Property management fees

[Jack Halldin]

Have a property management company, I thought agreement was pretty straightforward now I’m thinking I’m crazy. Fee is first months rent for new tenant + 10% per month. Fine, tenant renews lease and property manager wants to charge me another months rent. Agreement seems solid that they are not entitled to that but just curious how outside the norm that would be. I can see if they had to find new tenant but a renewal? Thoughts? Opinions?

[Penny Clark]

@Jack Halldin, It sounds like they are charging you a month's rent for tenant placement and 10 percent (of the gross rent) management fee. This is not unusual. Although in my town (Sacramento, CA) our management fees are typically flat fee of $85-$95 or percentage fee of 7-8 percent of gross rent because it is more competitive here for management companies. The lease up fee is a one time charge. When your tenant's lease is up for renewal many management companies will charge a small fee to extend the lease with new terms (rent increase, for example). Charging another full month's rent to do a renewal seems excessive, however.

Always look at the financial terms before signing a management agreement:

- management fee ( Is it a flat fee or based on a percentage of rent) and what services does this include?

- lease up or tenant placement fee (full month's gross rent/35-50 % of full month's gross rent) and what services does this include?

- additional charges ( for example, some management companies charge an additional fee to bill tenant for utilities and/or pay utilities, mortgage, homeowner's insurance on your behalf) or annual safety inspections

- maintenance fees (some management companies will do a surcharge (5-10 percent) on any repairs done in house and by outside vendors

-cancellation fees (If the contract is for a year you may get charged a "kill fee" if you end the contract early)

Management fees take a good chunk out of your monthly profit so make sure you are getting your money's worth.

I hope this information was helpful to you and good luck!