What are property management fees, and how can you get an apples-to-apples comparison?
If you called 10 different property management companies and asked this same question, you would get 10 different answers.
Flat Fee/Percentage Pricing Models
The very first fee you are going to hear about is the flat monthly fee or the percentage of rent per month fee.
If you’re offered a flat monthly fee, be sure to find out what exactly is included in that monthly cost. For example, are you going to pay that flat fee every single month when the property is under management even if it’s vacant?
With a monthly percentage of rent fee, you most likely are only paying a property management fee when that property is occupied. This gives your property management company an incentive to keep the property occupied and avoid vacancy. You also want to ask what is not included in the fee. For example, how about maintenance, and labor or travel time from property to property to tend to issues? Is there an upcharge or a project management fee that is going to be charged to you, or is that monthly fee inclusive of that?
You should also ask about home inspections. Is the property getting inspected once a year or twice a year, and is that included in your property management fee, or is there an extra price for that?
What about evictions? If you have a non-paying tenant and you have to go to court, is your property manager going to go there for you, and is that fee going to be included in your property management fees or is there going to be an extra charge?
Tenant Fulfillment Fees
Tenant fulfillment fees are usually the cost it takes to acquire a new tenant, get them moved in and execute a lease on their behalf. Usually it’s a percentage of the first month’s rent. Tenant fulfillment includes all the marketing, all the advertising, and all the promotion of your property. It’s going to include getting the unit rent-ready between tenants, and usually, it should include the background checks, credit checks, reference checks, and income verification for that tenant.
The tenant fulfillment fee should also include all the lease compliance documents that you need for the state you are in. This also might include the move-in inspection. When you collect a security deposit, you need an inspection to go with it. So, make sure you find out what is included inside the tenant fulfillment fee.
Lease Renewal Fees
Not all property management fees include the cost of lease renewals. The lease renewal fee generally is used to cover:
- Managing the relationship with the tenant and making sure the tenant wants to stay on for another year.
- Engaging with the tenant and offering an extension to their lease for another 12 months, based on the current market value of the home.
- Annual property inspection.
If the company you are interviewing offers a lease renewal fee, what exactly comes with that?
It’s important to know all the details of each fee. If you have any questions or you’d like to hear about how we charge our management fees, please contact us at Real Estate Gladiators.
