Rental Management Fees Explained

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Rental Management Fees Explained

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Looking after rental income property can be a lot of work—especially if you’re looking over several properties with multiple units or are trying to run a business separate from your rental properties. It’s even more difficult if you’re a first-time landlord. It would help if you kept up on dealing with tenants, handling repairs, managing upkeep, and a whole lot more—all while trying to turn a profit.

Other reasons why hiring a property management company may be the answer for you would be:

  • \You live far from the owned rental properties.
  • You have issues dealing with tenants.
  • You’re having trouble managing property issues promptly.
  • You’re not sure how to best hand things like repairs or upkeep.
  • You’re not enjoying any of the tasks associated with being a landlord.

To keep the workload manageable, many landlords and real estate investors hire a rental property management service to take care of the multitude of details and tasks required to maintain positive cash flow and protect the value of your investment.

It also saves you from a lot of unnecessary stress.

Some landlords—particularly first-time landlords, hesitate to pay someone else to do the heavy lifting that comes with rental property ownership. Most learn quickly, however, that it’s money well spent. Property management services save you time and aggravation. Paying those rental management fees will result in numerous benefits.

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What are the advantages of a rental management service?

There are quite a number of services most companies provide. In most cases, you can select which services you want to hire for, thus allowing you to customize your rental property management agreement to fit your specific needs as a rental property owner.

Such services include:

  • Rent collection
  • Maintenance and upkeep
  • Tenant searches and screenings
  • Marketing of rental property
  • Property inspections
  • Tenant relations

Knowing that these tasks are being taken care of can provide a lot of peace of mind to property owners. Having an experienced team screen tenants for you can result in more reliable tenants who pay their rent on time and do less damage to the property while there. It also cuts down on tenant turnover, which costs you money when units sit empty.

A dependable rental management company will stay on top of repairs and the maintenance of your property, so it remains in good condition. An excellent looking property means attracting good tenants, and it’s less expensive to keep a suitable looking property maintained than to let a property deteriorate and then have to fix it up later. Your rental management company will take care of whatever repair requests are needed to keep your tenants happy. Also, regular inspections of individual units on your rental property will help make sure that no tenant is causing damage to your investment.

Finally, a rental management service can make sure that the rental property costs remain under control. This lets you enjoy positive cash flow from your investment property.

What it comes down to is that paying for a rental management service leads to a higher return on your investment.

But what sort of fees should you expect from a rental property management service?

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Typical rental management fees

Rental management fees depend on factors such as type of property, size, condition, location, and range of services offered. Here are some of the most common rental management fees you can expect to see from a property management company.

Initial Set-Up Fee

Like it sounds, this is the fee charged when first engaging a property management company. The services for this fee often include site inspection, letting tenants know about new management agreements, and getting the rental management account underway.

Monthly management fee

The contract you sign with the management company will explain what services are covered by the monthly management fee, and how the cost is calculated.

The monthly management fee can be a flat fee, but it is more often a fixed percentage of the monthly rental income from the property. This fixed percentage can range from six to 12% depending on the rental property and its needs. For instance, a higher rate may apply if the servicing of the property has less than ten units. Properties with ten or more units, often have rental management fees that are 8% or lower.

Be aware of whether the contract states that fees being charged for are for rent collected or for rent due. You may be paying for services for tenants who have not yet paid their rent, so you want to make sure to set your budget accordingly.

Fee for placing tenants

Many rental management companies charge an additional fee for each time place a tenant in your rental property. This fee can be anywhere between half a month’s rent to a full month’s rent.

Look at your contract

Some fees are included in the monthly management fee. Others might be charged separately, such as advertising costs, background checks, and lease signing fees. Some companies will also charge to maintain a vacant unit.

Knowing what you’re paying for is key to having a productive and profitable arrangement with a rental management company. The costs are generally worth it in terms of the financial return on your investment and the peace of mind of not being overloaded with rental property ownership tasks yourself.