If you’re an investment property owner, you’ve likely considered the cost of rental property management. Maybe you already have a company handling your building or maybe you’re just thinking about partnering with a property management company. No matter where you’re at in the process, unfortunately, when it comes to cost, there’s no straightforward answer. We’d love to sit here and tell you the exact breakdown of costs for your building or unit, but this is one of those situations where “well, it depends” is likely the most common answer you’ll receive from other property management companies. A variety of factors come into play including your property location, number of units, size of units and services needed.
With all that said, that doesn’t mean you can’t get a sense of what you should be paying for property management services. In an effort to help you better understand what truly makes up the fees a management company charges, we’re giving you some insight into how we price out rental property management. Hopefully, this will help you establish a baseline as you seek out rental property management proposals or review your current management company.
Base Management Fee As A Percentage
Most rental property management companies base their monthly fee off of a percentage of rent. We typically charge a monthly base fee of 5% of the gross monthly income of the property, with a minimum charge of $200/month for individually managed condo units or single-family homes. On a national level, according to the National Apartment Association in 2019, average management fees were in the range of 7-9%, although local markets can vary.
Now let’s dive into where the “well, it depends” of pricing comes into play. The size of your property and whether or not it has on-site staff can impact your monthly fee. For example, having a building manager whose salary is absorbed into the building operating budget, can lower your fee. It’s important for any property management firm to take an individual look at each property and portfolio to create a specific proposal.
What Your Fee Actually Gets You
In most cases, a management fee assigns a property manager to your property and puts the company “on-call” for 24/7/365 maintenance and emergency services. In addition, they’ll handle the administrative pieces of management and executing on the general maintenance plan for the property. Additionally, a good rental property management firm will handle the lease renewal process with ownership. When you partner with a rental property management firm, you should also have a maintenance team that prioritizes your properties to ensure they are serviced in a timely manner.
Most management firms also handle general bookkeeping functions associated with your property such as collecting rent and paying bills. Depending on the company, pricing can include additional fees passed through in the way of technology fees, postage, paper, bank fees, etc. A well-run management firm will utilize a web-based platform. This creates a frictionless process for renters and promotes easier leasing processes and paying rent online through ACH direct deposits.
Additionally, hiring an established management firm often gives you priority access to top in-house maintenance teams. Fees for maintenance can range, and vary by area. In urban areas where parking is difficult and it takes time to get from job to job, you are often looking at higher fees for gas and truck charges. They are often billed out at an hourly rate and it is broken down between normal work hours and emergency time with a minimum hourly charge, which can range from 1-3 hours. Some firms also provide competitive rates with in-house services including cleaning, janitorial, snow removal and landscaping. Looking at the full range of services offered by a management firm is important as they typically have more control of the vendors if they are within the same company.
Why Understanding Management Fees and Manager Workload Matters
As you start to seek out proposals for rental property management, you’ll likely find that fees will vary from company to company. At Charlesgate, our pricing structure reflects our “hospitality-based” management approach. We have set our management fees so that we can provide high-touch services and a first-class experience to both you and your tenants. We have found this results in tenants taking better care of the property, paying their rent in a timely fashion, and also increases retention, which lowers turnover costs and vacancy for owners.
Experienced property managers are dedicated to their portfolio of rental properties and care about their properties, owners, and tenants. It’s important to understand a firm’s property managers’ bandwidth in order to adequately handle the workload and provide the services owners expect and residents deserve. Rental portfolio size can drastically vary for a manager depending on their experience, type of properties, and the number of owners they report to. There is no set guideline for this, but it’s an important conversation to have when talking to prospective management firms.
Now that you have a better sense of what makes up the rental property management fee, you can confidently seek proposals or reevaluate your current management company. Remember, rental property management is a partnership so you want to select the firm that’s most aligned with and committed to your goals.
If you’re interested in learning more about Charlesgate Property Management Services and Fees, or to request a proposal, please click the button below.