How much does a property manager cost?

If you're a real estate owner, you might be considering hiring a manager to oversee your properties. Keep in mind that the amount you end up paying depends on several factors and vary by company. Keep reading to learn more about management fees and how to get free cost estimates from property managers near you.

Property managers set their rates according to either a flat fee or a percentage of the monthly rent. Depending on what you charge for rent, you may be able to save some money while still getting a quality property management company. 

For example, if one company charges a monthly property management fee of 10% of the rent and the monthly management fee of another company is $150 flat, you would save money if your monthly rent was under $1,500. 

The chart below shows some common rates that property management companies charge to manage real estate:

In addition to the monthly fee, management companies may charge these management fees:

Maintenance fee

Sometimes, maintenance is included in the monthly management fee. Other times, it’s an additional cost.

Managers often hire maintenance professionals to help maintain the property. When a professional is hired to do the work, the property manager may charge a markup on the pro’s services, depending on the project.

For example, if a washing machine required maintenance and a pro charged $100 to perform the work, a management company might include a 25% markup, meaning you’d have to pay a $25 maintenance fee.

Setup fee

The setup fee that a property management company charges covers creating your account and the initial costs of taking care of your rental property. 

The setup fee may include inspecting your property, and drafting all agreements and addendums so that you and the property manager can start on the same page. It could include an analysis of your properties, which helps the management company get a better sense of how to take care of the property, how to keep the tenants happy and how to ensure that your units are occupied as often as possible. 

This is typically a flat fee instead of a percentage of the monthly rent. As the property owner, you should double-check what’s included in the setup fee to avoid miscommunication about the nature of the setup process. 

The amount of the setup fee varies, but it can be the same as one month of management. Among other fees, commercial property management companies may also charge the owner slightly more for a setup fee to cover the extra paperwork that’s often involved.

Leasing renewal fee

A property manager may or may not charge a lease renewal fee. If they do, they typically charge it as a flat fee or a percentage of the rent.

The fee typically covers the work they will perform (drafting paperwork, negotiating terms with the tenant, making adjustments to the lease, etc.) to secure a lease renewal. 

Tenant placement or leasing fee

One of the primary challenges associated with a rental property is maintaining a tenancy. Even if you prefer a hands-on approach to marketing, property management companies can help you find tenants. 

This often requires additional fees, which cover marketing, advertising, communicating with potential tenants, interviewing them and vetting them with background checks or informational surveys. 

The tenant placement fee will vary from one property management company to another. For some, it’s a percentage-based fee based on the rent. Others may charge a flat fee

Vacancy fee

Because many property management companies make their money through a percentage of the monthly rent, you may have to pay a vacancy fee when units aren’t being rented out. 

This helps cover the property management company’s expenses. The vacancy fee may be as low as $50 to $75, but not all companies charge it.

Early termination fee

An early termination fee is what you pay when you end your business relationship with a property manager before the contractual term ends. For example, if you agree to a one-year relationship but opt for self-management 10 months later, you may have to pay an early termination fee. 

When you’re researching and contacting potential managers, be sure to ask about any other miscellaneous fees. If possible, request to receive a free structure in writing.

For many companies, their pricing depends on the type of property you have, as well as its size and location. For example, property managers often have different fees and pricing structures for residential and commercial properties.

The state or city where the property is located can affect the costs. In areas with higher rental rates, managers will generally charge more for their services.

Hiring a full-service management company can make property management a hands-off experience. It can also help improve the landlord-tenant relationship because the property manager can take care of tenant concerns, helping make their experience smoother. 

Do your homework when researching and hiring a management company. Here are some things to keep in mind:

Ask about the fees they charge and their pricing structure. They may charge fees that you haven’t thought of before. For example, many managers charge an eviction fee when they have to help you get a tenant out. Some also charge late fees if you don’t pay on time. This may happen occasionally, especially if you pay the property management company after your tenants pay and the tenant’s rent comes in a little late.

Check the licenses or credentials they need to have. In most areas, there are prerequisites for being professional property manager. For example, they might need to obtain a license in your state. You should make a list of the requirements in your state and ask the professionals to verify their credentials.

You can learn more about state licensing requirements by visiting Thumbtack’s Smart Hiring guide.

Ask about their approach to renter satisfaction. Inquire about how they assist tenants during the move-in or move-out process. You may also want to ask how they handle the lease-up period and how they help encourage tenants to continue renting your property. 

Carefully read online reviews. Look for reviews that offer detail. A perfect review that’s only a few words may be less useful than one with a less-than-perfect score but with a good amount of detail. 

If the property management company has a few bad reviews, check them for patterns. For instance, if words like “unprofessional” or “unreliable” pop up multiple times, this could be a red flag. Also, check to make sure that the quality of service has been consistent over time.

Check out photos. Property managers should have plenty of photos that showcase not just the units they manage but also the value added by their services. They may showcase how they add value by posting before-and-after shots of the building or its maintenance, including social areas, the parking lot or landscaping.

Hiring a property manager is well worth the monthly management fee if you have a busy schedule and multiple properties to manage. If you want help with collecting the monthly rent, taking care of tenant requests or handling some of the maintenance and repairs around your rentals, a property management company can be a powerful ally. 

You might also want to hire a manager if you’re in the process of growing your real estate investment business. If you need to spend time vetting potential investments or meeting with sellers or potential partners, hiring a property management company may free you up to earn more money in the long run. 

If you’re in the process of expanding and you sign on with a property manager, their services can help tighten your overall rental property infrastructure. You can establish systems around rent collection, maintenance and renter retention that can be applied to your future properties. 

On the other hand, in some instances, the fees may not be worth the investment. If you have one property and enough time to handle it on your own, hiring a manager may cut too deeply into your profit margin. 

Take the time to thoroughly research the costs and gather cost estimates before you decide whether to hire a property manager or self-manage your own property.

A good property management company can help you save time, keep your renters happy and expand your real estate investment business. If you’re ready to hire a pro, start searching for property managers near you on Thumbtack.