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 42 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: 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 42 Brilliant Comments

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  1. Michelle Kennedy says:

    The answer to the riddle is TIME!!!

  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.

  8. Tina says:

    Can a management company that was hired to lease and occupy the owners property only, but not manage the property have the right by law to not provide the owner with copies of the tenants application and background check information as well as provide the owner with a receipt before the W2-1099 showing that the management company has been paid for the leasing and occupants process?

    • Hi Tina,

      It depends on your state’s laws and what your management agreement says. Some management agreements will not share tenant application information in order to protect the applicant’s private information. For instance, under the Fair Credit Reporting Act, it would illegal for a manager to give you a copy of the applicant’s credit report.

      What can happen is that you set up tenant screening criteria with your property manager, like credit score must be XX, income must be XX, and the applicant must have zero evictions on his background report. The manager can then approve or disqualify tenants based on that criteria, and provide you with a summary of the tenant’s qualifications that meet your criteria. The property manager may only choose to do this if it outlined in the management agreement.

      Based on your comment, it sounds like you are asking for proof that your property manager completed the work before you pay him? Am I understanding that right? I would say, yes, your property manager needs to provide some sort of proof that he has preformed the tenant screening and leased the property, but not necessarily by giving you copies of completed applications and background reports. Perhaps a copy of the lease agreement and a summary of how the tenant met your tenant screening qualification?

      • Tina says:

        Thank you Ms. Wegener for your reply.

        I am in need of some paperwork other than the lease agreement which l do have. I do not have proof showing that the tenant screening was done and qualifications were met. My concern is if I was to have to go to court for any reasons in reference to my tenant​
        I have no file on my tenant other than the lease agreement no other prior history or contact information or driver’s license ID on my tenant and I don’t feel that I should have to ask my tenant for these items again since they have submitted these documents during the screening process
        To the management company. Who said they are not required to go to court once the property becomes occupied and they are not required by law to give me these documents. Any suggestions on what I should do to get these documents for my filing since I am managing the property? Sincerely, Tina

        • While not a solution, a potential remedy could be to get your property manager to sign a document that says the tenant they placed meets all the agreed upon tenant screening qualifications and if it turns out the manager did not verify the tenant’s background or the tenant does not meet these qualifications, the property manager is liable for any damages. I would have a lawyer review this document, and any contract regarding your rental, before it gets signed.

  9. Jimmy says:

    Hi Kaycee, very informative answers by you, it helps. I will like to ask 2 Qs specific to my situation. I just purchased 2 rental properties through an individual, he is fixing it for me and has offered to Manage them for me as well through his newly formed management company. Asking Permission to authorize opening of accounts for Utilities in the name of management company. He is charging 1 month rent for tenant placement and on top charging 10% as management fee on gross monthly rent. Also he is asking for maintenance charges @ $45/hour + cost of material, and $65/hour on weekends. Lawn cutting $25/lawn per cut. Snow removal $35/time. This all will be billed to me. No other fees or costs are shown on the contract. Does that mean they don’t apply?

    These maintenance charges are billed to me so as to attract the tenants, however i feel there should be cap on the amount i should agree to pay.

    I don’t live near these properties and i am new to this. Whats your overall view on this? Should i ask to add some clear fee structure in contract? There is no mention of:

    1. What if tenant leaves after 6 months, will i be charged again for new placement?
    2. Penalties, late payment charges, security deposits, from tenants goes to whom?
    3. Any charges if tenant needs to be evicted (not mentioned)
    4. No mention of charges for tenant contract renewal.
    5. No mention of vacant unit fee.
    6. No defined criteria of vetting of tenant
    7. Further the contract states that i will hold the manager harmless from any claims, charges, debts, demands and lawsuits including attorney fees related to management of these properties.

    There has to be some accountability or responsibility i believe.

    Please advice what conditions should i put on the contract?

    Thanks.

    Jimmy.

    • Congratulations on your new investments!
      I would absolutely ask him to define the fee structure for all the items you listed above. And you should create your own criteria for tenant screening and outline these terms in the contract (like min. credit score, income requirements, zero evictions, etc.). Part of the contract should include who is responsible for going to court if you have to collect on unpaid rent, process an eviction, or other rental related reasons.

