Property Management, Tenant Selection, Real Estate News & Tips

All You Need To Know About Property Management Fees

By on March 28, 2017 in Education with 15 Comments

property management feesIf you own rental property, deciding to work with a property management company to represent your property is a big decision.  While a lot of owners self-manage their homes, using a management company is an alternative way to secure rental income for less stress and less dedicated time.  The trade off for working with a property manager does mean less income from your property as the result of owed management fees.

Property managers collect fees for services to keep your property occupied by a reliable tenant and to handle the dirty work, like late night phone calls, maintenance management, hunting down rent payments, or dealing with an eviction process.

Every task that a property manager performs for your investment is done to promote the success of the property. If you are new to the industry, management companies will also have all the appropriate  leases, applications, notices of entry and other relevant documents, as well as screening procedures and knowledge of the landlord tenant laws in your state.

One negative seen from working with a property manager are management fees that are collected out of your rental income.  Some owners will base a management decision purely on the cost of services, and while cost should be considered, it is important to understand what type of fees a particular management firm collects and why.

Property management fees are typically set up as a percentage based fee, flat fee, or billed per project.

Leasing Fee: A leasing fee is charged to owners to cover the cost associated with advertising and showing your rental property, reviewing applications, screening tenants, processing lease paperwork, and preparing a property for move-in.  Leasing fees usually cost 75-100% of the first month’s rent and are sometimes be referred to as placement fees.

Monthly Management Fee: A monthly management fee is collected for services associated with accepting and processing rent payments, ensuring tenant rent payments, property inspections, maintenance management, and emergency maintenance calls.  Monthly management fees typically range from 7-10% of collected rent on a property.  An owner should double check the management’s policy about monthly fees based on collected rent or rent due.

Owners can decide to work with a property management company just for leasing, for regular monthly management, or both.

Other Types of Management Fees

Vacancy Fee: Some property managers collect a fee even if your rental property is vacant and not making any rental income.  Vacancy fees can range from a small flat fee or the regular monthly management fee even if no rent income is coming in.

On-boarding Fee: An on-boarding fee, or setup fee, may be charged as a one time amount to establish a new partnership with management company and set up your account. Setup fees can vary depending on how many properties or units exist in your portfolio.

Late Fee:  If a tenant needs to pay a late fee for a late rent payment, a management company can choose to collect all or a portion of late fees charged to your tenants, or pass along 100% of late fees to you as the owner.

Maintenance Fee: Depending on who the management company uses for repairs and property maintenance, they may charge a markup for cost of services and keep the difference from the owner as management income.

Lease Renewal Fee: When a current tenant decides to renew their lease for your property a management company may charge a flat fee per property or a full month’s rent, by treating the lease renewal like a leasing fee.

Eviction Fee: Evictions can take a lot of time to process, especially if taken through to court.  Management companies may charge fees based on the amount of effort and time it took to remedy or process an eviction.

Other Income Fees: Management companies may keep all, part of, or none of income associated with returned check fees, rental income for pets, lease violation fees, unpaid invoice fees, bill payment fees, or income from laundry or vending machines.

When assessing a property management company, make sure to ask specific questions about their fee structure and the services included.  Consider the management company’s overall performance and decide if it is worth paying for all their services or if another firm would suit your needs better.  As an owner, you also have the opportunity to negotiate contract terms.

Some owners may feel like they are overpaying for management services because when things are going well with their property, they can see fees as wasted income.  However, when a manager is needed for time consuming or stressful duties, you may appreciate and understand the cost of services.


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About the Author

About the Author: Kaycee manages marketing and media relations for Rentec Direct, bringing a unique perspective to the world of property management and proudly shares industry news, products, and trends within the community. .

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There Are 15 Brilliant Comments

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  1. Michelle Kennedy says:

    The answer to the riddle is TIME!!!

    • kayceew says:

      Great job Michelle! Check your inbox for information about how to access your prize. Thanks for playing.

  2. Hi Kayceew,

    Thanks for sharing the information.Have you published any book on property management.I would love to buy it.

    • What a great idea! I have written so many articles about all the different areas of property management I bet I could put a book together. Thanks for the inspiration and support!

  3. Lenesia Nelson says:

    Can property management companies charge the tenant lease renewal fees?

