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Know Property Management Fees, Costs & What To Expect

As per the 2021 State of the Property Management Industry Report released by Buildium, the number of rental owners looking for property managers who offer additional services rose as much as 11 percentage points. The most sought-after services by property owners included:

  • Rent collection (90%)
  • Maintenance (81%)
  • Evictions (77%)
  • Leasing/marketing (69%)
  • Property inspections (67%)
  • Cleaning (55%)
  • Accounting/bookkeeping/taxes (45%)
  • Construction/renovation (37%)
  • Outdoor services (32%)

With an ever-expanding portfolio of value-added services offered by property managers, their growing importance cannot be overstated. If you consider hiring a professional property management company, this guide page will help you get a fair understanding of the property management fee charged.

Factors that Impact Property Management Costs

Even before we get into the typical components of the average property management fee, let us look at the factors that impact them. Key among them being:

  • Type of property
    Typically, multifamily properties attract a lower fee than managing a portfolio of individual houses that are spread across. Similarly, the size of the property also offers an advantage. For example, an apartment building with 20 units turns out to be far more economical than a 5 –unit building.
  • Location of Property
    While this sounds contradictory, the average property management fee tends to be higher for lower-end neighborhoods as rent default rates, eviction rates are higher, and the work is associated with maintenance and property management.
  • Condition of property
    Going by the same logic, a property that is dilapidated and requires more maintenance, and is likely to attract low-quality renters, is typically charged more in terms of the property management fee.

6 Types of Property Management Fees

The answer to what property management companies charge lies in understanding the following constituents:

  1. Onboarding Fee
    Also known as a setup fee, this is a one-time fee that covers:

    • Initial Inspection
    • Cost of paperwork
    • Reviewing your portfolio’s books

    You could expect this fee to average $500.

  2. Property Management Fee
    Typically property management companies charge a monthly fee that ranges between 7-10% of the collected rent on a property. Alternatively some companies could charge you a flat monthly fee. The fee could vary slightly based on the location, size, quality of the property, and market conditions. This fee covers activities such as:

    The fee is either deducted directly from your account or billed to you, as per the terms of your contract.

  3. Leasing Fee
    To fill a vacant unit requires a property management company to advertise your property, organise showings, and effectively screen tenants. Filling your property with the right tenant at the right rental is where many of the property management company’s work lies.You could expect the leasing fee to be 75% to 100% of the first month’s rent. Yet, it is important to note that the fee structure should not reward high tenant turnover so that bringing in long-term tenants is as much in the interest of the property management company.
  4. Maintenance Fee
    Typically maintenance and repair services are one of the biggest concerns of property owners. And this is what property management companies do the best. From property inspections to cleaning and repairs, they help you build a hassle-free tenant relationship. While some property management companies have their maintenance teams, other companies prefer to contract maintenance services to a list of trusted professionals.To ensure that there is no scope for communication gaps and misunderstanding, you must discuss the following issues with the property manager concerning the maintenance work and the fee involved:

    • The protocol on who will approve maintenance and repair work.
    • What constitutes an emergency repair situation
    • Bill rates (per hour or per job)
    • Minimum Billing Time, and so on.
  5. Eviction Fee
    While eviction isn’t something you hope you need to deal with, you sure need to be prepared for contingencies. The eviction process is quite laborious and involves serving an eviction notice, working with attorneys, court appearances, the physical eviction process, and more. While some property management companies charge a flat fee (over and above the legal cost) for eviction, others could charge on an hourly basis. So, it is best to discuss the eviction fee in detail when signing the contract, so you don’t have to deal with any unbudgeted costs.
  6. Sales commission
    Property Management teams are also equipped to broker sales, should anyone want to buy your rental property. In such cases, a property management company typically works on a percentage of sales commission that varies between 1-3%.

Is Property Management Fee Tax Deductible?

In addition to knowing what property managers charge, it is also important to know if their fee is tax-deductible. While just like any other business owner, landlords are required to pay taxes on profits that accrue from their property, expenses including the property management fee are tax-deductible.

Pro-Tip- It will help to remember that any capital improvements that extend the property’s lifespan aren’t deductible, and these expenses can be depreciated over a period of time.

The details of the property management company fee must be discussed in detail at the outset so that there are no hidden costs that come up as a shock during the terms of the contract.

Know More About Beach Front Property Management Fees

At BFPM, we offer a wide range of property management services at a transparent fee structure with no fine print. Some of charges we have in place are the management fee (4-7%), setup fee ($500) and an off-site management fee ($29/unit/m). We like to remind clients that if they implement RUBS, those numbers are extremely manageable.

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