Understanding the Most Common Property Management Costs in 2023
Understanding Property Management Costs in 2023
When you hire a property management team to take care of your property, you want to know what’s covered in the monthly fee. Property management fees are usually broken down as a percentage of the rent or flat fee based on the number of units you have.
Some property management companies charge a fixed fee, for example, $100 monthly for a single-family home. However, this may vary by market. While a flat fee may seem attractive, management companies may need to be more motivated to maximize rental income.
Property management companies may charge between 8% to 12% of the monthly rent, so it’s essential to know what’s involved.
Let’s break down some of the most common fees associated with property management. Then, you can make the best decision possible when outsourcing the care and management of your asset.
Fees for property management companies vary
Different property management companies offer different types of services. Within those
services, the exact costs are decided based on various unique factors – such as the size, style, condition, and location of a property.
For example, a large, commercial REO property has more extensive management needs than a small, single-family home. Older properties tend to have more maintenance and upkeep needs than newer buildings.
Property management fees also vary depending on the amount of work required. For example, a small multifamily building with three or four units will require more work than a single-family home.
Factors that affect property management fees include:
- Property type: Single-family homes, multifamily buildings, and short-term rental properties all require different levels of management.
- Property size: Larger properties require more work than smaller properties.
- Neighborhood: Properties in desirable areas with high rental demand may command higher management fees.
- Level of service: Property management companies offer various services, from basic rent collection and maintenance to full-service property management. The level of service will affect the cost of management.
- Market competition: Property management fees may be higher in markets with less competition.
When choosing a property management company, it is important to compare fees and services to find the best fit for your needs.
Monthly property management fees
Usually, property management fees are paid in the form of a certain percentage of the property’s income. Larger apartment buildings may have a lower percentage, but the overall income is higher, which may also translate to higher fees.
Fees entail ongoing tasks that need monthly upkeep when caring for a property. These include making sure tenants pay rent, processing rent, and keeping up with all inspections.
Daily or weekly tasks of caring for a property include leaf blowing, taking out garbage, and snow removal.
In addition to routine maintenance (which should be decided on ahead of time), this cost would include some repairs, as needed.
Evictions can strain property owners and landlords, which is why having a property manager makes the process much simpler.
Larger property management companies may handle evictions in-house, while others may hire a lawyer. Eviction fees may cost you around $500 plus legal fees. Collections agencies may charge 50% of the amount collected.
An eviction fee covers the entire process from start to finish – minimizing hassle and reducing vacancy time.
Repairs and maintenance
Top-notch property management companies will have a well-established network of reliable
contractors or an in-house, full-time maintenance team. Most vendors offer management companies discounts in exchange for their business, so repair and maintenance costs are expected to be lower than what you could find on your own.
During your interviews with prospective property management firms, inquire about any labor or supply cost markups.
Many property management companies will charge a project management fee if you are making significant changes to your property. Ensuring the work is done correctly may cost around 10% of the project value.
Property management companies also handle leasing, which can be a time-consuming process. Here’s a more in-depth look at how property management companies handle leasing:
- Advertising and marketing: Property management companies can help to advertise your property to potential tenants, including listing it on online rental marketplaces, running print and online ads, and posting flyers in the community.
- Screening tenants: Property management companies can screen potential tenants to ensure they are qualified to rent your property, including checking their credit history, rental history, and employment history.
- Preparing leases: Property management companies can prepare leases that are fair to both you and the tenant and negotiate lease terms with the tenant.
What to look for in a property management company
The right property management company saves you time while giving you peace of mind that you can spend your focus elsewhere. You can trust that a property management company can handle the day-to-day operations and larger projects that may arise with your property.
When researching and talking to various companies, beyond understanding what fees are involved, ask about their communication styles and methods of handling problems.
Here are ways to help you narrow down your search and vet a reliable property management company:
- Experience managing properties that are similar in size to yours
- Services should include a wide range, including property inspections, cleaning, and repairs
- Responsiveness and open communication
- A solid reputation in the industry, not just with property owners but also with landlords and tenants
Finding the right vendor opportunities
You understand the investment potential of trusting them to keep your property in tip-top shape, and they see the long-term benefits.
The right property management company is a worthwhile investment in the longevity and performance of your property – not just another expense.
The right property management company should be a solid partnership.
Here’s what to consider:
- Shared goals: Goals can include maximizing the value of your property and minimizing risk while establishing a long-term counterpart.
- Open communication: Ensure that everyone is on the same page and that any issues that arise can be resolved quickly and efficiently.
- Trust: You need to let go and believe your property management team will handle your property better than you.
How VRM can help with your property management needs
In your search for a reputable property management company, consider VRM Mortgage Services. We’ve been in business for 17 years and have an extensive network of licensed experts who can help you with your property needs.
We’re a total solution provider for mortgage servicing and more, including management for properties of all sizes, property preservation, personalized mortgage loans, and short sale services. Within property management, we can help with dispute resolution, tenant screening, marketing and leasing, and maintenance and repairs.
VRM helps you mitigate risks, avoid fines, and get the most value through our extensive network of professional vendors.
Reach out to a VRM team member to find out more. We can discuss your options, develop a tailored plan, or answer any questions.