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What are Average Property Management Fees?

October 1, 2021

Some real estate investors consider hiring a property management company an essential aspect of success. When it comes to your property, it's critical to consider a few different elements while doing your research. First and foremost, you want to get a good idea of the average property management fees to determine if they are within your budget.

Setup Fee

One of the first fees you'll encounter with a property management company is a setup fee. Setup fees are common in most companies and are one-time fees you will pay upfront.

On average, you can anticipate paying your property management company around $300 for a setup fee. Included in this setup fee are some of the initial duties they will handle, including:

  • Initial property inspection
  • Help with applying for any business or tax licenses
  • Opening a bank account in your name
  • Creating your account

Additionally, if you purchase a turnkey rental property, this setup fee will include coordinating your transition to a new property management company.

Management Fee

Beyond your initial contract setup fee, property management companies will charge fees for the day-to-day management of your rental property. Duties covered in management fees include:

  • Collecting rent
  • Processing rent
  • Responding to emergency maintenance calls
  • Coordinating repairs
  • Conducting property inspections
  • Communicating with tenants

 Modern apartment building

Types of Fees

Property management companies will charge management fees based on two primary structures: percentage or flat rate.

Percentage of Rent

Most commonly, property managers charge management fees based on a percentage of the monthly rent they collect. On average, property management companies will charge you anywhere between 8% and 12%.

Based on the national average of 10%, if the monthly rent is $2,639 (the average cost of rent in a one-bedroom in Los Angeles), the property management fee will be $263.90 per month.

Handling Vacancies

If your rental property is vacant, most property management companies will still charge you a monthly fee, which will either be a fixed fee or one equivalent to the anticipated monthly rent.

While it might seem unnecessary to pay a property management company while you are not currently collecting rent, understand that vacant properties often require more work on their end. Usually, management companies will visit the premises every week to ensure no squatters or break-ins have occurred.

Flat Rate

The alternative management fee structure is based on a flat rate rather than a percentage of your monthly rent. Several different factors determine this fee, including:

  • Services provided
  • Square footage
  • Type of property

The national average flat rate fee a management company charges to run a single-family home is approximately $100 per month. Bear in mind, however, that these rates can vary dramatically depending on your market.

The Downside of Flat Rate Fees

While paying a simple flat rate each month might be enticing to some rental property owners, it's essential to recognize the downside of doing so. Since the property management company collects the same fee value regardless, they may not be as motivated to ensure you are receiving rental income from your property.

Late Payment Service Charges

Most landlords enforce late fees if rent is not paid on time each month. Even if you have a late fee setup in your lease agreement, it does not necessarily mean that you will collect it in its entirety if you are working with a property management company.

Some companies charge a percentage of your late fees, ranging from 25% up to 50%, on average. After all, the management company will be responsible for tracking down your tenant to collect the rent, as well as the late fee.

Bill Payment Fee

Another less common fee of property management companies comes in the form of a bill payment fee. Not all property management companies have these services since they are optional and depend on your housing type.

Bill payment fees cover handling the payments for things associated with:

  • Homeowner association (HOA) dues
  • Insurance
  • Gardening
  • Landscaping

Returned Check Fee

It is legal and often encouraged for landlords to charge extra fees if rent checks bounce. This charge ensures tenants have the necessary funds to pay their monthly rent on time.

Like late payment service charges, it's not uncommon for property management companies to take a percentage of this fee. Of course, just like late payments, property management companies are responsible for tracking down your tenants to collect the proper charge of rent plus the returned check fee.

Repairs and Maintenance

Working with property management companies can benefit rental property owners, as many of them have an extensive network of trusted vendors or full-time maintenance crews on staff. As such, you can anticipate paying lower costs for general repairs and maintenance on your property than if you were to source the work on your own.

While researching different property management companies available in your area, always be sure to ask how repairs and maintenance requests are handled.

In some instances, such as significant property updates, your management company may charge a repair and maintenance fee of around 10% of the value of the project. This fee will cover the management company's time and effort to ensure the work is handled correctly and promptly.

 Modern residential home apartment building architecture with garage.

Leasing Fee

Another fee to be mindful of when researching property management companies is the leasing fee, otherwise known as the new tenant placement fee. This fee refers to the sum collected by the property management company for leasing the property once it is vacant again.

Usually, leasing fees equal one month's rent or a predetermined percentage, anywhere from 50% and up. Alternatively, you might find some property management companies that charge a flat fee.

The purpose of this fee is to cover costs associated with listing your property again, including:

  • Showing your property to prospective tenants
  • Advertising your property
  • Preparing the lease agreement
  • Screening applicants
  • Performing the move-in inspection

Be sure to find out the details of each property management company's leasing fee. Some provide full or prorated rent in the circumstance that a tenant breaks the lease before the agreed-upon term. These clauses are beneficial to property owners, who can rest assured that the management company prioritizes finding quality tenants for their homes.

Eviction Fee

Evictions are a nightmare for landlords and property management companies alike. Whether your tenant needs to be evicted due to lack of payment or damage to your property, it's a sticky situation.

Another benefit of utilizing a property management company is that they handle evictions. The larger companies will have expertise in the area and possibly even have a legal team of their own. Others, though, will outsource the work to local legal professionals who specifically handle evictions.

On average, eviction fees are fixed and run about $500 on average, as well as applicable legal fees. However, the costs don't stop there. If your case goes to court and you are awarded funds, collection agencies and attorneys will likely charge you an additional 50% of the money you receive.

Final Thoughts

There are several considerations to keep in mind when hiring a property management company. It is your responsibility to do your homework and find out your options to choose wisely. The first step in this process is assessing the average property management fees and seeing if it makes sense to you financially.

However, if you're looking to get started on your own, it's time to get your property listed. Make sure you choose a platform you can trust to get the job done.

Your go-to for property listing needs should always be Apartment List. We'll deliver prospective tenants eager to rent your unit. All prospects have been matched to your unit and have a higher chance of signing a lease agreement with you.

Are you interested in filling your apartment vacancies?

List with us today!

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Emily Kho
Emily is a professionally trained writer who covers a wide range of topics associated with the rental market and real estate industry. With over a decade of professional writing experience, Emily comes from a strong background in the field backed with a Bachelor of Science from the world-renowned William F. Read More
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