Your property manager is the person you work with to rent out your home. The relationship between owner and property manager is important, so understanding how much it costs to hire a good one can help you make a more informed decision.
Itemized List of Services
Property managers should offer an itemized list of services. This means they should break down all the costs that you have to give them for property management services. Make it clear if there are any additional fees or charges associated with their service agreement (like late fees). They should outline how they communicate those charges to tenants, too.
What are typical property management fees?
Property management fees are the cost of hiring a third party to manage your rental property. If you’re thinking about becoming a landlord and have no idea where to start, then hiring an experienced property manager is one of the best starting points.
One of the most common questions we get from those looking to rent out their homes is, “How much does a property manager cost?” There are a wide variety of property management companies out there that will charge different rates based on their services. These fees can vary depending on the type of property, the location, and the services needed.
The best way to avoid being surprised by unexpected costs is by negotiating in detail before signing any contracts with property managers. Both parties must understand exactly what each other is providing and what they expect from each other. This way, if anything goes wrong down the road, there shouldn’t be any surprises for either side.
Now it’s time to dive into what kind of associated costs they have, so you’ll have a better understanding.
- Initial Setup
You need to know that some companies charge initial fees, while others don’t. So, it depends on which company you choose. It’s like a registration fee that covers the expense of setting up the account. It’s a one-time fee for building a partnership with the property management company that covers the cost of the initial inspection as well.
Almost typically, the first setup charge is around $500 or less.
- Monthly Management Fees
The monthly management fee is the most common property management fee. It’s the property management cost per month that you give to have someone else manage your property, including finding tenants, taking care of repairs, paying bills, and collecting rent. The name implies that it’s a regular payment.
What is included in a monthly property management cost? Typically, all services provided by a property manager are included in this fee. This includes day-to-day tasks, advertising for tenants, screening potential renters for creditworthiness and references, collecting rent on time each month, sending out notices about lease renewals, etc.
Property management companies commonly charge between 8% and 12% of the monthly rental income that you receive. Some companies may offer a flat fee instead of a percentage-based fee.
How to calculate property management fees?
When thinking of how to calculate property management fees, you can use a simple formula — take the monthly rental income and multiply it by the percentage fee charged by the property management company. For example, if you have a rental property that generates $2,000 in monthly rental income and the property management company charges a 10% fee, your monthly management fee would be $200 ($2,000 x 0.10).
- Maintenance Fees
The maintenance fee is a percentage of your monthly rent and is charged by the property manager. The fee covers all of the costs associated with maintaining and repairing your home. Maintenance fees are a part of monthly management expenses. Keeping up with property maintenance issues such as broken appliances or leaky faucets and keeping the areas clean.
Additional Property Management Fees
There are some other property management costs that you need to consider:
- Tenant Placement Fee
A tenant placement fee is a fee that property managers charge landlords to place tenants in their rental units. Again, companies may differ, but you need to consider this fee as well, which is charged when managers find a tenant for your property. If you look for a new tenant, you need to discuss with your property manager how much it will cost. The placement fee can also cover the costs of property marketing, tenant screening, preparing the lease agreement management, etc.
- Vacancy Fee
Sometimes, when the property is vacant, there may be more potential threats than when there is a tenant. Utility services must be kept running during showings, which increases the risk of water leaks or any other issues, regarding gas, security lights, etc. When the property remains vacant for a long period, there is a chance that the assets can be broken or damaged.
- Eviction Fee
There might be a need to evict a tenant for failing to pay rent or damaging your property, even if it typically doesn’t happen that often.
So, don’t be surprised if the company will also ask for an eviction fee as well as any fees regarding court expenses.
- Early Termination Fee
You frequently have to pay an early termination charge if you terminate cooperation with the property management agreement too soon. The fee can be different depending on the terms of the contract.
There are also costs associated with property bookkeeping and accounting services. So, make sure to ask about them as well if you want those services to track your finances.
How Much Does Property Management Cost?
How much do property managers charge? To summarize, you should budget between 8% and 12% of the rental value as a commission when hiring a property management business.
Property management fees in Canada can vary based on different factors:
- The location of the property
- The level of engagement
- Property condition
- Size and type of property
- Number of services
At the end of the day, property management is a business. Property managers are paid to provide services and keep landlords happy while making sure they’re getting paid for their work. So, when looking for property management services, consider asking them about the general and additional costs that you have to pay not to be surprised later on. Good luck!