Do you pay a tenant finder fee?

Question

Does anyone pay a tenant finder fee to a property manager or agent?

We have a property manager that we pay 8% of rents to plus a tenant finder fee. He also wants to be paid per showing because we've had many showings per each listing and it's taking months to get a tenant.

How much do you all pay for these services? (In Kentucky or elsewhere)

Thank you!!

Nathan Gesner · Answer

Again, showing a vacant property is part of the job and why they are charging you a leasing fee. The fact they are asking for more is amateurish. You wrote your own PM Agreement? That means you've hired an amateur for sure. If you are in a market with professional property managers, I highly recommend you do some research and find one. There's no point paying market prices for someone that doesn't even have their own agreement.

Remember: cheaper doesn't mean you'll make more money.Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

Nathan Gesner · Answer

Did you read your Property Management Agreement? That should spell out the specific fees you're going to be charged. It's not unusual for a property manager to advertise low fees (6%, 8%, etc.) and then kill you with add-on fees. It's normal to pay half a month's rent or even a full month's rent every time they find a new tenant. Some also charge lease renewal fees.

The showing fee is unusual. If your PM is showing it that many times, it means they aren't pre-screening the interested parties well enough. I would push back on that and tell them they need to pre-screen people over the phone to eliminate the unqualified lookers that are wasting their time. Or they can combine showings into a one-hour period and cram as many people in as possible to avoid the extra drive time.

Again, read your PM Agreement. If you agreed to these fees, there's not much you can do.

Tracy Streich · Answer

Account Closed  Most of the above is spot on.   The leasing fees should include all showings.    I have been at this 20 years as a PM and have never heard of that up charge!

I will disagree with the comments that leasing fees do not line up the owner interest and the Pm interest.   Vacancy and leasing are just part of the cycle of SFR.   You are always going to have turnover.   I hope just like you the owner, that they never turnover.   However, they will and you want your PM to be good at leasing as well as management.

Peri Eryigit · Answer

@Nathan G. Thanks for the feedback! We wrote our own PM Agreement and showing fees are not a part of it; we only agreed to pay a new signed lease/tenant finder fee. Our PM is asking us to reconsider so I'm trying to see what other investors might be paying for this service. The pre-qualification process is a great point. Thank you!

Phillip Dixon · Answer

@Peri Eryigit BiggerPockets' forums have a mind of their own sometimes, right lolol.

To answer your question typically one month's rent is the norm here in the Chicagoland area. And 75% or less of the first month's rent is normal when the landlord is conducting their own application processing instead of the management or Realtor.

One month's rent is usually enough to make up for traveling costs as long as the building isn't in a rural location.

Rick Albert · Answer

I would push back on the "per showing" fee. You shouldn't have to pay for their poor planning. When I show my units, I group them together so I only have to make one stop. Plus those fees could add up quickly and I don't see the incentive for them to get it rented out quickly.

Follow the PM agreement or find a Realtor/find the tenant yourself. If they are trying to charge you for this I would do a read the PM agreement to make sure there aren't any other fees.

Matthew Paul · Answer

A showing fee ?  What a great way to make money . Set up an open house for the weekend , show the place to 40 people at 50 bucks a pop . A cool $2000 . Rinse and repeat next weekend .  ...............  Not

Mike Dymski · Answer

Something else is wrong if it's taking months to get a resident.  The rental market is extremely hot and many landlords are able to rent units quickly, sometimes within a day or two of posting.

IMO, placement fees do not properly align owner and manager interests.  If you are building your team, you have more flexibility than most...I recommend paying a bonus for economic occupancy instead.

James Wilcox · Answer

Account Closed has stated. Always coming in with the killer advice on BP. :) Being paid per showing would not be worth doing on your end and trying to "train" to be a better PM might not be the way to go either.

Also, if it is taking months to get a good tenant then that also goes to show the lack of skill from your PM or the property itself is lacking in some department. The vacancy rate in KY is around 6%. It might be time to get a different PM if they insist on the per-showing fee. That would be a deal-breaker for me personally. Finder fees and renewal fees, I think can be reasonable. You could definitely find a better PM in L-ville.

Peri Eryigit · Answer

Thanks for the responses. Really just wanted to figure out what a fair tenant finder rate might be but appreciate the feedback.

Do you pay a tenant finder fee?

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