So, you’ve decided that you need help managing your rental property and are considering hiring a professional property manager. While searching for options, you notice that there are a wide range of pricing structures and services included. The cost for property management seems all over the board, and you’re not sure how to make an apples-to-apples comparison.
In this article, we’ll outline how professional property managers are typically paid, along with some important considerations to keep in mind when interviewing potential property managers. Before we proceed, it’s important to note that all real estate commissions, fees, and compensation are not fixed by law and are negotiable between parties. Essentially, there are endless options when it comes to choosing “how” and “how much” to pay for property management - there is no “standard” when it comes to fees.
Common Pricing Structures
While there isn’t a standard for compensation, there are some common fee structures you will encounter as you search for a property manager. Generally, there will be some form of a monthly management fee. This could be a flat dollar amount, or based on a percentage of the monthly rent. This means the property manager is collecting a fee monthly in exchange for their services. Typically, this is a general fee related to the overall management of the property.
In addition to the monthly management fee, there are several other potential “line items” you could encounter when it comes to the total cost of working with a manager. These other fees are typically more specific to a situation, or “ad hoc” in nature. This means they only apply as you encounter a specified situation. The types of fees you could see are wide-ranging, but could potentially include items such as a tenant placement, lease renewal fee, inspection fees, etc.
Monthly Management Fees
How much do you charge? This is probably the most common question from clients, and probably one that you are asking property managers during your search. The answer that is typically provided here is whatever they charge for their monthly management fee only. While this answer isn’t technically incorrect, it’s also not entirely accurate in that it doesn’t encompass ALL fees an owner might incur while working with that manager.
The “All-In” Cost
The “All-In’ Cost of a property manager includes not only their monthly management fee, but also ANY additional fees that you might incur while working with them. More often than not, this number is significantly higher than the management fee alone. It can be difficult to precisely quantify “all-in” cost, because many of the fees are unpredictable by nature.
Take a “tenant placement” fee for example. This fee is charged when a new tenant is procured for a vacant property. How often will you pay this fee? Hard to say. No one can predict how long your tenant will stay in the lease. Ideally they fulfill the full term of their lease, but who knows how many times they’ll renew after that. This can make it challenging to accurately estimate the all-in cost, but it’s still critical to keep in mind as you compare potential managers.
The Schedule of Fees
Every property manager should be able to provide a detailed schedule of their fees, and they should be able to clearly articulate what those fees are and when they’ll apply. It should detail ANY fee you might incur down the road while working with that manager. A lengthy schedule of fees isn’t a bad thing, it’s actually a good sign - it shows that the manager prioritizes transparency in their pricing.
Asking the Right Questions
When you are interviewing potential managers, make sure you ask questions about their pricing structure and how it works. If there are fees in addition to the monthly management fee, ask to see their schedule of fees. They should be able to clearly articulate these fees so that you understand the “all-in” cost of their services. While it might be tempting to go with the manager who has the lowest monthly management fee, you may end up paying more in the end depending on how their fee structure works.
The Coastal Oak Difference
At Coastal Oak Property Management, we pride ourselves on transparency and open communication. We ensure that you are always aware of the fees you might incur, and we are happy to answer any questions you may have about our pricing. We believe in building lasting relationships, and the foundation of any relationship is trust. Contact us today to learn more about how we can partner with you in managing your rental portfolio.