Smart investors know that hiring a professional property management company is a good way to earn more on a rental property. But before hiring a property management company, it is important to know where your dollar is going.
Every property management company has its own structure of fees, and you need to know what you can expect to pay and what sorts of services you’ll receive in exchange for those fees. It’s never a good idea to choose a management company simply because you like their rates. There are far more important things to consider. However, you do need to know what you’ll be expected to pay, so be sure to have an open and transparent discussion with any property manager before you sign a contract.
Orlando Property Management Fee Structures
There are two different fee structures involved in management services. The flat fee structure has you pay one price every month, regardless of what your property rents for and whether there’s anyone in it paying rent. In Orlando, your flat fee might be less than $100 per month or more than $250 a month, depending on your property type, the companies you’re considering, and the services you’re receiving for your management fee.
With a percentage-based free structure, you’ll be charged a percentage of the rent that’s collected. Perhaps you’ll pay between eight and 12 percent of the rent that a property manager collects from the tenant. So, if your home rents for $1,400, and your property manager charges a management fee of 10 percent, you’ll pay $140 every month.
Your property manager will tell you whether the company works on a flat fee basis or a percentage basis. Make sure you’re comfortable with the way this fee is paid and what it covers. Every company is going to be different, so a service that’s included with one company’s percentage plan may not be included in another company’s flat fee plan.
Orlando Property Management Fees: The Leasing Fee
The first fee you will normally come across is the leasing fee. This is the fee you pay in order to cover the costs of finding and placing a great tenant in your rental property. Usually, the leasing fee is a percentage of the first month’s rent, but there are some management companies that will charge a flat fee. You should expect the following services to be included in your leasing fee:
- Marketing your vacant or soon-to-be vacant property.
- Scheduling showings at your property and conducting some pre-screenings when tenants call or email for more information.
- Communication with owners during the leasing period.
- Comprehensive tenant screening, including background, credit, and eviction checks as well as income verification and rental reference checking.
- Collection of security deposit, first month’s rent, and other move-in funds.
- Negotiating, explaining, and signing the lease agreement.
- The move-in inspection and ultimate placement of a well-qualified tenant.
When additional services are provided, find out from your potential property management company if you’ll be required to pay for them. For example, if the property is advertised on the Multiple Listing Service (MLS), your property manager should pay other real estate agents a commission when your property is rented by one of their clients. You’ll want to know if you’re going to be responsible for paying the commission and any other advertising and marketing costs.
Talk about what’s included in your leasing fee. Some property managers will hire a professional photographer to take pictures of your home for your online ad. That’s a great idea, but you’ll need to know if the photography fee is included in your leasing fee, or something you’ll have to pay on its own.
The leasing fee is a one-time fee and you’ll likely pay it directly to the property manager once a tenant is placed, or the fee will be deducted from your first month’s rental payment.
Orlando Property Management Fees: The Monthly Management Fee
While the leasing fee is a one-time fee, the management fee is something you’ll pay every month. It’s important that you budget this expense into your plans when you’re buying an investment home or deciding to have it professionally managed.
Typically with management fees, you are going to have an online portal that your property manager will set up so you can log on and see real-time financial information. You’ll also see any communication and other information that’s relevant to you and your property. Your portal will show you lease documents, maintenance records, invoices that were paid, and rent that was collected. You can use it to access accounting statements, run reports, and get in touch with your property managers.
It can also help you stay organized with your management fees. The monthly management fee covers the day-to-day requirements of protecting your property and keeping your tenants comfortable. Most management fees will include:
- Rent collection.
- Accounting and bookkeeping.
- Lease enforcement.
- Tenant communication.
- Emergency maintenance.
- Routine maintenance.
- Tenant relations.
- Compliance and regulatory issues as well as legal protection.
- Service of legal notices.
- Evictions and court proceedings, if necessary.
The management fee will cover all these services and more, so talk to your property manager about anything else you require.
Additional Property Management Fees in Orlando
While the leasing fee and the management fees are the two most common fees, and expenses that you can plan on no matter who you work with, there are also other fees associated at times. Depending on the management company you choose, there may be other costs.
You might be charged to activate or change utility accounts between tenants. There might be additional inspection fees charged for the move-in inspection or the move-out inspection. You may see an administrative fee or an advertising fee. Some property management fees will charge a technology fee or a document fee. It’s possible you’ll be charged for postage any time the property manager has to mail something to you or your tenant. You might see maintenance mark-ups where your property manager charges a fee on top of your invoice amount to compensate them for coordination and scheduling. So, if your maintenance invoice is $400, your property manager might have a 15 percent mark-up, bringing the total service to $460.
These additional fees are not necessarily wrong. If the company charges an extremely low leasing or management fee, it might be due to the fact that everything is paid for separately. Do the math to find out whether it works out to be more expensive for you or more cost-effective. And, make sure the property management company you’re considering is transparent about the fees. There’s nothing wrong with charging an extra fee, as long as you know it’s coming. You don’t want to be surprised when you open your accounting statement and you see that you’ve not earned as much as you were expecting because of those extra and hidden fees.
Renewal Fees in Orlando Property Management
Renewal fees are important to inquire about when you’re interview property management companies. They can be handled in a number of different ways. Some property managers won’t charge any type of renewal fee, or they might charge tenants to renew a lease. Other companies will charge you a renewal fee that’s similar to your leasing fee.
Lease renewals are going to be an important part of tenant retention. You earn more ROI when good tenants stay in place. So, when your property manager is able to renew a lease with a tenant, paying a renewal fee is well worth the money. Make sure there’s an incentive for your property manager to renewal a lease.
When you’re deciding how much you’re willing to pay a professional property manager to take care of your property, remember that your investment has a lot of potential, and good property management can help you earn more. It can also keep you protected from legal issues and liabilities. When you pay your leasing or management fee, you’re not just paying for the services that are provided. You’re also paying for your property manager’s experience and resources. You know you’re getting something of value when you don’t have to think about your investment at all. Peace of mind is worth a lot, and so is your time. Keep this in mind when you’re interviewing property managers. Saving money is great, but you want to make sure you’re not sacrificing great service to save a few dollars a month.
Property management expenses can become expensive, and we sympathize with that. However, those property management fees you’re paying can often be turned into higher returns. There’s also the potential of writing those fees off at tax time.
What you pay will really depend on the type of management services you are seeking. Ask questions and educate yourself on all the fees and all the processes. There are many parts to this business. We are certainly here to help. If you have any questions about property management fees, please contact us at Specialized Property Management in Orlando.