Professional Property Management Fees in Real Estate Investing

Professional property management fees have been a concern for many real estate investors. So, what are these? And what are the different types of property management fees?

Before we get into the fees, let us tell you a little about real estate property management first.

Real estate property management, which is also called residential property management, is one of the types of investment property management that specializes in rental properties. Basically, it consists of running the daily operations of the rental properties in a way that maximizes the rental income. These operations include rent collections, repairs, and maintenance as well as dealing with rent arrears. Therefore, in return for the professional property management services, you pay property management fees.

So, in order for you to understand what real estate investment management firms charge, here are the types of professional property management fees in real estate investing:

#1 Administrative Management Fees:

Professional property management fees include the administrative or the monthly tasks. These include the collection of the rent and making sure the tenants pay on time. It also includes receiving emergency calls from your tenants, receiving complaints as well as maintaining the rental property. Not only that but also performing regular home inspections to make sure your property stays in shape.

This monthly management fee is typically somewhere between 7-10% of your rental income. Therefore, make sure to double check with your professional property management company about the fees they charge.

#2. Property Leasing Fees:

This is another type of professional property management fees that a real estate property management firm will charge you. The leasing fees are directly related to occupying your rental properties. This means that a property manager will take care of marketing your property, receiving tenant applications, screening tenants which includes running a background check on them and preparing the property for the selected tenants to move in.

Sure enough, this is a lot of work that you get to skip by hiring real estate investment management firms. However, this also applies to when your tenants decide to renew the leasing agreement. Some professional property management companies treat it as a new leasing agreement. So, you want to check with the company you are hiring to manage your investment properties.

As for how much they charge, well, it depends. Some property management companies charge a fee per unit rented. However, others charge the first month’s rental income. Basically, you should expect to pay somewhere between 70-100% of the first month’s rental income.

#3. Vacancy Fees:

This type of professional property management fees is a bit tricky for a real estate investor. Some property management firms charge fees regardless of whether the property is occupied or not. So, if your rental properties are vacant and not producing any rental income, then you might still pay professional property management fees. Therefore, you might want to check with the firm you choose to partner with.

#4. Setup Fees:

The setup fees are basically the ones you pay at the beginning of your partnership with a professional property management company. Even though we cannot tell you for sure how much they will be, they are one-time fees. You only pay them at the beginning of your partnership with the property management company. You should also know that the amount you pay depends on the number of investment properties you have. The more rental properties you have the more you will pay.

#5. Late Fees:

Late fees are also part of the professional property management fees you will be paying. This type of property management fees occurs when your tenant is behind on rent and has to pay a late fee. In this case, your professional property manager will either 1) collect 100% of the late fee 2) collect only a portion of it or 3) not charge at all and pass it all to you as the property owner. Regardless, you will also have to double check on that.

#6. Eviction Fees:

Evictions are the nightmare of every real estate investor. So, when your tenants get behind on rent, eviction is the legal procedure you go through to evict them from the property. The reason it is a nightmare is the long and complicated process that you will have to go through. In this kind of situation, it makes sense to make use of professional property management services. They will take care of the whole procedure for you, of course, in return for fees. Therefore, the amount they charge will depend on the amount of effort they have put into it. That is, especially, if it all went through court. So, you should also expect that as a part of your professional property management fees.

#7. Other Fees:

Of course, that is not everything to professional property management fees. You should expect other fees as well. For example, if you have facilities such as a vending machine that is a part of the rental property, you will also have to pay fees. Not all property management firms charge that, but you should check that out before you sign any agreements.

#8. Airbnb Property Management Fees:

This type of professional property management fees is exclusive to Airbnb rental investing. So, the concept of property management in Airbnb rentals is relatively new. Airbnb has added a new service on its site that allows for hiring property management. Therefore, as an Airbnb real estate investor, you get to hire a super host to manage your rental property. In return for their professional property management services, you will have to pay some fees. These fees are deducted from your Airbnb rental income.

What makes Airbnb property management special is that you hire super hosts who have excellent rankings on Airbnb as well as excellent guest reviews. This way you can be sure your rental property is in the hands of experienced property managers.

Finally,

At first glance, you might feel like it is too much to pay. However, there are ways that allow you to reduce the amount of professional property management fees you pay. For instance, you can do it yourself and save a lot of money. In return, you must be ready to give up a good portion of your own time and energy. Another option is opting for some of the professional property management services while you take care of the others.

To learn more about how you could save up on property management fees, click here.

To learn more about all aspects of real estate investing, continue reading our blog.

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