    • Hi Lenesia, I have heard about this type of fee. As long as it was written in the management contract and it is allowed in your state, they should be allowed to collect these fees.

  4. Sarah says:

    What if you have talked to your property management before eviction then charge you after the fact of an eviction fee and rent was paid

    • If they didn’t actually start the eviction process, I don’t see why a property management company would charge you an eviction fee. It might be a “pre-eviction” fee, if they had to do some administration work to begin the process before rent was actually paid. I would talk to them and ask them to explain the charge so you are both on the same page. Maybe it was a mistake and you’ll get a refund? It wont hurt to ask. Good luck!

  5. John says:

    Is it common or even appropriate for a property manager to charge a premium on repairs made on the property by a contractor? For example, a PM I am considering using is telling me that they apply a 20% surcharge on top of any cost associated with repairs to the property. This seems like a total conflict of interest.

    • I have heard of this type of “maintenance/repair fee”. While it is not very common, it may be industry standard for your area. I would call around to the other management companies in your town to see if they do the same. If no one else does, ask this management company while they charge so much to coordinate maintenance.

  6. Brian McDonell says:

    I have a question, the property management company I use to manage my property has TONS of fees but one in particular that I don’t understand. When the tenants move in they are charged a $250 non-refundable pet deposit on top of regular deposit, this I understand. They are also charged monthly pet rent of $24 on top of the property rent. However, the pet rent doesn’t come to me as the property owner, the management company keeps it as income for them. The $250 pet deposit doesn’t go in the deposit account, it goes to them as income. When I asked what they did with the deposit or if it is used for pet repairs upon move-out they said “no, we keep the money regardless”. To make it worse, my monthly management fees are 10% of “Gross income” which includes the pet rent that I don’t even get because it goes into their pocket.

    So what I don’t understand is how can they legally charge pet rent against MY property for them to keep? What claim do they have to my property? Then on top of that charge me a monthly fee for that pet rent? It seems to me that they are double dipping and making me pay them for their own income. Additionally, how can they charge a pet deposit and have no intention of using it for pet damage?

    It seems ethically very wrong to me but I am still looking for something in writing. They are making money hand over fist like this and it doesn’t seem right at all.

    Thanks in advance.

    • Yikes, sounds like your property management company really likes to nickle and dime you for extra income. Unfortunately, if it is in your management contract that they will collect and retain the pet-deposit and monthly pet-rent, there is little you can do. Most rental property laws are establish in regards to the manager and tenant; not owner and manager.

      So essentially, your property can collect whatever fees and percentage of income from you, as long as it in your contract. I have heard of property managers keeping 100% of late fees, similarly to your pet fee situation. If there is nothing in your management contract that says they will retain 100% of the pet fee, you could have grounds to ask for it.

      I agree with you that I don’t think it is right for them to collect their 10% off your gross income which is including the pet rent, but for you to not keep any of it. I would ask to change your contract or look for a new PM. Retaining you as a client is probably more valuable than the pet fee, so you might have some negotiating power. Good luck!

  7. C. Irick says:

    Hi Kaycee,

    My property management has decided to switch over to a different billing system and started charging a Convergent Fee in addition to the regular rent. Before this new systems each unit received separately billing for rent and billing for water utility which was just fine by me. When I asked what this additional fee was, I was told that the “Convergent Billing is the convenience of receiving just one bill per month containing everything from rent, utilities or any other necessary items needing to be billed. Rent, utilities, and more can be included on one emailed bill and linked directly to online payments. The Convergent Billing Fee is not an optional charge.” Well I have opted out of online payment to them and instead pay directly from my bank however based on the response from them, it’s not optional. Do I have the right to request that this extra change for “convenience” be removed from my bill?

    • It can’t hurt to ask. However, if you are still just paying one check from your bank to pay the newly combined bill, then it seems like they are still “converging” the bill and want to collect the fee (even if you aren’t using their online system). Are you on a lease? They should not be able to add a fee to your lease mid-term, so you might have some wiggle room there. Good luck!

      • C. Irick says:

        Hi Kaycee,

        I am paying with one check however I would be happy to split it up via my bank if they tell me that I would not be accessed the extra fee if I do that.

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