Today we are going to try and explain all those fees that go along with property management. We will focus on the property management fee, the leasing commission or the lease up fee and the lease renewal fee. These are all fairly standard in the property management industry.
Property Management Fee
As a property owner, you have to remember that the property management fee is almost always negotiable and can be decided between you and your property manager. Normally, the fee is a percentage of the amount of rent you collect from the tenant. However, some property managers will charge you a flat fee, regardless of whether the property is rented or vacant. In my opinion, the percentage is a much better way to go. If the property is sitting there vacant, the manager is not going to be doing a very good job of finding a tenant since he is collecting the flat fee whether it’s rented or not. Vacant properties make no money for the property manager when you are paying a percentage of collected rent. I suggest you always avoid the flat fee if you are a property owner.
A leasing commission is commonly called a lease up fee. This is used to pay other real estate agents who may be involved in the transaction of finding a tenant for your property. Contrary to popular belief, your property manager will not be the one to find every single tenant you ever have in your property. Your property manage will talk to their fellow realtors as they are looking for the right tenant for your home. Most realtors work with people who are actively looking for a home and are ready to lease. You have to remember that the larger the leasing commission, the more motivated those agents will be to bring tenants and ideal renters to your property. One word of caution is this: you should only be paying one leasing fee to your property manager within a 12-month time period. If you have a terrible tenant in your property who you need to kick out after a few months, or have evicted, you want to be protected so that you aren’t paying yet another leasing commission to find a new tenant.
Lease Renewal Fee
The fee you pay your property manager for a lease renewal is typically pretty minimal. Often, there is a fee of between $75 and $85, which covers the cost of renewing a lease. Your property manager will need to make some time to work with the tenants and get them into the office to sign a lease for an additional period of time.
If you have any questions about other fees your property manager might be charging you, please contact us at Blackbird Realty and Management. We are always happy to help you.