparent fee structure is in place to avoid high tenant turnover. Leasing fees are used to cover the expenses incurred by the manager in finding a renter for your property, which includes their time, travel, and other related costs. Some property owners, on the other hand, do not prefer leasing fees and look to management fees instead as it provides motivation for the management business to attract more long-term renters.
When it comes to the contract, make sure that it explicitly states that management fees will be deducted from “collected rent” rather than “scheduled rent” or “rent due.” This term will not only protect you from having to pay management fees in case a tenant stops paying rent but also help you avoid legal issues. The majority of property management companies do not require vacancy fees so it is essential to be cautious if they do. Some management agencies may charge a vacancy fee of $50 when a tenant is found. Lastly, do not forget that other companies expect to receive the monthly property management cost even if there is no income.
In hiring a property management company, making your choices based simply on who charges the lowest fee is not a good idea. Always remember that the company you choose will be the one managing one of the most valuable assets therefore in determining the cost, it must be compared to what other companies are charging, the range of services offered, and the quality of those services. Compromising the standards to win the competition and attract more customers and offering a cheaper price for services may appear as the company’s indirect way of saying that it does not offer high-quality services. This game of reducing the quality of services while still aiming to rake high profits is a serious issue in the property management industry everyone should beware of.
Making an accurate pricing comparison across property management companies and failing to fully identify all potential expenses for property management are some of the most common blunders. A higher number of expensive back-end fees might easily offset a smaller management fee, and the opposite is also true. If the management company doesn’t do a decent job, your payment still goes to waste even if it is very low. In actuality, cost is one of the last factors one should take into account. Not because it is the least significant factor but rather because you should only consider the cost and start hiring the company once you have determined that their quality of services is specifically suited to meet your demands.