Many property owners turn to property management services for a hassle-free rental experience. However, understanding the fee structure of these services is crucial to avoid surprises down the line. This guide will unpack the typical fees that a property management service may charge.
The management fee is the most common charge you will encounter. It is for the ongoing tasks associated with managing your property. These tasks can include collecting rent, handling tenant queries, conducting property inspections, and dealing with maintenance and repairs.
This fee is usually a percentage of the monthly rental income your property generates.
Tenant Placement or Lease-Up Fee
This fee compensates the property manager for the time, effort, and resources used to find new tenants. The process involves marketing your property, screening potential tenants, conducting viewings, preparing lease agreements, and moving the tenants in. This fee can be a flat fee or a percentage of the first month's rent.
Lease Renewal Fee
When a tenant decides to renew their lease, the property manager will often handle the renewal process, which involves negotiating new terms, updating the lease, and getting it signed. Some property management services charge a lease renewal fee for this service.
Maintenance fees cover the cost of keeping your property in good condition. This can involve routine tasks like landscaping and cleaning communal areas, and also unexpected repairs like plumbing or electrical fixes.
While some companies include this in the management fee, others may charge separately, especially for large repair projects.
Evictions are unfortunate but sometimes necessary. The process can be complicated, involving legal procedures and specific state laws. Some property management companies charge an eviction fee to cover the cost of this process.
Early Cancellation Fee
Property management agreements are usually long-term contracts. If, for some reason, you need to cancel the agreement early, you may be charged an early cancellation fee. This compensates the management company for potential lost revenue and the administrative costs of terminating the contract.
A few property management companies charge a vacancy fee when the property is unoccupied. The rationale is that even if the property is vacant, the property manager still performs tasks such as advertising the property, showing the property to potential tenants, and maintaining the property.
Reserve Fund Requirement
Property management services often require owners to provide a reserve fund, a readily available amount of money to cover unexpected costs. These can include urgent repairs, unexpected maintenance, or emergency incidents that cannot wait for the owner's approval due to their time-sensitive nature.
The reserve fund is held by the management company and topped up by the owner whenever it's used. While this is not a fee in the traditional sense, it's an essential financial aspect to consider when budgeting for property management services. Reach out to a property management service near you to learn more.