What are Rental Property Management Costs?

Rental property management costs refer to the cost incurred when you hire a property manager to take care of the property you have placed on rent. 

Although it's a significant cost, hiring a good property manager can make your rental property more valuable. Property management companies find tenants, which means more profit for you. It also gives you more time to grow your real estate business.

When you hire a property manager, you're giving them all the tasks related to managing your rental property so you can focus on your business. The rental property management costs depend on what they do, the company's rules, where your property is, and what type of property it is.

Average Rental Property Management Cost

The rental property management cost depends on how much work you want the management company to do. Usually, a monthly management fee is around 8% to 10% of the rent for a single-family home. It's rare to have a fixed monthly fee for property management companies, so make sure you read your contract carefully to understand how you're being charged for this basic management fee.

Rent Paid vs. Rent Due

While going through the contract, make sure to check whether the fee is based on the rent that's due or the rent that's paid. It's better if it's based on the rent paid because you only pay to the property management company when you receive rent. You won't pay if your property is empty for a while or if a tenant doesn't pay on time. When property managers only get paid when they collect rent and fill vacancies, they are more motivated to handle things quickly.

Common Types of Rental Property Management Costs

A property manager can handle tasks like finding tenants, checking their backgrounds, and handling property repairs. Some property managers can even handle tenant evictions if needed.

In addition to the basic monthly fee, there are other fees you might come across in a typical contract. Here are eight common ones:

• 
  Setup Fee: This is a one-time fee when first hiring a property management company. It helps set up your account and may include an inspection of the property.
• Management Fee: This is a percentage of the monthly rent that covers general management services.
• Maintenance Fee: You'll need to pay for property maintenance throughout the year, typically up to 1.5 times one month's rent. You can choose whether the property management company requires your approval for maintenance or if they can handle it without asking you.
• Vacancy Fee: If your property is empty and needs to be re-leased, you might be charged a fee, usually about one month's rent or a percentage of it.
• Lease Renewal Fee: This fee is for renewing a tenant's lease annually.
• Tenant Placement Fee: This fee is for finding and placing tenants in your property. It might include advertising, tenant screening, lease preparation, and move-in preparations.
• Eviction Fee: If the property management company needs to evict a tenant, they will charge you a fee, often a few hundred dollars plus any court costs.
• Early Termination Fee: If you end your contract with the property management company before the agreed-upon time, you may have to pay an early termination fee, depending on the contract terms.

Other Factors Affecting Rental Property Management Cost

Rental property management costs depend on the services needed to keep your rental property profitable. Not all properties are the same; some need more work than others. 

Several factors affect the fees charged by property management firms.

Property Quantity/Type/Size

Managing a multi-family building is more complicated than a single-family home because there are more units and tenants. Factors like square footage, number of bedrooms, and unit count can influence the cost. Short-term rental properties might have different fees than long-term ones.

Property Condition

Older rental properties often require more repairs and upkeep than newer ones, which can lead to higher fees.

Market Competition

In smaller markets, you might pay a higher rental property management cost. Smaller markets have fewer property management companies, which can increase demand and fees.

Conclusion

Rental property costs depend on how much you want to be involved in overseeing your real estate investment daily after hiring a property manager. Managing rental properties can be a significant time commitment. Consider the time you'll spend on tasks like finding tenants, preparing for new ones, and handling property issues. Eventually, you might realize it makes more sense to invest in a professional property management company to handle these tasks for you.

Guardian Property Management provides tenant placement and property management services to maintain your rental property, helping you make more money. With Guardian Property Management, homeowners can earn up to 20% more rental income. 

Find out more about Guardian Property Management.

FAQs

How much does a property manager cost in the US?

Property management companies usually ask for a monthly fee of 8% to 12% of the rent you collect. So, if your property rents for $1,200 monthly, you'll probably pay a fee between $96 and $144. Some companies may not charge a fee when your property has no tenants.

How do you calculate management fees?

Usually, management fees are a percentage of the money being managed, ranging from 0.25% to 2% or even more. The exact percentage depends on the type of investment and how the advisor charges their fees.

Can I negotiate management fees?

You can discuss and try to lower your property management fees, but there are some factors to remember when you do. Sometimes, you won't need to negotiate if you find a package that fits your needs perfectly!