Jennifer Simonson draws on two decades as a journalist covering everything from local economic developement to small business marketing. Beyond writing, she tested entrepreneurial waters by launching a mobile massage service, a content marketing firm.
Jennifer Simonson Small Business WriterJennifer Simonson draws on two decades as a journalist covering everything from local economic developement to small business marketing. Beyond writing, she tested entrepreneurial waters by launching a mobile massage service, a content marketing firm.
Written By Jennifer Simonson Small Business WriterJennifer Simonson draws on two decades as a journalist covering everything from local economic developement to small business marketing. Beyond writing, she tested entrepreneurial waters by launching a mobile massage service, a content marketing firm.
Jennifer Simonson Small Business WriterJennifer Simonson draws on two decades as a journalist covering everything from local economic developement to small business marketing. Beyond writing, she tested entrepreneurial waters by launching a mobile massage service, a content marketing firm.
Small Business Writer Lauren Holznienkemper Deputy Editor, SMBLauren (Hansen) Holznienkemper is a staff writer and deputy editor for the small business vertical at Forbes Advisor, specializing in reviewing and testing HR, payroll and recruiting solutions for small businesses. Using research and writing skills f.
Lauren Holznienkemper Deputy Editor, SMBLauren (Hansen) Holznienkemper is a staff writer and deputy editor for the small business vertical at Forbes Advisor, specializing in reviewing and testing HR, payroll and recruiting solutions for small businesses. Using research and writing skills f.
Lauren Holznienkemper Deputy Editor, SMBLauren (Hansen) Holznienkemper is a staff writer and deputy editor for the small business vertical at Forbes Advisor, specializing in reviewing and testing HR, payroll and recruiting solutions for small businesses. Using research and writing skills f.
Lauren Holznienkemper Deputy Editor, SMBLauren (Hansen) Holznienkemper is a staff writer and deputy editor for the small business vertical at Forbes Advisor, specializing in reviewing and testing HR, payroll and recruiting solutions for small businesses. Using research and writing skills f.
| Deputy Editor, SMB
Published: Aug 1, 2024, 8:09am
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
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Hiring a property management company can significantly ease the burden of managing your rental properties. Not only can they save you time, but they can potentially help you generate higher revenue from your passive investment. When considering hiring a property management company, the first question that usually arises is, “How much is this going to cost?” The answer is, it depends. We have broken down the cost structure, extra fees and tips to vetting a potential management company to help you make the best decision for your property.
Hiring a property management company to streamline the operations of your rental properties can be a game-changer. Property management companies usually charge for their services in one of two ways. They either charge a percentage of the property’s monthly rent or a fixed monthly fee for their services. Understanding the differences and deciding which option works best for you can help you make a decision that aligns with your financial goals.
The most common way property managers earn money is to charge a percentage of the rent money. The percentage varies by market, condition and property size, but a typical percentage ranges from 8% to 12%. This method establishes a straightforward connection between a property’s performance and the manager’s pay. It incentivizes property managers to keep a high occupancy rate and to rent the unit for as much as possible.
Alternatively, property managers may opt for a flat-fee structure. This is where property managers charge a fixed fee regardless of the property’s rental rate. While fees can vary depending on the local real estate market, an average fixed fee is $100 to $150 a month for a single-family home. This fee structure is appealing for its simplicity. Flat fees are typically established based on the scope of services provided rather than the rental income.
The price of a property manager is dependent on several factors. One of the most important factors is the famous real estate mantra—location, location, location. Just as there can be vast differences between real estate prices from one zip code to another, the same is true for management fees. Urban properties in bustling city centers may command higher management fees because of the complexity of managing properties in dense areas. On the other hand, properties in more remote locations might see lower management costs because of reduced demand and possibly fewer responsibilities. This geographical pricing strategy ensures that property management fees are a reflection of the local real estate market’s dynamics.
The type of property being managed can also play a role in determining the management costs. Single-family homes are typically much easier to manage than multi-family homes. Dealing with multiple tenants in such properties requires careful coordination of lease agreements, rent collection and addressing the concerns of multiple tenants. This increase in workload demands higher management fees. Similarly, larger single-family properties with more square footage than average can require more time, which can also increase management fees.
Finally, the price of a property manager will depend on their list of services. Some companies have a simple pricing structure for core services, such as rent collection, while other companies offer a whole list of services including lease renewals, meticulous property inspections, ongoing maintenance, tenant communications, evictions and other advanced services. The more services a company offers, the more it will likely charge.
Be aware that beyond the monthly fee for managing properties, many companies charge extra fees for specific circumstances. These additional fees should be detailed in the initial contract agreement, but it’s always wise to ask about them before choosing a company. Below are some of the most common additional fees.
A Setup Fee is the initial charge that some management companies require to begin managing your property. This covers the administrative costs of setting up a new account and can vary depending on the complexity of your property’s needs.
A Tenant Placement Fee is a one-time charge for finding and placing a new tenant in your property. It typically covers marketing the property, screening potential tenants and executing the lease agreement. Not all management companies charge a Tenant Placement Fee, but those that do usually calculate it as a percentage of the first month’s rent.
A Maintenance Fee is a charge for the upkeep and repairs of your property. It can cover the cost of everything from routine maintenance services to normal upkeep to emergency repairs. This fee can be a flat rate or a percentage of the rent.
An Eviction Fee is charged when a property manager must handle the eviction process for a tenant. Evictions typically happen when tenants fail to pay their rent. The fee covers the costs of the legal proceedings, paperwork and attorney expenses involved in the eviction process. It’s typically an additional charge to the regular property management fees and is only charged when an eviction takes place.
A property management company can charge an Early Termination Fee to property owners who terminate their management contract ahead of the agreed-upon end date. This fee covers the company’s lost revenue and the administrative work required to terminate services ahead of schedule. The details of the fee should be specified in the original management agreement.
Before entrusting a company with the management of your investment property, make sure you vet them properly. Skipping this step could leave you dealing with headaches such as sloppy tenant management, unexpected financial hits or even property neglect. To properly vet a company, follow these tips before signing on the dotted line in order to safeguard your real estate.
Hiring a company to manage your rental properties can help save you the headache of dealing with everything from tenant relations to maintenance. Finding a property management company that meets both your high standards and budget can be a challenging process. Once you find the perfect company for your needs, however, it will prove to be an invaluable decision.
A property manager is the go-to between property owners and tenants. They handle numerous responsibilities including marketing vacancies, screening prospective tenants, setting competitive rental prices, collecting rent and handling maintenance and repairs. At times, they have to deal with tenant evictions.
Property management fees are typically calculated in two ways: as a percentage of monthly rental income or as a flat fee. The most common way is a percentage of the monthly rental income. Fees generally range from 8% to 12% of the monthly rent collected. Under the flat fee model, the property manager earns a predetermined set fee regardless of rent income. An average fixed fee is $100 to $150 per month for a single-family home.
A property manager can be an invaluable asset, especially for property owners who own multiple properties or who live far from their rental units. Property managers can help relieve you of stress by handling the day-to-day operations of your rentals. Good property managers not only maintain your property’s value but can also increase it by ensuring high occupancy rates, timely rent collection and proper maintenance.
