How Much Does It Cost To Hire a Property Manager?
Written by
Aja McClanahan
Edited by
Susan Kim
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Investing in real estate can be an excellent way to diversify your investments while hedging against inflation. Though it’s tempting to think investing in real estate is a totally passive form of investing, it’s not always the case. When problems arise, they can take up a lot of money and time or both.
Check Out: 3 Things You Must Do When Your Savings Reach $50,000
For this reason, many real estate investors use property management companies or individuals to help manage their real estate investments. Learn more about these services and how they can impact your bottom line.
What Is Property Management?
Property management is the oversight and operation of property by a company or individual. This can include several tasks like:
- Collecting rent
- Maintaining the property
- Handling repairs
- Finding and managing tenants
Essentially, property managers act as liaisons between the property owner, the tenants and maintenance personnel. In some cases, these services can also cover working with the city or village to remedy citations or overseeing extensive renovations. The goal is to relieve property owners of the day-to-day stresses and responsibilities of owning rental property.
What Factors Influence Property Management Costs?
The cost of hiring a property manager will depend mainly on the services you’ll need. Other factors that could influence the price of property management include how many properties you have and the location of your properties.
What Is the Typical Cost of a Property Manager?
Sam Dolciné invests in out-of-state real estate, has a background in property management and hosts a podcast called Black Real Estate Dialogue. He said the most common rate for property management is 10% of monthly income. “For a long-term rental property, the cost is typically 8-10% of the gross rent,” Dolciné said. “For example, if you are renting a property out for $1,000, the property manager will charge you $100.”
These numbers can be slightly higher for specialized properties like commercial or short-term furnished rentals. In other cases, a property manager may charge a fee to set up your account, ranging from $100 to $500 per property.
Are There Any Additional Costs?
In addition to the monthly management fee, there may be other costs, such as maintenance, advertising and tenant placement fees. Discussing these potential costs with your prospective property manager upfront is important.
Peter Kim is a real estate agent and owns a real estate agency, Odigo Real Estate Club, in Washington state. He said, “Property managers can charge landlords in a few different ways. There are some fees that are hidden that landlords don’t account for.”
Kim explained, “Some other unknown charges are that if there is a lease renewal, they can charge a fee, which can be a flat rate or 15% of one month’s rent. If there is a repair or maintenance job, some property managers actually charge a ‘premium’ on top of the vendor’s fee.” He added that “if there is a vacancy, they typically charge 50% of the first month’s rent.”
If possible, get a fee schedule of extra costs and a contract outlining when and if your property manager will charge these fees. From there, you should mutually agree on decisions that require your approval or advance notice. This way, you aren’t hit with unexpected charges for something you never approved (or knew about) in the first place.
Is It Worth Hiring a Property Manager?
Whether or not you choose to hire a property manager will depend on your personal circumstances. Dolciné said, “If you don’t want to deal with the day-to-day responsibilities of owning a rental property, then it’s a good time to hire a property manager.”
Having a property manager is common for people who don’t live close to their properties, have multiple properties or don’t have the time to handle all the issues that come with owning a rental property. In this case, hiring a property manager might be a worthwhile investment.
If you’re still unsure about hiring a property manager, try to do some rough math to get an idea. Add up the time you spend managing your properties. (You’ll need to assign yourself an imaginary hourly wage for this.)
Then, add up any money (or time) you may have lost from not using the services of a property manager. Perhaps you had prolonged vacancies, damages, or other issues that cost you money because you couldn’t attend to the needs of your properties. Compare those numbers and see if it helps you decide about hiring a property manager.
Can I Negotiate Property Management Fees?
In most cases, you should be able to negotiate the fees you pay for property management. As you interview different people or property management companies, this should be part of the conversation.
Find out if there’s price flexibility based on the number of properties you have or the level of service you’ll need. For instance, you may not need a full slate of property management services. In this case, you might negotiate a discount for a lighter workload.
Bottom Line
Choosing a property management service for your rentals is an important decision. Whether you decide to outsource this task or not, there will be effects on your time and bottom line. Evaluate your circumstances and choose the best route for your situation.
