How much does property management cost?
Are you considering real estate investment but don’t want it to take over your life? You’re not alone — less than half of landlords — 45% to be exact — actually manage their own properties. Those that turn over responsibilities to property management services gain plenty of freedom in exchange for a monthly fee. If you want to enjoy the passive income of real estate investment but need help managing it all, then hiring a property management company can be just what you need to proceed with confidence. But how much do these services cost? Is there a setup fee, and how much do these companies charge per month?
What do you get with property management services?
Landlords get a lot of benefits from hiring a property manager. For a flat fee or percentage of monthly rent, a full-service property manager will:
- Collect rent and deposits for all your rental properties.
- Conduct new tenant screenings.
- Write leases and contracts.
- Market your property.
- Be the main point of contact for the resident.
- Handle move-ins and move-outs.
- Handle inspections.
- Take care of maintenance calls.
- Bookkeeping, collections, and accounting.
Before you hire a property manager, make sure they can do everything you need. Not all investment property management companies are the same, and some services on the list above may not be included. Some are local, and others can operate on a national level.
It’s also wise to compare quotes to see which company will give you the most bang for your buck. Overall, it’s best to invest in a company that can do the most for you so that you can get the full benefits.
Types of Property Management Fees
So let’s get down to the big question: how much does property management cost? Overall, property management fees vary based on the services you require and where your property is located.
Property management companies may charge a flat rate fee, a percentage of the monthly rent collected, or there may be a combination both billing methods. For example, at Marketplace Homes Property Management, we either charge 8% of the monthly rent or a flat rate $120/per unit minimum. Across the board, the typical fee is 8-12% of the monthly rent.
There are also fees for other services, such as a “fill fee”, which usually includes the advertising, tenant screening, and move-in process for the rental. There may also be lease renewal fees, maintenance fees, and eviction fees (if ever required). Since each company is different, you should be aware of the fees before signing an agreement.
Factors That Affect Property Management Costs
Since every investment is unique, it’s common to see custom pricing based on the unit’s needs. One of the most significant factors is the property’s monthly rent. More expensive properties typically require more management and oversight. This is why a percentage of monthly rent is a fair charge for different property types — from a large single-family home rental to a small condo.
Another factor is location. Properties located in high-demand areas can require more costly management services. However, if you choose a national property management program like Marketplace Homes, you can just get the standard 8% rate.
Additionally, the level of services provided can impact the cost, as managers that offer comprehensive services like tenant screening and maintenance management may come with a higher price. Ultimately, it’s important to carefully consider all of these factors when choosing a property management company and their fee structure.
Flat-rate vs. Percentage-Based Fees
Flat-rate property management fees charge a set amount for a particular service regardless of your rental income. Meanwhile, percentage-based fees charge a percentage of the monthly rent so that cheaper rentals cost less than more expensive rentals. In some cases, large portfolio management can be negotiated into a large flat rate fee.
Understanding the differences between these two fee structures can help you make informed decisions about setting or paying fees.
Additional Costs to Consider
Landlords should know that the monthly management fee isn’t the only cost associated with hiring a property manager. There are typically additional fees for services like a tenant placement fee, maintenance costs, repairs, and evictions. Depending on the company, they may also charge you for marketing costs.
Get a clear understanding of all these costs so you are aware of all the expenses. This ensures that you select a property manager that aligns with your budget. Not all property management companies charge the same fees, so it’s best to shop around to get the best deal.
Choosing to DIY Property Management
Of course. Deciding to hire a property manager is a personal decision and should be done carefully after considering your schedule, abilities, and the cost of property management in regard to your budget.
If you decide to DIY manage your portfolio, understand that it can become like a full-time job’s workload. The accounting, time spent on the phone with tenants, maintenance calls, rent collection, lease drafting and renewal, filling your units, and screening applicants easily add up.
However, there are ways to make these processes easier. Using reputable accounting software, a system for remote rent collection, and customer management software that can take messages during off hours can help you significantly. If you have under 5 properties, you can potentially manage them yourself with the right tools and know-how.
Property owners that don’t have a deep knowledge of real estate law can find themselves in hot water if they do not screen applicants correctly or draft a flawed lease agreement. Investors with larger portfolios can quickly become overwhelmed by the number of calls and interruptions from resident needs and lease renewal tasks.
Is rental property management right for you?
In all, hiring a property management company is a personal choice based on your unique needs and abilities. If you decide to DIY, you can save money but spend more time with boots on the ground. If you pay a property manager to help, you can free a lot of time which can enable you to travel or go after other pursuits.
There is no one-size-fits-all approach to choosing the right path. If you need help deciding the best property management solution for you or if you want a free quote for managing your portfolio, give us a call.
Alicia Persson is the the real estate content writer for Marketplace Homes. She has several years of experience working in real estate teams that specialized in investments and property management. Before she joined MH, she was a freelance writer for 7 years, providing real estate and home living content for boutique digital marketing agencies.
She is a proud University of Virginia Masters graduate and enjoyed her undergraduate years at the University of Mary Washington. When she is not writing, she is playing keyboard in a local 90’s band in central Virginia or spending time with her amazing family.