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Successful landlords and investors know that hiring effective property managers is more of a capital expense than a normal one.
You see, the best property managers in the industry will help you keep your rental units occupied throughout the year, but that’s not all. The very best will also help you increase your overall ROI while also freeing up some of your valuable time so you can shift your attention to growing your business to new avenues.
How Does Property Manager Fees Work?
Property managers tend to structure their pricing modules in two basic methods, including a flat monthly fee or a percentage of the total rent collected. Let’s discuss both of these fee structures individually:
A Percentage of the Monthly Rent
Most property managers charge a monthly fee based on the monthly rent collected. You may or may not have to pay the property manager a fee when the property is vacant.
If your property is vacant, management companies will either:
- Charge a fixed fee, or
- Charge a fee based on the anticipated rent collected on a monthly basis once the property is leased to new tenants.
Sometimes, vacant properties tend to require more effort from the management. This may include weekly inspections to check for break-ins or perhaps for squatters.
Fixed-Rate of Property Management
Some property managers offer fixed fee structures instead of collecting fees based on a percentage of the month’s rent. Usually, this fixed fee is determined based on the type of property, its square footage, and even the variety of services that will be provided.
The amount of the fixed fee may be negotiable and the cost of services is bound to vary from market to market. Where a flat fee price structure may seem like a great idea at first glance, management companies that collect fixed fees aren’t going to be as motivated at their job as compared to those that strive to maximize their income based on your rental income.
Additional Fee Types
Property management is a form of service, and therefore it isn’t always all-inclusive. In some cases, property management companies will charge extra for additional services that are above and beyond the monthly rate they usually charge clients.
Some forms of additional fees include:
- Contract setup fees
- Overseeing and maintaining vacant properties
- Leasing long-time vacant properties
- Collection of late rent payments and penalty charges
- Maintenance and repairs
- Routine inspection fees
- Collections and evictions
- Contract termination fees
Factors That Affect the Cost of Services
- Type of rental units
- Size of rental units
- Condition of property
- Quality of neighborhood
- A la carte vs. Full-Service Pricing
- Competition in the market
Final Thoughts
While the cost of hiring a property manager may require some serious budgeting, their services pay off when you’re trying to grow your real estate business.
With a professional property manager by your side, you can rest assured that small tasks associated with keeping your properties profitable will be much easier to carry out. While they focus on the business end of things from a management perspective, you can put efforts into improving your property’s affordability, personalization, and authenticity as opposed to worrying about your safety.
If you haven’t hired a property manager already, click here to learn more about our services and how an experienced property manager can share some of your burdens.