A property manager should not be hired based solely on the fees they charge in comparison to the fees that other property managers charge. A property manager is in charge of one of your biggest assets and you do not want to make the wrong decision by hiring the property manager who charges the lowest fees.
There could be several negative reasons as to why a property manager’s fees are so low:
They may not provide top tier service
They may be attempting to gain business by undercutting the competition
If they are under-pricing their services they may be overloading their managers with too many properties to handle
Price should be the last thing you consider. This does not mean it is the least important factor, but a property manager should be hired based on whether or not they will provide the necessary quality services.
Do not fail to also identify all the potential fees for property management and remember that all fees are negotiable.
The average management fee ranges between 4-12% of monthly rent. A 10% rental property management fee can be expected for a single family home. This fee is based on the number of properties that need managing, the number of units in each property, the location and condition of the property, and the services included for the fee.
Not all management companies require this fee. Some management companies charge a monthly vacancy fee of $50 that is prorated when a tenant is landed. Other companies expect to collect the full monthly property management fee even if there is no rent coming in. Pay close attention to what language is used in contracts. Look out for "Collected rent" or "Rent collected" as opposed to "Scheduled rent" or "Rent due”. This will also prevent having to pay management fees if a tenant stops paying rent.
This fee is for the time invested in setting up a new account. It ranges from 0$-300$. The fee may be per unit or per property or possibly if the unit is occupied or not.
This fee compensates the manager for the time, effort, and cost associated with finding a new tenant. This fee is common but some owners prefer that the fee be included with the management fee as an incentive for management companies to find long term tenants. A good management company does not view the leasing fee, but the management fee as the primary profit center. This is why leasing fees as a stand alone service are typically higher. A transparent fee structure is laid out to hurt rather than reward the management company if there are high turnover rates.
How much is the leasing fee?
Does their leasing fee decrease or get waived if it takes an unreasonable amount of time to find a tenant?
Is the leasing fee structured in a way that provides the firm incentive to bring in reliable tenants?
Do they use leasing agents? If so, what will have to be paid in the event they find you a tenant?
Do they require exclusivity in advertising, or can you advertise the units as well? If you find a tenant, do you still pay the fee?
Are there any restrictions or extra charges for showings?