How much does property management cost?If you own rental properties, chances are, at some point, you’re going to start trying to wrap your head around property management fees so that you can make a wise decision as to whether or not to hire a property management company to manage your rental properties.The intent of this article is to help you make that decision. Let’s dig in.Variables That Impact Property Management FeesSo, how much does a property manager charge?As you might suspect, there are a handful of variables that could end up impacting the property management fee a property manager ends up presenting you.Let’s review a few for context.Property ConditionOlder or neglected properties tend to need more love and attention.In most cases, that means a property manager will want to charge you a higher management fee as it will likely take them more time to manage the property.What makes a rental property in “good” condition?A good rental property is one you feel great about renting to others. If you feel a bit guilty about taking renter’s money, something isn’t right.To get a bit more practical, in a spreadsheet, list out each major component of each room in a column (doors, lights, flooring, etc).Next, create a drop down list that populates the second column. The drop down list should contain the following three options:Rent-readyNeeds minor repairsNeeds complete replacementOnce you have your spreadsheet laid out, go through and inspect your properties for each of the items you’ve listed. Once you have everything “rent-ready”, you have yourself a rental property in “good” condition.The Holland & Picht ApproachWe always start by helping property owners develop a property improvement plan. The goal here is to improve the property to a point in which it is capable of being rented. The plan also includes what improvements should be made over time and when. Since this typically happens before we even find tenants, property condition doesn’t have a direct impact on the monthly management fee. We also don’t charge a fee for helping Owners develop or execute a property improvement plan.Property Location and Crime RateSimilarly, property management costs will likely vary based on the location of your rental property.There are really two questions a property manager is looking answer here:Is the rental property within my service area?Is the rental property within an area that has an acceptable crime rate?The Holland & Picht ApproachAt the moment, we only manage properties within or near the Tallahassee city limits. For us, we’re not willing to charge a higher fee for one or two properties outside of our service area as we don’t think we’d be able to provide the same level of service we do to the properties we manage within our service area.Crime rate, however, is very important to us; as we’re only interested in providing housing in safe and clean neighborhoods. Similar to location, for us, crime rate does not impact the monthly management fee as it would some other providers; we simply will not agree to manage unsafe properties.With that being said, here is an example of how those of you in Tallahassee can determine the crime rate of your rental property’s neighborhood: Go to https://www.talgov.com/gis/tops/ Apply the following “historical search”: Address Incidents Aggravated AssaultAggravated BatteryArsonAssaultAssault LEOBatteryBattery LEOBomb or explosiveBomb threatCarjackingHomicideHomicide - AttemptedKidnappingProstitutionRobbery - ArmedRobbery - SnatchingRobbery - StrongarmSexual BatteryTheft - GrandWeapons Violation Days = 365Buffer = 1/4 mile From there, you can create a scale that objectively evaluates the neighborhood:0-2 crimes = safe neighborhood3-4 crimes = not a safe neighborhoodProperty Management Services Included As illustrated in the image above, pulled from a report published by Buildium, property management companies can often provide a wide variety of different services to their clients.As you can imagine, what services you are receiving will impact the property managers fee.Let’s take a quick look at some of the common property management costs in the next section.Overview of Common Property Management FeesInitial Setup FeeAs I mentioned earlier, we don’t charge an “initial setup fee” and we don’t tack on a fee for helping property owners get their property up to speed.However, it’s very common for companies to include a fee in the $300 ballpark for setting up your account and preparing your property to be rented.This typically covers the costs associated with those activities.Monthly Management FeeA monthly management fee can range any where from 6-12 percent.There are a few important things to consider and keep in mind:Flat fee vs Percentage of Rent - A property management company will either charge you a flat fee or a percentage of the rent. At Holland & Picht, we will charge $75 per unit or 11% of rent collected; whichever is...
