Property Management Fees Explained: What Landlords Really Pay For

Published August 15, 2024

Share this article

Property Management Fees Explained: What Landlords Really Pay For Image

Finding a good property manager can feel like searching for a needle in a haystack. It can also be costly, with complicated and unexpected fees that catch you off guard. Understanding exactly what you are paying for is the first step in deciding whether hiring a property manager is worth it.This article will explain the most common property management fees, how they’re structured, and what factors influence the final cost. Let’s dive in:

Understanding Property Management Fees

Property management fees are the costs you pay a property manager or management company to oversee your rental property. These fees cover everything from collecting rent to handling repairs, and they vary widely depending on the company, the property type, and the level of service provided.

Monthly Management Fees

Property management companies typically charge in one of two ways: a flat fee or a percentage of the monthly rent.

Fixed Property Management Fee: Some firms employ a fixed fee structure. The property management fees might vary based on the property size and the range of services provided. Generally, for a single-family home, you might encounter a fixed fee of around $100 per month. While the price might seem attractive, companies with flat fees might handle less work compared to what you would manage yourself. Always weigh the level of service against the cost.
Percentage of Monthly Rent: Another common approach is charging around 8–10% of the monthly rent collected. For instance, if your property rents for $2,000 per month, the management company would earn around $200. If the resident only pays half of their rent, the company earns $100. This setup ties their earnings to performance, making these property management fees directly connected to occupancy and tenant quality.

Other Common Property Management Fees

Beyond the monthly management fees, you may encounter additional property management fees hidden in the fine print. Always review the agreement carefully.

Leasing or Tenant Placement Fee: Charged when securing new tenants, often 50%–100% of one month’s rent.
Maintenance and Repair Fees: Some companies charge 10–20% of the repair bill as a project oversight fee. Others include certain repairs in standard property management fees.
Vacancy Fees: Some managers charge during vacant months to cover inspections or marketing efforts.
Eviction Fees: Costs tied to processing an eviction and finding a new tenant.
Right to Sell Agreement Fees: Some agreements entitle managers to compensation if you sell, either through commissions or ongoing property management fees.

Each of these charges falls under the broader category of property management fees and can add up quickly if not reviewed upfront.

Factors That Influence Property Management Fees

Several factors impact the property management fees you pay:

Location: Market demand and local rental rates influence fees.
Property Type: Single-family homes, condos, and multi-units may have different fee structures.
Service Level: More services—like tenant screening, 24/7 emergency response, or marketing—usually mean higher property management fees.
Property Size & Value: Larger or luxury properties often carry higher costs because of the added complexity.

When evaluating property management fees, make sure your agreement clearly outlines which services are included and which are billed separately.

Property Management Fees vs. Alternatives

If you’re tired of juggling management fees, unreliable managers, or unexpected add-on charges, it may be time to consider alternatives. One option is the 721 Exchange.Through Flock’s 721 Exchange, you can exchange your rental property for ownership in a diversified real estate partnership. Instead of worrying about vacancy, maintenance, or rising fees, you receive consistent cash flow and professional oversight.This exchange also avoids triggering capital gains taxes, offers new tax advantages, and provides flexibility as to how you liquidate your equity and when—all without ongoing property management fees draining your returns.

Frequently Asked Questions About Property Management Fees

1. Why are property management fees so high? Because property managers handle time-consuming tasks like tenant screening, rent collection, and emergency maintenance, these fees reflect the value of outsourcing those headaches.2. Are property management fees negotiable? Yes, in many cases. Smaller companies may adjust their fees based on property size, location, or service level. Always ask.3. Do property management fees cover maintenance? Sometimes. Some firms roll basic maintenance into their standard property management fees, while others charge separately. Always read the fine print.4. How do I know if property management fees are worth it? If your time, stress, or distance from the property outweigh the cost, then paying property management fees may be worth the investment. If not, consider alternatives such as the 721 Exchange.

Final Thoughts

Whether you’re dealing with fixed costs, percentage-based structures, or unexpected add-ons, property management fees can significantly affect your rental income. By understanding how these fees are structured and what influences them, you can make smarter decisions about whether to hire a manager or explore other options.If you’re frustrated by unpredictable property management fees, consider the 721 Exchange with Flock as a way to simplify ownership, avoid hidden costs, and gain access to professional management without writing checks every month.Interested in learning more? Explore our website for more resources on the 721 Exchange and get a free valuation on your rental properties.

Landlords, retire and minimize taxes.

Get Started

Want more information?