Hiring a property manager may make things easier for you, but it also comes with additional costs. In this video, founders Chris and Eli break down the costs of a property manager.
Topics in this video include:
- Property managers charge a percentage of the monthly rent
- Fees for tenant placement [2:03]
- Transportation fees [2:38]
- Admin costs [3:25]
- Things to consider when deciding if you want to hire a property manager [4:07]
Transcript
Chris Lee: Hi there. Welcome to Landlord Gurus podcast. We’ve got Chris and Eli here. Today we are going to talk about “How much does a property manager cost.”
So if you have been thinking about getting a property manager, or are currently hiring and have hired a property manager, we’re going to talk about what costs you should expect, what costs you would have to pay, things to think about, and things you may not have expected.
So, Eli, I know that you have hired a property manager at various times in the past for certain properties. What’s been your experience with the costs?
How Much Does a Property Manager Cost?
Eli Secor: Well, it’ll vary a little bit. It could vary a lot, market to market, but where I have dealt with property managers, the costs have been anywhere from 7% to 8%, on the low side of gross rents per month that you pay out right off the top, to 10% of gross rents. And then generally that’s not the end of it.
CL: Yeah, I think that that’s true. And, I’ve heard even for like single-family homes, if you are renting out a single-family home, that you may be charged up to 12% of that monthly rent for property managers. So, yeah, again, depends on, how many units the building has.
ES: Yeah, for big, big, big complexes, it can be lower, but then you’ve got onsite property managers generally as well. So that’s an additional cost. I did decide to hire a property manager a couple of years ago for a property that I own in Portland, Oregon.
So that’s a three-hour drive from here in Seattle. And I did that because it takes time to get down there and back to fill vacancies and manage the maintenance. I found people that could deal with issues pretty well—good vendors—but sometimes, especially when the market was a little tougher, it really was taxing a lot of trips back and forth to fill the vacancies.
So yeah, I hired a property manager and wanted to see how it went. I think I got pretty favorable terms for a triplex. And that is 8% off of the gross rent is the fee every month that I pay. And then I pay 50% in a lease up fee. So every time there’s a vacancy, I pay half of whatever the rent will be, in a fee, to find a new tenant.
Fees for Tenant Placement
CL: So that’s a common expense that a lot of property managers will charge. If they are finding a new tenant, they will charge you, in your case, 50% of one month’s rent to find that new tenant. Sometimes even up to a full month for a new tenant. And sometimes, you know, on lease expiration, you know, even just for renewal, they may take another 25% or 50%. Just to renew with the same tenant. Not finding a new tenant, but just renewing with the same tenant.
ES: Yeah, I’d forgotten about that. That’s something that I do pay, actually, I think it’s a flat fee. I think it might be $200. It doesn’t feel like a huge percentage, but it’s a fee and they add up. And there are others.
Transportation Fees
CL: Yeah, so talk about some of the other fees there. You know, I think you had mentioned before that there might be a transportation fee that they charge or a fuel surcharge or things like that.
ES: Yup. That is becoming more typical as the fuel rates are skyrocketing right now, but it’s been there for a while now. And in the big cities, commute times are long, so it makes some sense, but it’s also an expense.
CL: So if it takes them an hour to get there and back, you’ll get charged either an hourly fee or a flat rate?
ES: I think I’m paying about 50 bucks per maintenance trip. That’s actually more often on the property management staff going out, that usually the trip surcharges are kind of buried in the vendor costs. Although it could be a line item on the vendor invoice, but you can see it in both cases.
Admin Costs
Another one of the fees that I see are admin costs. It can be pretty low, it could be $5 for submitting a maintenance request to a vendor, for example. There can also be markup overhead on any expense that the property manager pays on my behalf, right?
CL: So if they have, say a plumber, come out to your apartment to do a repair, you might get charged not only what the plumber charges, but a surcharge or a markup by the property manager on top of that.
ES: Yeah. I don’t think it’s usually 15%, but it could, could be 10 or at least 5.
CL: Right. So similar to how a general contractor might charge for their subcontractors.
ES: Yeah.
Additional Things to Consider
CL: Got it. Any other fees or expenses that we should think about if we’re considering hiring a property manager?
ES: That’s what comes to mind. I think those are most of them. It’s important to ask about all of the fees that are associated. And my property manager told me about all those upfront. That’s a good sign. So you wanna be really clear though. What actions do I pay on?
CL: And just know that it all adds up and affects your bottom line. We actually have a property management cost calculator on our website that you can check out and input those percentages and rates and those markups. And you can see for yourself, how much of your gross profit is being eaten away by a property manager and see if that makes sense for you.
Also Read: Property Management Fees Calculator
For some, it might. You know, if you’re too busy to do it yourself or don’t want to handle that yourself, maybe it makes sense. For others, you might say that’s too much and look for other options, which we talk about as well.
ES: Right. We write about lots of property management software tools, lots of services, and ways to make managing yourself more palatable and easier and more profitable.
CL: Yeah, check it out. Look for more videos on this topic and we’ll see you all soon. Thanks a lot.
ES: Yeah, thanks for watching.
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