      I don’t know what state or city your rental properties are in, but 10% of the monthly rent is on the high end of industry standard. So an additional hourly charge for maintenance seems excessive. What exactly does the 10% cover? Collecting rent and depositing it into your account? The tenant placement fee of one month’s rent would be for all the overhead to market and process rental applications.

      Since you are a long-distance landlord, it’s smart to use a property manager. But I would seriously consider shopping other management companies and doing research on their fee structure to make sure this guy is pricing his services competitively. You should also read reviews and ask for references.

      • Jimmy says:

        Thanks Kaycee, I have sent him a detailed email to clarify these Qs and have added my requirements. I appreciate your reply.

  10. Veronica A says:

    Kaycee,
    Can your property management / apt. Manager charge you for a maintenance that was done. I recently contacted my manager and informed her that my bathroom sick wasn’t going down and so she sent someone out there a few days later. However she then informed me after we went out there that the drain was clogged by some hair that they would be charging me a service see. One i try not to let hair go down the sink, however I dont think this is right i have to pay this can they really charge me for something like this and at that this being the 1st time this happen

    • Did you check your lease agreement? It might say something specific about charging tenants for plumbing issues that can be proved to be a caused by the tenant. While this might sounds like a ridiculous charge, it isn’t considered an issue with the building and a standard maintenance request. If it makes you feel any better, whenever I have called my landlords in the past with clogged sink issues, they solution was to just pour drain-o (which I purchased) down the sink. If it really bothers you, you might be able to take your property manager to court for unfair charges. You have to decide what is more valuable to you, the cost of the maintenance charge, or the time and cost involved in going to court to get a refund. I would contact your local housing authority for some free tenant advice for your situation.

  11. Matt says:

    Hi Kaycee,
    I’m a landlord for a 3 bed single family home in Florida.
    Previous tenants left in July without paying last 2 months rent (not good, but better than eviction process). PM tells me only light repairs needed. One month later house is back on the market, and finally rented to new tenants after 3 months.
    At that time a bill comes to me for around $1,600 for painting and repairs from the previous tenant.
    I tell them that wasn’t what I was expecting, since they’d indicated only light repair work, besides in my contract any bill above $350 they are supposed to contact me in advance, which they didn’t.
    On top of that they have given me bills for the previous tenants unpaid water and electric bills and reconnection costs. Electric bill $200, water bill $200. Again seems way too high.
    Plus a couple of other little bills (under the $350) gives me bills of around $2,500 (on top of the 5 months vacant period!)
    I’ve asked to see receipts of all of this work, but so far received silence. I’m starting to get very worried that they are scamming me. I’m out of the country long term though so moving PM company may be a bit tricky
    Are there any legal rules about PM companies providing receipts to landlords for bills? Would I have any chance in refusing to pay for the unreceipted bills? PS they deduct bills from rent payments to me rather than actually bill me.
    Thanks in advance!

    • Hi Matt,

      You are absolutely entitled to receive copies of receipt; I would demand them from your property manager. In terms of the painting and repairs from the previous tenant, was there a security deposit to cover at least some of these costs? The security deposit can also cover the cost of unpaid rent and any utility bills. IT also sounds like your property manager is in breach of contract if he is charging you for bills over the $350 mark without your prior approval. You might need to bring a lawyer on board to help you with this one especially since you live out of state. I would also seriously consider switching to a new pm.

      • Matt says:

        Hi Kaycee,
        Thanks for your reply. Yes there was a deposit taken of $1250 so much of the redecorating costs were covered, but still out of pocket overall.
        The PM is HomeEncounter, for your info and for others that is one to avoid!

  12. Krishna says:

    Hello Kaycee
    I own a townhouse and I am living in there since last 10yrs. I pay my monthly maintenance regularly to property management. In 2017, property management sent a circular to all homeowners in the neighborhood to get the attic baffle inspection done by a certain time otherwise they will impose a late fee. Home owner has to hire a contractor on his expenses and get it fixed if something is wrong and inform the management. All they do is document it saying the attic inspection is completed. I was travelling and for some reason that got delayed from my side and now property management is charging $1000 as late fee. I requested the board members to waive the late fee. They denied my request.

    I was wondering why I have to late fee to the management since they did not provide any service towards my attic inspection?

