A Breakdown of Property Management Fees

Picture of Tips for Selecting Property Management Strategy
Tips for Selecting a Property Management Strategy. Photo: Peter Dazeley/The Image Bank/Getty Images

Key Takeaways

  • Property managers charge a monthly fee to manage the property, which can be a flat fee or a percentage of the monthly rental income.
  • Property managers typically charge between 4% and 7% of the rental income, but smaller properties might cost 10% or more.
  • Maintenance fees may also be charged for services, including garbage, snow, and leaf removal.
  • The size and condition of the property can be a factor in driving property management costs higher.
  • Also, the property type influences the property management fee, such as single or multi-family homes and commercial properties.

A property management company will help landlords manage their rental property for a price. Property management fees will vary based on a variety of factors, such as property type and services provided. Here is a breakdown of the fees a property manager may charge.

Standard Property Management Fees

Initial Setup Fee

A property management company may charge an initial setup fee to establish your account with their company. However, not all companies charge an initial setup fee, but if they do, it is usually $500 or less. This fee could also include costs to inspect the condition of the property, as well as costs to notify tenants that they will be managing the property.

Monthly Management Fee

Almost every property manager will charge you a fee to manage your property on a monthly basis. The contract you sign with the property manager will specify how this fee is calculated and what services the fee includes. Some companies charge a higher monthly management fee, but it may be more inclusive, so do not be put off by a higher initial fee until you understand what is included.

A property manager may charge a flat fee to manage your property or a percentage fee:

Flat Fee

A flat fee is a specific dollar amount you pay the property manager each month. The exact number is determined based on the size or square footage of the property and the services provided. For example, a flat fee might be $100 per month for a single-family home.

Percentage of Rent

More commonly, a property manager will collect a percentage of the monthly rent as a property management fee. The percentage collected will vary but is traditionally between 8% and 12% of the gross monthly rent. Managers will often charge a lower percentage, between 4% and 7%, for properties with ten units or more or commercial properties. However, a higher percentage fee of 10% or more is typical for smaller or residential properties.

For example, a 5% monthly fee for a property with $50,000 in monthly rent would be $2,500, while a 5% fee for a property with $2,000 in monthly rent would be $100, which might not even cover the cost of business for the management company. A 10% fee for the property with $2,000 monthly rent would allow them to collect $200 instead.

Rent Due vs. Rent Collected

Make sure your contract with the property manager states that the fee is for rent collected rather than rent due. Otherwise, the property manager will be collecting money even if the tenants are not paying their rent.

Maintenance Fee

Maintenance fees are generally included as part of the monthly management fee. This could include keeping common areas clean, taking out garbage and snow, and leaf removal.

If a specific repair must be made, the cost of the repair will be deducted from the reserve repair fund, which is a separate account where the landlord holds money for property repairs. There are a few ways to manage the account and handle the repair process.

  • The landlord can choose to authorize every repair deduction from the account.
  • The landlord can choose to only be notified for repairs over a certain dollar amount.
  • The landlord can allow the property manager to use the account at their discretion.

A minimum amount must be kept in this account, such as the equivalent of one month’s rent.

Additional Property Management Fees

Tenant Placement Fee

A property manager may charge a separate fee for placing tenants in your property. Again, this could be a flat fee or a percentage of the rent. Half a month’s rent to a full month’s rent is common.

The tenant placement fee can include advertising costs to find a tenant, tenant screening, move-in procedures, and preparing the lease agreement. Depending on contract terms, this fee may be refunded to the property manager if the tenant breaks their lease early or is evicted.

Vacancy Fee

A property management contract could include a fee for vacancies. This could be a one-time fee of one month’s rent upfront, or it could be a fee per vacant unit, such as $50 per unit.

Eviction Fee

If you want a property manager to handle tenant evictions, you will have to pay for it. Expect to pay a few hundred dollars for each eviction, plus any associated court costs.

Early Termination Fee

If you break the property management contract early, you will often have to pay an early termination fee. This fee will vary greatly based on the terms of the contract. You may only be responsible for paying one month of additional management fees or you could be taken to court for breach of contract.

Factors That Influence Property Management Cost

There is no set price that a property management company will charge to manage your property. The fees will depend on a number of factors, including the level of services that are needed from the property manager.

What Property Managers Do

Property managers are helpful since they manage the property and handle tenant issues on behalf of the landlord. A property manager's responsibilities include booking new rentals, collecting rent, maintenance, and repairs, as well as eviction of tenants. An effective property manager can help save landlords time and headaches by responding to tenants promptly and handling the property's ongoing day-to-day operations.

Size of Rental Property

One of the key factors that influence the cost of a property manager is the size of the rental property. Managing a larger property involves more work than managing a smaller rental property, so the fee collected will be larger.

Type of Property

Property managers can manage all types of investment properties, including single-family homes, multi-family properties, commercial properties, and even vacant properties.

Condition of Property

Newer properties, or older properties that have been renovated, may have fewer maintenance issues than older properties.

Location of Rental Property

Property managers may charge more to manage properties that are in areas that command higher rents and lower fees to manage properties in areas that command lower rents.

Extent of Services

The services that the property management company provides play a large role in how much they charge. If you are only hiring a property manager to collect rent, you will pay much less than someone who wants a manager to collect rent, fill vacancies, handle repairs, handle tenant evictions and keep financial records for your taxes.

Frequently Asked Questions (FAQs)

Is a property manager worth it?

In determining whether a property manager is worth the cost, consider how much time you'll need to run the property, including booking new rentals, rent collection, repairs, maintenance, and ongoing tenant issues. It might be worth the fee for properties with several units, while the fee might not be worth the cost for a single-family home.

How do you calculate management fees?

A management fee that's charged based on a percentage of the rental income might cost a landlord $2,400 per month for a property that earns $30,000 in monthly income with an 8% monthly property management fee ($30,000 * 0.08).

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. National Association of Residential Property Managers. "Financial Benchmarks Guide," Page 14.

Related Articles