Renting out houses can be pretty financially rewarding. Each month, you use the rent that you collect from your tenants to manage the property and handle your own expenses.
The problem is keeping your head on straight. Being a landlord is a huge time commitment. You don’t have several hours a week that you can put toward it.
It’s for this same reason that many landlords hire a property manager. They’ll handle collecting the rent, setting the rental rates, marketing the property, and more.
As you can imagine, their services come at a price. Rental property management fees are probably the most important thing to consider when hiring a company. Keep reading to learn what to expect.
Factors That Play Into the Costs
When asking how much rental property management costs, the answer is, it depends. The size of the property, its condition, and the services that you want the company to perform all have a role to play in the fees.
Managing a large two-story house is a lot more difficult than taking care of a small two-bedroom home. It’s for this reason that the property manager will charge you more to handle the former.
Let’s say that you’ve got a property that you’ve flipped. It took a lot of work and renovations to make it livable, but you can rent it out now.
If you want a company to manage it for you, it’s going to cost you. Properties that have had tons of work done are more at risk for certain maintenance issues.
Extent of Services
If the only reason why you’re hiring a business is to collect rent, your rental property management company fees will be pretty manageable. The price racks up depending on how much you need your manager to do.
So, if you’re hiring them to take up rent, manage vacant properties, attract new tenants, and stay on top of repairs, it’s going to cost you.
Understanding Rental Property Management Fees
Now that you know what goes into the average management fee for rental property, you can start crunching the numbers. Here’s a rundown of everything your manager will charge you for.
Getting Things Setup
The first step of hiring a property management company is getting your account all set up. Companies usually never charge more than 500 dollars for this process.
It will cover the cost of inspecting the property and letting current tenants know that there’s a change in management. Not all rental management companies charge this fee.
Every manager is going to charge you a monthly fee of some kind to take care of the property. This charge covers the basics such as collecting rent, doing inspections, responding to maintenance calls and arranging for repairs.
The company will charge you a flat rate or take a percentage of the rent that you collect. The latter is much more common. The amount they take out of the rent varies from company to company, but it’s usually between 8 and 12 percent.
Whatever you do, check over the contract and make sure that you’re being charged for rent collected rather than rent due. If you don’t, the rental manager will be taking money from you even if the tenants aren’t paying their rent like they’re supposed to.
The leasing fee is also called the tenant placement fee. It’s the money that the property manager demands for placing new renters in your properties.
They’ll charge you a flat rate, or much more common, a percentage of the rent to perform this service. The amount you pay will cover the cost of advertising the vacancy at your property, drawing up the lease agreement, and tenant screening.
When it comes time to renew a lease, you’re most likely going to be making a few changes to your existing tenant’s contract. Well, your property manager will anyway.
Not all managers will charge you for this process. The ones that do will request a small flat fee or a percentage of the rent. You’ll never have to spend more than 200 dollars on this service.
Nine times out of ten, the property manager’s maintenance fee comes out of the regular monthly fee. It includes keeping your properties clean and taking care of the garbage. If you need to hire a vendor to shovel snow, mow the grass, or repair a roof, it will come out of this fee.
When your tenant calls your property manager to request a repair, you’ll use your reserve repair fund. This is a separate account that you pay into to cover the cost of emergency fixes.
It’s never easy to evict a tenant, but if they violate the lease or don’t pay their rent, it can’t be helped. You’ll have to pay a few hundred dollars for your property manager to take care of the eviction process.
The fee doesn’t include any costs that would occur if the tenant decided to take you to court. If a renter needs to break their lease early for whatever reason, there’s a charge for that as well.
Put Your Property in the Hands of the Best
Being a landlord can be pretty lucrative, but it’s stressful. Setting aside the time to market a property, fill the vacancy, and take care of general paperwork can be a lot on most people. That’s why a lot of landlords hire a management company.
The rental property management fees can be a lot, but it’s worth it when you think of how much they take care of. Put your property in the hands of the best. For more tips that will help you with all your real estate endeavours, visit the business section of our blog.