Property Management Costs

Today we're going to talk about how much a property manager costs. You may be looking into property management and wondering what sort of fees are involved. Today, we're here to break it down and take a deeper dive into the costs associated with property management.

Find a Professional

Before we get into costs, it's important to make sure that you're actually dealing with a property management professional. There are a lot of people who can assist you with your rental property. There are some real estate agents that dabble in rentals, as well as maintenance technicians that call themselves property managers, and they're usually able to take some of the rental-related items off of your plate.

If you're looking for professional property management, you really want someone who specializes in the full scope of property management. You may have heard us talk about the Property Management Trifecta, which is leasing, accounting, and maintenance, and all the subsets below those three primary focuses. You'll want to make sure that whoever you're using is a well-rounded property manager who's able to take all of those things off your plate, not just one or two of them.

So again, be sure that you're actually working with a professional property manager, and not someone who just dabbles in one or two areas of rental properties.

Management Fees

When looking at the cost associated with property management, the first thing is the property management fee itself. There are a couple of different structures to property management fees.

The first is percentage based. In this scenario, the property manager will calculate their fee based on the rent and income that's collected at the property. Sometimes there's a minimum and a maximum dollar amount that can be charged, so that's something you'll want to keep an eye out for.

There are also flat fees. Some property managers charge a flat monthly fee or annual fee for their service. Like the percentage based fees, flat fees may have a minimum and a maximum amount, so you'll want to read all of the terms of the management agreement. The flat fee is typically a nice, simple way of pricing.

Finally, there are hybrids, which include a percentage and a flat dollar amount. Sometimes that flat fee is per unit or per property, so you'll want to take a look at those things and weight the pros and cons of each type of pricing structure.

Ancillary Costs

The second thing that you want to look at is any additional fees. It's pretty common that there are going to be some additional fees that a property manager may charge outside of the management fee itself. Some of those things may be leasing fees, lease renewal fees, cost of evictions, early termination, or setup fees. It's important that you take a look at those things and budget for them.

One of the most important factors about ancillary fees is transparency. When speaking with a property manager, you'll want to make sure that you discuss all of the ancillary fees. We recommend going to the property manager's website and making sure that they have their fees posted online. If their fees are hidden in fine print in a long property management agreement, you may want to look a little closer to see what else may be in the agreement that wasn't mentioned on the phone.

Maintenance Costs

Lastly, you'll want to look into any maintenance costs that may be charged. There are two common setups for property management companies; in-house maintenance where they have their own technicians on staff, or third-party maintenance, where they hire outside vendors to do maintenance and repairs on their managed properties.

Typically, there's a cost associated with either setup. For the third-party vendors, there's often a maintenance markup (also known as a maintenance coordination fee). The property manager may charge either a flat fee, or a percentage markup on maintenance invoices. Companies that have in-house technicians, will typically have a profit margin built into the hourly rate.

So it's important to know whether the technicians are in-house or third party, and determine how much the hourly rate or maintenance coordination fees are.

Ways you Can Save by Hiring a Property Manager

So, we've spoken about a few of the fees associated with property management, but I'd also like to touch on some of the savings that come along with using a property manager. There are definitely some costs upfront with hiring a professional, but on the flip side, there's also some savings there.

Time Savings

The first one you want to think about is time savings. If you own a rental property, you'll want to do an evaluation of how much time you're spending at your property, and working on your property. Time on the phone, putting out little fires, making calls, sending emails. Your time is valuable. So when you hire a property manager, they're going to take all that stuff off your plate. You really want to do an honest assessment of how much time you're spending at your property and how much time you're going to save. Time is money, and so there will definitely be a savings there if you can have somebody take those things off of your plate.

Shorter Days on Market

The second way you can save some money on hiring a property manager is that typically when a property manager lists a home, you're going to have shorter days on market. They're usually able to do better marketing, take more better photos and write more compelling ad copy, which cuts down the average days on market. This ultimately adds to your bottom line.

Accurate Pricing

A professional property manager will typically have the pricing dialed in, which shortens the days on market as well. If you have the proper pricing on a home, shorter days on market, again, equal more money for you.

Higher Renewal Rates

Lastly, when a resident is in a property with a property manager, the renewal rate tends to be higher. You typically have higher resident satisfaction, and maintenance work orders go smoother and faster when you have a property manager involved. So, you have happier residents that tend to stay longer. If you are familiar with rental properties, you'll know that turnover is one of the biggest expenses that will really eat into your bottom line. So, making sure that you get a high renewal rate is very important. So, with property managers, you typically have happier residents and a higher renewal rate.

So, those are some of the cost savings that you'll see with a property manager.

We Can Help!

We're happy to discuss this further with you if you'd like. Please feel free to give us a call at (845) 345-4477, or set up a discovery call below.