Any landlord can attest – what appears as a simple cost on paper can turn out to be a major benefit. In many cases, it is only $0.10-$0.20 an hour because PM companies work 24/7/365. The term “fees” can seem like a scary term, but these small costs of doing business tend to reap enormous returns for landlords by saving time and reducing turnover expenses. Below are the fees you might see.
Management Fee– This fee is crucial in ensuring sustainable & high-quality service. Management fees can range from 5-15% of the monthly rent charged to a tenant. Factors that may cause fee variance include the diversity and quality of a landlord’s portfolio, the market in which the property exists, and the management services needed.
Leasing Fee- A leasing fee allows the manager to effectively attract and land quality tenants. It covers the cost of marketing the property, phone calls, showing it to prospective renters, as well as the time and effort associated with reviewing applications, and processing lease paperwork. It varies from company to company ranging from 50-100% of your tenant’s first month’s rent.
Vacancy Fee – Even without a tenant, it is the responsibility of the manager to make sure a property stays in livable move-in condition, perform property checks, and keep utility services on while still answering any landlord questions. These fees can be prorated once a tenant is landed. Vacancy fees can be a %, flat fee, or no additional cost.
Set-up Fee: This is a one-time fee that allows the manager to fully prepare your account. It can take time and effort to ensure accuracy so through services can be performed. A management company is leveraging tools to streamline communications with insurance companies, utility companies, maintenance, and banks. Once the proper amount of time is dedicated to the initial set-up, the cost can be completely worth it to have quality service.
Maintenance Fee: Maintenance is handled 1 of 3 ways. The management company has maintenance employees, third-party relationships with experts or a combination of the two mixed together based on the need. Working with a management company that has an established maintenance system in place and its size is large enough to have consistent service is a very positive thing. It ensures quality control and understanding of expectations from everyone involved. Maintenance fees can be in the form of an upcharge, flat fee, or they take the discounts received from the vendor in negotiations.
Just remember, management companies are designed to charge for services that you need, it isn’t meant to “nickel-and-dime”. Rather, it helps guarantee that the PM company upholds its obligations in the contract. Example: A new property has lower maintenance costs thus pays lower premiums. The best advice is that “you will pay for what you get” and these fees are surprisingly affordable even for top quality service. As a landlord, be sure to ask questions on their process, procedures, and policy to understand their values mirror yours.