How much do property managers charge?

The cost of hiring a property manager depends on how much responsibility you want them to take on. A monthly general management fee typically falls between 8% and 10% of the monthly rent for a single-family home—flat rates are rare for the monthly fee. Pay close attention to how fee structure is worded in your contract so that you know exactly how you are being charged for this baseline management fee.

Another important detail to look for in your baseline cost is rent due versus rent collected. Make sure the agreement is such that the property management fee comes out of actual rent collected from tenants for the month rather than the amount of rent due. 

This means that you will only pay a fee to the management company when you are receiving rental income and not if a property is vacant for a period of time or if a tenant fails to pay rent. If the property manager has to collect rent and fill vacancies in order to get paid, this will further motivate them to handle the situation as quickly as possible.

As the property owner, you can be hands-on or hands-off as you choose—ask your property manager questions to determine how involved you want them to be. A property manager could take care of everything from tenant recruiting and background checks to property maintenance. Some property managers will even handle tenant evictions for you, should it ever come to that. 

Beyond the baseline monthly fee, there are other property management fees you can expect to spot in a typical contract. Here are 8 of the most common:

1. Setup fee: This is a one-time, flat fee that you’ll likely need to pay a property management company when you first hire them. It serves to onboard you with the company and set up your account. It may also include an inspection of the property and/or introductory materials for the tenant(s) to outline how communication will work going forward.

2. Management fee: As mentioned above, you’ll likely pay a percentage of the monthly rental income as a general management services fee.

3. Maintenance fee: Property maintenance issues are bound to come up, so expect to pay maintenance costs over the course of a given year—typically up to 1.5 times one month’s rent. You can ask the property management company to come to you for authorization for any maintenance costs or to take a more hands-off approach and handle maintenance as it comes up without seeking approval.

4. Vacancy fee: A vacancy fee is an amount a property management company charges to re-lease the property if/when it is vacant. This fee is typically about a month’s rent or some percentage of it.

5. Lease renewal fee: This is the fee a property management company may charge for handling the renewal of a tenant’s lease when the time comes, generally annually.

6. Tenant placement fee (or leasing fee): Similar to the vacancy fee, the tenant placement fee is the cost to fill your property with tenants. This fee could be a flat fee or a percentage of the monthly rent and can include the cost of advertising the vacancy, tenant screening services, lease preparation, and move-in preparation costs.

7. Eviction fee: Should your property management company need to evict a tenant, they will charge you an eviction fee—likely a few hundred dollars plus any court costs that may arise over the course of the eviction.

8. Early termination fee: If you terminate your partnership with the property management company earlier than is outlined in the contract, you may need to pay an early termination fee, the amount of which will depend on the contract’s terms.

There are other elements that will affect how much you may pay for property management services beyond fees for services. These include:

• Condition of the property: Newer properties, or newly renovated properties, may have fewer maintenance costs than older properties.

• Property size: Multifamily investment properties with larger total square footage per property demand more work, and thus draw higher costs than smaller single-family investment properties.

• Location: Property managers may charge more to manage properties that are in areas with higher rents or in expensive cities.

 Managing a rental property can be a full-time job, so the decision to budget for a property manager comes down to how involved you want to be in the day-to-day management of your real estate investment. Think about the time you’ll spend being a landlord—filling vacancies, preparing for move-ins, handling property maintenance, and more. In the long term, you may find it’s well worth the fees to have an experienced property management company handle those tasks on your behalf.

Bungalow offers tenant placement and property management services that keep your property fully occupied and well managed—helping you earn more rental income from your investment property. With Bungalow, homeowners earn up to 20% more rental income. Learn more about Bungalow.