Real estate property managers typically charge around 8% to 12% of monthly rent for basic tasks, including collecting rent, communicating with tenants and arranging for repairs. They may also collect an array of fees for various additional services, ranging from placing new tenants to overseeing evictions. Property owners can generally select and pay for only the services they want or need. Anyone who is thinking about investment properties could benefit from working with a financial advisor to understand their bigger financial picture.
Property Manager Fees
Real estate investing can be an excellent addition to any portfolio. Real estate offers investors the opportunity for ongoing income, price appreciation and diversification. However, the work of overseeing rental property requires significant time, energy and attention and many property owners hire property managers for the job.
For a property owner planning to contract with a property manager, it’s important to have an idea in advance of what the costs are likely to be so that you can be prepared to find the right manager. Here’s a rundown of typical fees and services that property managers are likely to charge:
- New account fee: Property management firms often levy a fee of a few hundred dollars to set up a new account. This covers initial property inspection, bookkeeping costs and other expenses.
- Tenant placement: When the property becomes vacant, the property management firm will typically charge 50% to 100% of a month’s rent in exchange for marketing and advertising, property showings, screening applicants and getting the lease signed.
- Lease renewal: If a tenant is renewing the lease, the manager may charge a smaller fee for negotiating a rent increase or other changes and getting signatures on the new lease.
- Monthly fee: The monthly fee is an ongoing charge for handling routine management tasks such as collecting rent, answering tenant questions and complaints and scheduling repairs. This is usually 8% to 12% of monthly rent. Some managers charge a flat fee of around $100 a month.
- Maintenance fees: If a property management company has its own maintenance crews on staff, part of your management contract may call for you to pay the management firm directly for labor and materials for specified maintenance.
- Major project fees: If a property manager is expected to oversee a major renovation or upgrade of the property, the owner may be asked to pay a project management fee of 10% of the cost of the renovation.
- Eviction fees: When a tenant must be evicted, the property manager will charge a fee of a few hundred dollars or so plus attorney’s fees and court costs for overseeing the process.
- Late fees: When tenants pay late, the property manager may keep a portion of the late fee that is charged for past-due rent.
- Property inspection fees: Rental properties should be inspected a few times a year to make sure the property is in good condition. The property manager may charge a small fee for this if it is not included in the monthly fee.
- Vacant unit fee: Managers may have to pay special attention to vacant units, turning utilities off and on for showings and checking frequently to make sure vandals haven’t damaged the property or squatters haven’t moved in. They may charge an extra fee for watching unoccupied units.
In addition to the typical costs, there could be additional costs based on what happens during the business relationship. For example, a property management contract is normally for a year and if the property owner decides to terminate it early, the property management firm may assess a contract termination fee.
Benefits of Property Management
An absentee property owner who lives a long way from the property may find it difficult to do property showings and perform other tasks that require physical presence at the address. For these owners, property managers are almost a necessity. For other owners, having a property manager can save lots of time, energy and attention to devote to other tasks.
Property managers can potentially save some money. An established property manager will have a network of reliable service people to do repairs and maintenance and may be able to get discounts compared to the price the owner would pay. When maintenance and repairs are handled swiftly and competently, it can increase the property’s value and enhance price appreciation. A well-kept property may also experience fewer vacancies, which can increase income and profitability.
Real estate investments can be rewarding to your portfolio but can cause many headaches in order to properly operate. Property managers charge monthly fees ranging from 8% to 12% of the monthly rent, plus other fees for additional chores such as placing new tenants, handling repairs and overseeing evictions. Property owners can generally pick and choose from the services they want to find a property management solution that they can afford and that fits their needs.
Tips for Real Estate Investing
- A financial advisor can help you determine whether having a property manager makes economic sense for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re just getting started, you can better understand the impact of real estate investing for you by reading our guide.
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