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How Property Managers Structure Their Fees

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Why are property managers so in demand? It is because the job of maintaining a property is quite difficult. Homeowners need help and these managers make life much easier. Pretty convenient, right? However, property managers can be costly, especially if you do not know how they structure their fees. Without that knowledge, you will not be able to pick the best out of all the options available to you. Following is the structure followed by property managers when charging their clients:

General Structure: The general structure includes the overall pricing strategies that the majority of the property managers follow. No matter where you look, you will find property managers using at least one out of the 3 main categories. They are:

  • Percentage of Monthly Rent: Property managers charge a percentage of the monthly rent when a homeowner employs them on a complete-service basis. The rate can range anywhere between 5-15%. Usually, managers will charge between 8 to 10% for single family homes and 3-10% (discounted) for multi-units. The discount is dependent on the size and range of income of the property. This fee structure implies that you do not have to pay if your property is not rented.
  • Flat-fee: A flat fee is a pricing structure where a single fixed price is charged for a service. The money has to be paid irrespective of whether the service is used or not. This amount will not change with the amount of work done. A flat fee per month is usually charged for larger buildings. Property managers mostly use this structure when they expect managing your building to require a significant portion of their resources.
  • Hybrid: In this structure, property managers charge a percentage for the monthly management. Other than that, they provide different value-added services which have fixed prices. This means that extra money is charged only when the owner avails the other services offered. Additional services can include lease-up fees, advertising fees and so on. Other Services: This category is more of a specific structure. It includes the different services that property managers offer which are not considered as part of the management fees. The services have their own varying prices. These prices are similar across property managers.
  • Lease-up Fee: Property managers charge a fee when you want them to fill up a vacancy. The amount can be a flat fee, a percentage of the first month’s rent or a portion of the lease term. Typically, a percentage of the first-month rent is charged, and it is usually between 50 to 100%. • New Account Fee: This is a set-up fee charged when establishing an account. It covers the cost of transferring data from the owner to the property manager. Some companies perform inspections on the property, so this fee includes the work involved in it. The cost usually varies between $200-$500.
  • Advertising Fee: This is a bit self-explanatory. Some companies charge money for advertising. The fee is dependent upon the type of property and the advertising requirements.
  • Eviction Fee: Property managers can sometimes charge a separate fee for serving an eviction notice or appearing in court. This fee is charged per hour most of the time and can vary between $20-$100.
  • Maintenance Fee: Sometimes, maintenance work has to be performed on the property. Some companies tend to charge a percentage of the total cost of the maintenance. This is taken more seriously for repairs that are outside the domain of regular plumbers or handymen. The fee can go up to 10% of the total maintenance cost. It’s all about the agreement Some of the fees in the ‘other services’ category can be included in the management fees. It depends upon your property manager. If you have a formal agreement specifying which services are part of the management fees, you will not have to pay extra. Remember always to check and be aware of what you are paying for and what you aren’t paying for.

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