Landlords are swamped with work. They have to deal with repairs, screening potential tenants and more. Property managers can help make your life easier by handling the day-to-day management of rental properties for a fee. Based on your property type and services provided fees will vary – so here’s what you need to consider before your property management fees are calculated.
What will influence my property management fees?
Size of rental property
The sheer size and rooms in a rental property can definitely influence the level of work required. The number of bedrooms may also make your rental property more suitable as a sharehouse. This can significantly make the rental process more complicated with more tenants to deal with. So a larger house can make the property management fees higher.
The type of property
A property manager can manage all sorts of investment properties. They can take care of family homes, multi-family properties, commercial properties, and vacant properties. Again, the type of property can make your property more or less complex.
The condition of your rental property
A newer property may in fact cause fewer headaches for you compared to an older property. Older properties tend to have more maintenance issues which lead to more inspections and service callouts to ensure all essential maintenance is done. Proper maintenance will help keep your rental property in working order and help to keep your tenants safe.
Location of rental property
In some cases, a manager may charge higher property management fees depending on the location of your investment property. They will see the higher rent you command as a chance to ask for a higher property management fee.
The extent of the service provided
The number of services that a property manager provides can vary. It’s for this reason that your property management fees can fluctuate depending on what level of service you’re after. For example, if you are only hiring a property manager to collect rent then you won’t have to pay much more in fees compared to one that does regular inspections and continuously books maintenance services for you.
How your property management can be broken down
Let’s say you’re looking to invest in a property management company, but the fees are too big for your liking. Some companies charge as much as $500 just to set up an account with them. That might seem like such a lot of money at first glance; however, it’s really not so bad when we consider what these funds can be used for: Inspecting all properties and informing tenants who will now be running the show that they’ll need new checks sent from this point forward.
Monthly management fee
Some property managers charge you a monthly fee, which includes the management of your property. Contracts with these companies specify how this fee is calculated and what services are included in it. If one company charges more initially but provides better coverage for maintenance or other needs, then that might be an option worth looking into before signing on some other less expensive contract to save money upfront without paying attention to quality at all ends.
Your monthly management fee may be made up of the following:
This is a dollar amount that you pay your property manager on a monthly basis. This amount is calculated by taking into consideration the size of the property and the services provided.
Percentage of rent
It is more common for a property manager to charge you property management fees that are based on the monthly rent that your property yields. It will work out to be a set percentage of what your property makes in a month. Traditionally this percentage sits around 8-12% of the total monthly rent charged.
Rent due and rent collected
Read your contract with your property manager very carefully. It may state that your property manager will continue to charge property management fees even when the tenant doesn’t pay rent. So your property manager may continue to charge a fee for the rent due instead of the rent collected.
Tenant placement fee
A property manager may charge you a separate fee for placing a new tenant in your property. This could end up being a set amount or a percentage of the full month’s rent. This fee may include the work involved with advertising the property, searching for tenants, arranging move-in procedures, and preparing a lease agreement.
So before you consider hiring someone to manage your rental property, consider all the possible property management fees you may have to pay. Communication is key as you make a shortlist of potential property managers. You need to clearly establish what their fees are, what tasks are included in the fees, and how the fees are charged. It’s important to get honest feedback on these service features. Whoever can give you the most honest and detailed answers on property management fees will most likely be a good fit for you.