Property ManagementHow Much Do Property Managers Charge? Is It Worth It? by Mira Teneff August 6, 2020August 6, 2020 by Mira Teneff August 6, 2020August 6, 2020Owning a rental property brings about many questions. One major one is “How much do property managers charge?” Do you need their services at all? And what is a good price to pay that will not eat too much of your rental income?Professional property management has its pros and cons. It saves you time and headaches, but it can be costly if your investment property is walking the thin line of cash flow. Let’s see what property management fees you can expect and how to decide if it is worth it for your investment strategy.How Much Do Property Managers Charge?Most property management companies charge either a percentage of the monthly rent price or a flat rate. For residential properties, it ranges between 8 and 12% of the rental price, most commonly 10%. Commercial properties usually go lower. Airbnb property management fees, however, are much higher because of the work involved – 12-40% of the Airbnb monthly income.It is very important to read the contract carefully. If it says you are to pay a percentage of “rent due” or “rent scheduled”, this means the property management fees are due even if the rental unit is not occupied, so beware! It would be much better if it says “rent collected”, meaning you pay fees only if you earn rental income. The size of management fees for a rental property depends on:The type and size of the property – a bigger house with a pool and huge yard requires more effort than studio apartmentsLocation – a posh address in town means higher maintenance and high-income tenantsThe number of rental units you are hiring a property manager for – Multi family homes get better prices than single family homes because it is cheaper and easier to maintain multiple units in one buildingRental price – the higher it is, the more property managers want it so they are ready to compromise 1-2%Your negotiation skillsWhether or not the cleaning materials are includedWhether the property management company has its own maintenance team or hires subcontractorsAdditional feesIf the main fee is low, expect to be charged for every extra job done. On the contrary, if the property management fee is sizable, all occasional services might be included. Make sure everything is clearly stated in the contract and negotiate as much as you can.Here are a few typical property management fees:Account setup fee (free-$300) – negotiable if the rental unit is already occupiedLeasing fee (25-100% of one month’s rent, 50% is most common) – for finding new tenants Lease renewal fee (up to $200) – you should negotiate to get a refund if tenants leave before the end of the lease or get the leasing fee for the new ones waivedVacancy fee (about $50/ month) – while the rental unit is vacant, it only needs a bit of cleaningEviction fee (up to $500 plus legal expenses)Reserve fund (as agreed) – you give money to the property manager upfront so they can pay for repairs as needed. Or they’ll have to call you to pay every time a doorknob is changedPaying bills fee (1.5% of sum due) – the property management company can handle bills, taxes, mortgages, and HOA fees for you so you don’t incur late payment feesRepairs and renovationsCleaning materialsWhat Does a Property Manager Do for You?Being a landlord is more time-consuming than you might think. You might want to do it yourself to save on property management fees, but be prepared. It involves finding, dealing with and evicting tenants; and doing the related paperwork. Then comes collecting rent and managing security deposits, paying bills, preparing taxes, and dealing with other owners or neighbors. Then the “real” property management work: maintain, clean, and repair the rental property or hire contractors. This means common areas and outdoor spaces, too. Do not forget about doing house inspections and keeping an eye out for house rules. Last but not least, you would be the one to answer calls 24/7 and handle emergencies. Related: How to Manage Rental Properties on Your OwnIt is doable if you do not work full-time or buy the house next door to rent out. But it means a lot of work and always being available – going on vacation might be hard. This is where a property manager comes in. They can handle all of this for you and you do not even have to visit the investment property. On top of all the convenience, property management companies might even save you money because the prices they get for repairs, upkeep, and so on are often better than what you can get yourself. And it all works smoother and faster. So if you ask, “Is hiring a property manager worth it?”, we say yes because it saves trouble.Related: 11 Ways Landlords Can Cut Costs & Save MoneyAirbnb managementRenting on Airbnb requires a lot more effort and time on your part. Managing the listing and communicating with guests should be done with care. Then, check-ins and check-outs, cleaning, and restocking are due even for a one-night stay. You also need to be available if anything happens or if guests miss their flight and arrive at midnight. Also, Airbnbs wear and tear faster than traditional rental properties so you will have a lot of maintenance and repairs to do.Not only will a professional take care of all of this, but hiring an Airbnb property manager makes managing an Airbnb remotely possible. It lets you be a remote landlord, doing passive real estate investing. You can invest in rental properties in vacation hotspots away from home where rental prices are higher and never worry about dealing with guests. So paying a management fee actually can earn you a bigger income.Related: Airbnb Property Management: DIY or Hire a Pro?How to Calculate If Paying Property Management Fees Is Worth ItIt is worth it to hire professional property management, if the cash flow generated is positive and the rate of return matches your investor goals. Positive cash flow properties are profitable rental properties because they earn you an income after expenses are paid.To calculate your expected cash flow, it is best to use a rental property calculator. This is an online tool that analyzes the investment potential of a rental property. Real estate analytics software Mashvisor offers one. Search for your investment property’s address on the platform or add it, if it’s not in the database. Using historical data from similar properties in the area, the calculator estimates:Monthly rental income/ Airbnb rental incomeCash flowOccupancy rateCap rateCash on cash returnAs far as property management fees are concerned, the rental property calculator estimates rental property expenses, too. This includes management fees along with taxes, utilities, insurance, mortgage payments, HOA fees, rental income tax, and more. And these fees are all accounted for in the above calculations.The best part is that you can manipulate the numbers of this rental property analysis, including the property management fees, to see how they influence the cash flow and return on investment. This allows you to compare rates from different companies and will give you a clear answer if it is worth paying for it.Try uploading your investment property and play around with the numbers. How is the profitability if you pay top-range fees for property management? And does it improve significantly if you do not make the expense at all? Can you tweak other numbers to increase your profit while hiring help?Just a heads up: If you were wondering “Can you write off property management fees?” the answer is yes, property management fees are tax-deductible. So that should be accounted for in your decision. Start Your 7-Day Free TrialIn ConclusionDeciding whether or not to hire professional rental property management is a hard decision and answering the question, “How much do property managers charge?” is not enough. Compare the price to the benefits and what profit is left after it is paid. For real estate investors with more than one rental property, it is definitely worth it. Start Your Investment Property Search! START FREE TRIAL AirbnbCash FlowCostsInvestment CalculatorTraditional 1FacebookTwitterGoogle +PinterestLinkedin Mira TeneffMira's family is in the real estate development business. 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