Property Management Fees - What to Expect

Managing a rental property is as time-consuming as a full-time job. From finding and screening tenants to handling maintenance, collecting rent, ensuring legal compliance, and dealing with evictions, the responsibilities can quickly pile up.

That’s why many landlords hire a property manager to take the load off their shoulders. But peace of mind comes at a cost.

Whether you're a first-time landlord or a seasoned real estate investor, understanding the cost of hiring a property manager is crucial. It will help you make informed decisions and calculate your profit margins accurately.

In this guide, the team at TRI Property Pros will break down the various fees and charges associated with property management to help you plan accordingly. Let’s dive in!

Why Hire a Property Manager?

Before diving into the costs, it’s worth understanding why landlords hire property managers in the first place.

A good property manager can help you with the following tasks:

• Tenant screening and placement.
• Drafting strong leases.
• Rent collection.
• Collecting and storing security deposits.
• Maintenance and repairs coordination.
• Legal compliance.
• Marketing and advertising vacancies.
• Financial reporting.
• Handling tenant complaints and emergencies.

Hiring a property manager can be especially beneficial if you own multiple units, live far from your rental, or lack the time to manage day-to-day operations closely. Additionally, they can be an invaluable tool for landlords who are looking to grow their real estate portfolios.

After all, it’s easier to focus on growing your business when you’re not on call 24/7.

Fees and Charges Associated with Hiring a Property Manager

Property management fees can vary widely from state to state. Moreover, they can be affected by factors such as size, location, and the number of units to be managed. However, these are the common fees every property manager charges:

Setup Fee

This one-time fee covers the administrative work involved in onboarding a new property. It’s typically a flat fee, ranging from $200 to $500, although some managers waive it under specific conditions.

Monthly Management Fee

Property managers typically charge between 8% to 12% of the monthly rent collected. However, some managers charge a flat fee instead, typically ranging from $100 to $400 per unit, which can be beneficial if rent prices are high or if you own a short-term rental.

This ongoing fee typically covers tasks such as rent collection, maintenance coordination, and regular property inspections.

Leasing or Tenant Placement Fee

Finding new tenants takes plenty of time and dedication. That’s why most property managers charge an additional fee for placing tenants in your rental. This can be anywhere from 50% to 100% of one month’s rent or a flat fee, ranging from $500 to $1,000 per tenant when renting out your house.

Lease Renewal Fee

Some property managers charge a smaller fee to renew an existing tenant’s lease. This is usually a flat fee, ranging from $100 to $400, or a small percentage of one month’s rent (usually less than 30%). While it may seem minor, it’s a recurring cost to account for annually if tenants plan to stay long-term.

Maintenance Fees

Maintenance costs are unavoidable in property management. Typically, landlords are responsible for paying the cost of maintenance and repairs, but property managers may also charge a markup on contractor invoices (typically 5% to 15% of the total cost) or a coordination fee.

You may also be required to pay minimum call-out fees, emergency service fees, or annual or seasonal maintenance surcharges.

Vacancy Fee

Some companies charge a fee even when the property is vacant. After all, a vacant unit requires more thorough inspection, maintenance, and marketing. This can either be a reduced management fee or a flat monthly charge, ranging from $50 to $200.

Eviction Fees

Evictions are complex and time-consuming. Property managers often charge extra for dealing with evictions. The typical fee is around $200 to $500 per eviction, while some companies offer eviction protection plans for a monthly premium ($10 to $30 per month).

Keep in mind that, in addition to paying an eviction fee, you’ll also have to cover court filing fees, legal costs, and process serving under the landlord-tenant laws.

Additional Service Fees

Some property managers charge extra for services such as paying utilities for you, property inspections, key duplication, handling insurance claims, and more. It’s important that you ask what the ongoing management fee includes to make sure you don’t incur unexpected expenses.

Estimated Annual Cost of Property Management

So, how much can you expect to pay for a property manager? Let’s put it all together with an example. Say you own a single-family rental earning $2,000 per month, these could be your potential management expenses:

• Setup Fee: $300.
• Monthly Management Fee (10%): $2,400/year.
• Leasing Fee (75%): $1,500/year.
• Maintenance Markup (10% on $1,000/year): $100/year.
• Miscellaneous/Inspections: $200/year.
• Renewal Fee: $300.
• Eviction Fee: $500, plus court fees.

The total would be somewhere around $4,000 to $5,000 per year. This means roughly 25% to 30% of annual rental income might go toward property management in the first year, with lower costs in subsequent years if tenant turnover is low and no evictions occur.

Bottom Line

Hiring a property manager can bring ease and professionalism to your rental operations, but it comes with substantial financial implications. You can expect to pay between 10% to 30% of your annual rental income for management services. Of course, this number could vary widely depending on the scope of work, property type, and location.

To avoid surprises when hiring a property manager, you should read contracts carefully, ask for an itemized list of additional fees, save at least 6 months of potential expenses, and factor in management costs in your pricing strategy.

This will ensure you reap the benefits of property management without being caught off guard by hidden fees or additional expenses.

If you’re looking for a transparent property management company in North Carolina, contact TRI Property Pros!

Disclaimer: This article is intended for informational purposes only and should not be considered financial, legal, or investment advice. Property management costs may vary by region and provider. Always consult a licensed professional for guidance tailored to your specific situation.