Property Management fees

[Bryan Cavellier]

I am curious of property management and their fees. Anywhere from 5%-10% of monthly rent? Lawn or snow maintance is just charged to the owner or is included in the above %. Then come tenant screening time, is there a fee for each tenant screened or a flat rate... Just really curious about how all of it works, thanks!

Best,

Bryan

[Ricardo R.]

@Bryan Cavellier most companies charge around 10% for management fees. However, the way they collect their management fees differs... Some collect only on rents collected, others charge it as flat fee and when the units are vacant as well... the best option here for you is to ensure that management fees are only applied to rents collected. If management fees are being charged while the units are vacant then a property management company really has no incentive to fill your unit in a timely manner. 

Most if not all good property management companies also charge a placement fee to find a tenant, screen, and place them and they typically charge anywhere from 50-100% of the 1st month's rent to do this, some go as low as 25% of 1st month's rent. The reason is because marketing (pictures, listing, etc.), showings (scheduling, meet & greets, etc.), lease signings (negotiation, collecting of move-in req., etc.) and move in days.... take a lot of time and effort to do correctly. If there is a placement fee (which most good companies will charge) then all of the above should be included, including all the marketing and screenings for each applicant. 

You need to keep in mind however, that it's really all about the services that are INCLUDED in your plan rather than the price that counts the most. For instance, a company may charge you 2% to manage a property but may charge you for any and every little thing they do i.e. inspections, leases, notices, late payments, maintenance, etc. and may actually be much, MUCH more expensive than finding a company that charges slightly more but includes all these services without charging extra fees. Most of the good and reputable property management companies out there will include most if not all of your necessary services within your plan without charging you many extra fees and price gouging you. So extra fees... very important to know what is and what is not included in their services. 

One thing most never talk about but which is a HUGE hidden fee to you is VACANCY. If you have a management company that is not proactive, no matter how cheap their fees are, you will loose a lot more in vacancy simply because they are not able to move fast enough to get your units ready and occupied again. If a company takes more than 24-72 hours to simply give you a make-ready estimate and then takes another week to draft up the listing... you will loose big time in vacancy costs... so this is super important. 

Guarantees, look so see what guarantees the company offers. Do they give you some type of guarantee on the type of tenant they place for you? Do they guarantee that they can find you a tenant within a certain amount of time? Do they offer any type of eviction protection? Do they allow you to easily cancel a contract without fees if you are not happy? 

Here is a link to a post on property management selection:
https://www.biggerpockets.com/member-blogs/12069/85208-top-14-questions-for-a-property-manager

Whether you or the tenant has to pay for lawn and snow has to do with what is common in your market and the property type and property manager in your area should be able to advise. Property management companies do not include mowing and snow removal in their fees, but a good company should be able to get you bids and coordinate and oversee those services free of charge, but the actual cost of the services would go to you or your tenant... if that makes sense. 

Lastly, I agree with @Hai Loc the more units you have the more likely you will receive a discounted management rate however, this all has to do with the unit type and location. 

I hope this helps.