Investing, Flipping and Reselling: Real Estate Investment Tips

What You Need to Know About These 3 Types of Property Management Fees

Are you investing in real estate? One thing that often comes with this decision is how to manage the properties. Some people choose to do it on their own.  However, this may become overwhelming especially if you have a considerable number of properties or have other businesses to take care of and that's when you may consider hiring a property management company to manage your properties for you. Among other tasks, property management companies will deal with your tenants and prospects directly, collect rent, market your property, handle maintenance issues, and respond to complaints from tenants. Before choosing a property management company, you will want to how much you will pay. Here are the major types of fees charged by most of these companies.

Management Fees

You will of course have to pay the property management company for managing your property. This fee usually a given percentage of the monthly value of your property so you can actually choose a property manager based on the percentage they charge. However, it is important to note that the rate of the management fees charged will vary depending on things such as the number of properties being managed, the condition or location of the property, and the number of units each property has.

Before signing the property management agreement, you need to be extremely careful on the terms used especially concerning management fees. This is because for some property management companies, you may be required to pay this fee even you are not collecting any rent. Contracts where management fee is paid out of the rent collected are often the best option because you only give what you collect. An agreement that suggests you pay the fee out of rent due or scheduled rent may not be a good idea because should a tenant stop paying rent, you will still have to pay the fee based on the monthly value of the property had the tenant paid the full rent.

Leasing Fees

Leasing fees are also crucial in property management. Leasing fees are generally meant to compensate your property manager for the costs, effort, and time spent in finding you new tenants for your property. This includes things such as advertising the property, reviewing the applications for occupancy, screening the tenants, and processing the needed paperwork. Leasing fees are oftentimes calculated as a percentage of the rent of the first month.

Vacancy Fees

This is another common fee you may have to pay. Some property managers will charge this fee to cover the costs of real estate agents helping to find tenants for the vacant units. This may involve compensation for advertising the vacant units and time spent showing them to interested tenants. However, most companies, especially those who charge management fee on rent due basis usually don't have such fees so it may be a red flag if they do.