To be considered a good real estate investor or a good landlord, you need someone to manage your property. However, with so many varying types of property managers out there, the question “How much do property management companies charge?” is asked the most.
The answer to this question is not straightforward. The diverse methods of property management, the specific type of property you own, and the experience of the property management company all play a significant role in determining the costs. Understanding these factors will make you a knowledgeable and prepared property owner.
This article will provide a brief overview of the charges involved with property management and how they work.
How Much do Management Companies Charge to Manage Properties?
Without further ado, let us address the question of how much companies charge for property management.
The core answer to this question involves three structures.
Fixed Property Management Fee
Some property managers charge a flat fee. These fixed charges are different for the type of property you are considering being managed. They depend on the type of properties being managed, the size of the property, and the types of property management services provided.
Conventionally, a fixed property management fee ranges from $100 to $200 a month. While good for properties with higher rental incomes, it is not good for lower-income properties.
Percentage of the Monthly Fee
This is one of the most common ways that a property management company charges fees. It involves taking a percentage of the total monthly rent. However, these can be different depending on the types of services provided. So, how much do rental property management companies charge?
It could be anywhere between 8% and 12% of the rent received. However, some companies can go as low as 5% to 8%. These charges will also depend on the types of properties being managed.
Guaranteed Rent Model or Sublet
This particular model of property management involves a property management company leasing property for you and then subleasing it to another.
This method is considered fruitful for those who want to generate passive income from their properties quickly. Property management companies pay rent even if there are no tenants available.
That said, it often involves losing control of the property and getting a lower rent value.
What Type of Services are Provided by a Property Management Company?
The core of the answer to the question “How much do most property management companies charge?” lies in the types of services that these companies provide. Here is a list of some of them.
Tenant Acquisition Services
These involve marketing and advertising the property as well as showing it off to potential tenants. Tenant screening, lease preparation, and signing are also involved with this particular service.
Rent Collection
Monthly rent collection services are provided. Furthermore, if payments are late, this service also covers follow-ups. If rents need to change, property management companies play a crucial role in recommending what the new rents should be.
Financial Management
These services involve budgeting and financial reporting, as well as bill payment for specific utilities and taxes, etc. Furthermore, property management companies provide complete reports after they have done so.
Tenant Relations
Property management companies are also responsible for managing relationships with tenants. That includes addressing any complaints that tenants have and enforcing lease terms. Furthermore, when the lease terminates, the company is responsible for managing the process.
Legal Compliance
Property management companies have teams belonging to the legal niche. These are responsible for ensuring that the property adheres to local, state, and federal compliances. If needed, these companies also handle tenant evictions.
Conclusion
So, how much do property management companies charge? It depends on multiple factors that we have covered in this article. These factors not only include the services provided but also the size and location of the property.
For further details, it’s best to contact your local property management company.