    I would like to know is this a legal practice to charge late fee even though the management did not provide the service to me?

    how do I get my late fee waived from my account..

    thank you in advance if any kind of information/input.

    thanks

    KR

  13. J. Carney says:

    Hi Kaycee – Any thoughts on this one? Our management company /residential coop building has been found to be estimating heat charges based off a broken metering system. Our building has serious issues and is run by a certain group of people (Tyranny of the board ) Apparently, this has been going on for years. Prior to this last February, my unit starting receiving huge bills in the 300.00 range (normally 60-80 month) I informed the Board of Directors and the management co. that I would be withholding this inaccurate and ‘guesstimated’ charge pending investigation. In March – the heat bill disappeared but new charges appeared stating that I had not paid fully certain charges in my previous bill as well as my water – which I had. These new charges, all combined, added up to the exact amount of the heat bill in question. I have kept my heat off since March of last year – and am still billed for turning on the heat – and continue to withhold the amount in question each month. The following months – new charges appear showing that I did not fully pay my bill ( which I did minus the heat ) and the same thing continues as the new charges always add up to the amount that I am withholding. I have send many letters stating that I will continue to withhold until the building comes clean about arbitrary charges. Is this legal to do ???

    • I would absolutely speak with your attorney to help you settle this situation. An attorney will be able to review your management agreement and provide you with the best course of action of legally withholding fees and moving forward with recouping any losses you have assessed.

  14. Katie Slezas says:

    Kaycee,

    The management company for our HOA is trying to charge us a 4% fee for “coordinating” a siding project. The wording used to describe exactly what we are getting besides weekly meetings with contractors and a “binder of all documented change orders” is vague. This will amount to $20,000 for the management company whereas the yearly cost of the
    regular management is only $6,000. Is 4% of a project’s cost (more than 3 times the yearly cost) for the “oversight” of a contractor normal?

  15. Hillary says:

    Hi Kaycee – I am a landlord using a property management company. My property had set empty for a few months, but I wasn’t too worried as I was considering selling. My PM company took it upon themselves to lower my rent $100 a month without notifying me (and of course without my permission) and signing a year lease with a new renter. The PM signed as the owner and no one contacted me. We found out someone had moved into the house by driving by and talking to them.
    When confronted, the company said its typical to lower rental prices on properties if they aren’t moving- even without the owner’s consent. Is this a true and legal action?
    Thank you!

    • Yikes! That sounds like a crazy situation. I would check your property management agreement. Does it say anything about what happens if the property is vacant for xxx number of months? Does it say anything about the property management company having the power to change the rent amount without the owners consent? Not sure how to handle this, and if the rental agreement with the new tenant is even valid, since they signed for you. If you can prove that it wasn’t your signature, then the rental lease might be void. I would highly suggest talking to an attorney familiar with property management and landlord-tenant laws in your state. The first step would be to check your property management agreement though.

  16. Javier says:

    I live in a mobile home , last month a had a leak problem and a neighbor called the community management to reported and they sent 2 men to investigate the leaking. Now the billed me $456.00 just to check the problem. I think that’s a lot of money for nothing.

  17. Raoul says:

    My property has been vacant since Dec 2017. My PM used the security deposit to of course pay for fees needed for repairs etc. But in Feb 2018 I received a statement of Mgmt fees deducted from my security deposit %10. I contacted them to ask how can you take a fee when no one is in the house and was told the deposit was used as a rental income. Does this sound right? Also, the PM decided to keep utilities on which I agree, but I started receiving high utilities billing for 3 months the house was vacant and was told my heating was turn on for 24/7 cause it got cold in Florida, but not freezing. Can they do this without asking me. Don’t understand why an empty house needs to have this on for so long to just show the place. Thanks for any comments in regards.

    • That kinda sounds like someone forgot to turn down the heat in the vacant house and is now trying to figure out how to pay for it. I would definitely refer back to your management agreement and figure out what is happening to fees when the property is vacant. Also 4 months is WAY too long for an investment property to sit vacant. I would seriously question their marketing efforts. Good luck!

  18. Raoul says:

    My PM has over charge me more than once on my statements for duplicate billing. I’m constantly having to double check their work and find many mistakes. Is this justification for me to be able to get out of my contract with them? I’m currently out of country and I’m spending more time worrying about my property handled by the company than I should be. I have other examples from last year that is in the same area of poor management. Any thoughts?

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