How Much Does Property Management Cost

Introduction

A property management company alleviates much if not all matters between landlords and tenants.

This includes finding and screening prospective tenants, having the chosen tenant enter into a legal agreement, collecting rent on time, organizing maintenance requirements, plus a number of other matters present in a landlord/tenant relationship.

Often, landlords, particularly first-time landlords, overlook the intricacies of a healthy landlord/tenant relationship and come to realize that their investment is not quite as passive as they imagined.

This is where a property management company plays an important role that benefits both sides, and a segue into this article.

Naturally such a service comes at a price, but how much?

Because different property management companies offer different services and have different fee structures, we’ve outlined ranges based on extensive first-hand experience and industry research.

Administration (Setup) Fees

A small percentage of property management companies require a setup fee. This fee is considered an administrative fee to set the client up in their database.

The cost of this service, when charged, is typically a fixed amount and can range from a nominal amount up to the equivalent of 50% of a month’s rent.

JMC Property Management does not charge this fee.

Tenant Placement Fees

A tenant placement fee is the amount a property management company will charge to find, screen, and select a qualified tenant.

The industry standard is the equivalent of one month’s rent.

Although this fee can vary from the industry standard, all the way down to free, it is often compensated for in other fees such as a setup fee, increased monthly fees, or sometimes fees not so evident upon signing.

Please contact JMC to find out more about their affordable fees.

Monthly Management Fees

The monthly management fee compensates the property management company for collecting and processing rent, dealing with tenant matters, and often other responsibilities such as serving notices and preparing accounting reports.

This again can be a fixed amount but more often a percentage of the monthly rent, ranging from 5% to 12% depending on the company and their application of other fees.

Please contact JMC to find out more about their affordable fees.

Inspection Fees

Depending on the company, property inspections can occur during move-in and move-out, or on a per requirement basis.

A percentage of property management companies will charge the landlord for these inspections, typically a small fixed amount, although highly dependent on the type of inspection.

Aside from property inspections, a landlord may be asked to pay miscellaneous third-party inspection fees for such things as fire alarm testing by an accredited organization.

Inspection fees are generally not expensive or frequent, but when necessary, an important service in a properly managed investment property.

Maintenance Fees

Maintenance fees may be charged by the management company for arranging and overseeing property maintenance.

Such maintenance may include repairs, upgrades, and seasonal maintenance such as lawn care and snow removal.

Typically, these fees do not exceed 20% of the maintenance costs, keeping in mind it is not always clear what the property management company may or may not be charging.

JMC Property Management does not charge these fees.

Renewal Fees

Renewal fees are often a point of confusion, even contention, therefore let us explain the two most common scenarios.

In the majority of rental agreements, an initial fixed term (typically one year) is established to commence the tenancy. When the initial term is exhausted, the tenancy is automatically converted to a month to month arrangement, there no renewal fees for landlords or tenants.

Note, a tenant cannot be forced to re-sign a fixed term agreement.

The other less common scenario is when both parties agree to renew a fixed term rental agreement on annual basis. In this case, it is common for the landlord to pay an administration fee, typically no more than 50% of the original fee.

Paralegal Fees

There are rare occasions when a property management company may need to exercise legal rights to handle a non-paying or non-abiding tenant.

A large percentage of management companies can handle these situations in-house, but there are infrequent times when professional advice or legal representation is prudent.

It is difficult to put a number on this simply because each case is unique, and because paralegal fees differ from one provider to another.

Although it is uncommon for tenant matters to escalate to this point, tenants are people and unforeseen things can happen to them just as unforeseen things can happen to landlords, or any one of us for that matter.

The majority of these cases are preventable if the property management company has taken the time to build rapport with tenants, followed by effective negotiation.

Hidden Fees

It is important for landlords to scrutinize the contract between themselves and the property management company with a focus on less obvious fees.

A conscientious property manager will take the time to highlight all areas of the contract that relates to fees, both obvious and not so obvious fees.

No one likes hidden fees and because an experienced management company strives to find and place long term tenants, it is important the landlord/manager relationship is forthcoming from the very first meeting, and respectful of each other’s time and money throughout the entire relationship.

JMC Property Management prides itself on zero hidden fees.

Conclusion

Most seasoned landlords will attest to the importance of property management, it is a professional and generally affordable service that provides a virtually hands-off experience.

In most scenarios, a landlord can expect to pay a tenant placement fee followed by an affordable monthly fee. The amount of fees above this will highly depend on the company chosen.