How Much Do Property Managers Charge? (Understanding Their Fee Structure)

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Before you find and hire a property manager, there’s something you need to know: Not all property management companies structure their costs the same way. 

Knowing how much property managers generally charge—including their fee structure—allows you to determine if it’s the right fit for you. 

Common Fee Structures for Property Management Companies

Understanding property management fee structures is critical to making an informed and confident decision on which company to use. There are two basic arrangements.

Percentage of rent

In this fee structure, property management companies charge owners a fixed percentage of the monthly rental income, usually between 8% and 12%. This arrangement motivates the company to maximize occupancy and rental rates, as their revenue is directly tied to property performance.

Flat fee

In a flat-fee structure, the property management company charges a fixed amount each month regardless of rental income, providing a predictable cost for property owners. This fee model is often preferred by owners with higher rental incomes or multiple properties, as it simplifies budgeting and financial planning.

Fee Structure	Cost Determination	Payment Variability	Incentives for Management	Ideal Usage
Percentage of rent	A fixed percentage (typically 8% to 12%) of monthly rental income.	Varies with rental income.	Encourages maximizing occupancy and rental rates for higher revenue share.	Best for properties with fluctuating rental incomes, or those seeking aggressive management.
Flat fee	A fixed amount charged monthly, regardless of rental income.	Remains constant each month.	Provides stable income for management, regardless of property performance.	Suitable for owners with high rental incomes or multiple properties for simplified budgeting.

9 Additional Fees Property Managers Charge

There are additional fees that property managers often charge. Being aware of these helps you more effectively plan for financial management of your properties.

1. Rent due and rent collected

Many property managers charge monthly management fees as a percentage of the rent, but watch the wording. There’s a difference between charging as a percentage of rent due and a percentage of rent collected.

• Rent due means your company will charge you based on how much a tenant owes you. You may pay for property management even when your property is vacant.
• Rent collected means you’ll be charged based on actual rental income. This is generally more favorable for the owner.

2. Early cancellation

You may incur an early cancellation fee if you break the property management contract early with your property manager before its outlined term ends. For example, if you agree to work with them for a year and want out after eight months, you might pay an additional few hundred dollars. Be especially wary of this early termination fee with untested property managers.

3. Setup fee

Many residential property managers will charge an initial flat fee at the start of your property management contract. This usually costs a few hundred dollars and is necessary to initiate your account.

4. Vacancy

If a company charges you based on collected rent, not rent due, there may be an additional vacancy fee, which acts much like a retainer.

5. Advertising

Some property management companies charge an additional advertising fee. This covers the cost of creating media, such as taking photos or videos and marketing the property.

6. Leasing fee

A tenant placement fee may apply when hunting for a new tenant. This covers the cost of drafting and securing a new lease agreement and tenant screening, including background checks. It’s generally low in cost. 

High leasing fees should raise red flags—especially if your tenant turnover seems to increase.

7. Lease renewal fee

Lease renewal is a simpler process than initial leasing, but it may still require a lease renewal fee. Property managers might draw up new paperwork or renegotiate terms with a tenant, and they may charge for that extra work.

8. Maintenance

Most property management fees cover basic maintenance and repairs that property owners wouldn’t want to handle themselves. Some property management firms may charge extra for big jobs or an inspection before placing new residential property tenants.

9. Eviction

Eviction can be messy, and you’ll be grateful to have a property management service in your corner. Most managers completely handle the rental property eviction on your behalf, but some charge you an extra fee for the service. Expect to pay at least a few hundred dollars here.

Actionable Advice for Hiring a Property Manager

When hiring a property manager, especially when considering the impact of fee structures on your investment, you must be well-prepared. Here are some actionable tips that can help ensure you make the right decision.

Negotiate terms

Don’t hesitate to negotiate terms of the fee structure. For example, if a company typically charges 10% of the monthly rent, see if it’s possible to reduce this percentage or negotiate a cap on monthly fees. This can be particularly effective if you’re offering multiple properties to manage.

Review the contract carefully

Examine the management contract in detail. Look for any clauses related to fee increases, additional fees, or terms of service termination. Ensure that the contract specifies what services are included within the fee and what would incur additional charges.

Check for performance clauses

Consider asking for performance clauses in the contract that tie some part of the fee to the property manager’s performance. This could be related to maintaining a certain occupancy rate, timely rent collection, or tenant satisfaction rates. 

Ask the right questions

Ask the property manager questions that cover all aspects of their service. There’s no such thing as a silly question. Your objective is to gather information to help you understand what the company offers.

Get references and reviews

Always ask for and check references or reviews from other property owners who have used the management company’s services. This firsthand feedback can provide crucial insights into the company’s reliability, responsiveness, and overall effectiveness.

Final Thoughts

Understanding the fee structures of property management companies is essential for choosing the right partner to manage your investment. By thoroughly comparing percentage-based and flat-fee structures—and being aware of additional charges—you can make an informed decision customized to your property’s financial needs and your management style.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.