property management

Property Management Fees Explained

When you hire a property management company to serve as the liaison between yourself and your tenants, you want to be sure you’re getting the best possible property management services for the money. The services a property management company provides can range from ala carte to an all-in-one inclusive package. Along with that comes an array of fees for each. There is no set in stone fee structure we can provide you. But we can educate you on what common fees to expect and what each is commonly for. In the end it will be up to you to compare company fee structures and choose the best one that fits within your budget. Below are some of the most common fees and what service they provide.

Commission

This is an ongoing monthly fee charged to the owner to compensate the property manager for the responsibilities of overseeing the management of their property. This fee can vary from as little as 3% to over 15% of the monthly gross rent. In place of a percentage some managers may charge a flat monthly amount which again can vary from $50 to over $200 per month. All property management companies generally charge this fee.

Lease-Up or Setup Fee

This fee is charged to the owner to compensate the property manager for their initial time invested and resources used in setting up an owners account; showing property and/or other activities resulting in tenant placement. I guess you could look at it as a “finders fee” for placing a tenant in your property. Once a tenant has been placed and first rent income comes in, the property manager will deduct this fee from the rent proceeds. Some property managers have been known to require this fee upfront prior to tenant procurement. Usually this fee is non-refundable once the property manager has started the process of tenant procurement or any legwork has been initiated with the property. This fee can vary from none to as much as the first months rent, and usually is a one-time fee per tenant.

Lease Renewal Fee

This fee is charged to the owner when a property manager renews a current tenants lease and covers the costs of initiating paperwork or communication involved in implementing the new lease document. A property manager may also justify this fee if they perform a year end inspection of property. This fee can vary from none to $200 or higher, and may be charged every time a lease renewal is implemented.

Advertising Costs

Depending upon the property management company’s contract, either they will pay the advertising costs or the owner or they could split the costs. If the manager is willing to cover this cost, most likely they will charge the lease-up or setup fee as outline above. If the management company covers this cost make sure to find out what type advertising or marketing of your property is included. If it’s placing your listing on their own web site and other free online classified sites you may not be getting your monies worth. They are many good rental or tenant resource online web sites that bring in qualified tenants for a reasonable fee and you will want to consider these. And don’t forget about print media, yard signs, listing on the MLS or even an open house. Nothing is worst than having your property vacant, bringing in no money only because you or your property manager skimped on advertising. Read the rest of this entry »

Tags: ,

Related posts

Top 9 Questions to Ask a Property Management Company

Now you have an investment property the next step is to find someone to take over its management. Do your research and list questions you want to ask when interviewing prospective property management companies. Short list a few companies that interest you.

Phone them to ask questions then, if you are still interested; make an appointment to visit in person. Visiting in person gives you an idea of how they conduct their business and you can meet the people who will represent your interests. Here are the top five questions to ask when you interview a property manager.

1. Does the Company have a Dedicated Management Arm?

You want to know whether the property management company offers a complete service or if it is just a side line for a real estate office. Who and how will your property be managed. How many staff are in the office? Who will deal with you and your tenants if staff leave or are sick?

2. Does the Company Owner/Director get Involved in the Business?

Most property management companies are divided in two – selling real estate and managing real estate. Usually the company director is involved with the sales side as it is the high profit area of the business and a property manager takes care of leasing. If the company director is involved with the property management arm of the business, you may find they take it more seriously than others.

3. How well do they know the Rental Business?

Check with the property manager how long they have personally been dealing with property management. Just because you are talking to a well known real estate company does not mean their staff have a lot of experience. It also does not mean they provide top quality customer service.

Some property managers start out working in a real estate office as the office person and work their way up. Some move into property management and the rest into sales. Other property managers have specifically chosen property management as their career.

4. How long has the Property Manager worked for the Company?

You want a property manager that is stable in their employment, and who takes looking after your interests seriously. There is a lot of stress involved in property management, with a high turnover of staff. In six months time, you want to be talking to the same person to build a business relationship that understands your needs and the property. This is a good reason to look for a property manager dedicated to it as a career. Read the rest of this entry »

Tags: ,

Related posts