Although hiring a property manager is very beneficial, there are many considerations landlords make before taking the plunge. One of these is the average property management fee.
How Much Is the Average Property Management Fee in Florida?
Property management is a booming industry in the United States. With nearly 44 million renter-occupied units, this does not come as much of a surprise. Additionally, many rental property owners lack the time or skills to go at it alone.
But, hiring a property management company, while beneficial, is perceived as an unnecessary cost. Landlords already have to shoulder countless expenses, so paying for a professional to come in and manage their property isn’t usually high on their list. Average property management fees, though, don’t tend to be very high.
How much do landlords pay for professional property management?
Percentage of Rent
Property management companies average charge between 8% to 12% of the gross monthly rent. Of course, several factors can affect the final cost, but the general fee often lies somewhere in between this range. Moreover, managers usually charge a lower percentage to manage 10 units or more. The same goes for commercial properties. In contrast, they may charge a higher fee for smaller properties or properties with fewer than 10 units.
Flat Fee
Rarely, property management companies will charge a flat monthly fee instead of collecting a percentage of the rent. In terms of flat fees, the average cost of property management will depend on the property size.
Factors That Affect the Average Fee for Property Management
Five things can influence property management fees: the location of the property, the size of the property, the condition of the property, the type of property, and the nature or extent of services. Let’s break each one down below.
1. Location
As the saying goes, real estate is all about location, location, location. Expensive neighborhoods usually command higher rents. This naturally results in a higher management fee.
2. Size
A large rental property is harder to manage than a small one. As such, property managers will typically charge a higher fee to manage a sizable property, especially if the property also comes with many amenities.
3. Condition
The condition of the rental property also plays a role. Newer properties don’t need much maintenance or repairs, whereas older properties usually require more attention. Because there are more maintenance issues to deal with, older properties likely cost more to manage.
4. Type
The type of property can also affect property management average fees. Management companies take on various property types, including single-family homes, condo units, apartments, commercial properties, and even vacant properties. And some of these are harder to manage than others.
5. Extent/Nature of Services
Property management companies provide a wide array of services. If you only need help with a few things, then you might be able to negotiate a lower fee. On the other hand, if you need full-service assistance, it will cost you much more.
Rent Due vs Rent Collected: What’s the Difference?
Because property managers usually charge a percentage of the rent, it is important to understand the difference between the rent collected and rent due. Landlords should ensure their management contract stipulates that the management fee will come from actual rent collected instead of the amount due.
This means you will only pay your manager based on how much money they collected instead of how much your tenant owes. That way, your property manager will have more of an incentive to collect rent. If you operate on rent due, your manager can charge you a fee even for vacant properties or units with unpaid rent.
Understanding the Cost to Manage Rental Property
A fee ranging from 8% to 12% of the monthly gross rent doesn’t sound too bad, especially considering everything a property manager does for you. But, the average property management fee isn’t the only thing landlords must take into account. A property management contract can come with several other fees, too.
1. Initial Setup Fee
The initial setup fee is a fee that companies charge for account establishment. This can include the cost of notifying tenants, onboarding, and initial property inspections. Initial setup fees are one-time payments, and not all companies charge them. On average, you can expect to pay $500 or less for the initial setup fee.
2. Maintenance Fee
More often than not, the monthly management fee already includes the maintenance fee. But, if repairs are necessary, the property manager will use money (with or without permission from the landlord) from a separate reserve fund that landlords must maintain. The exact dollar amount of the reserve fund can vary, though owners are expected to keep at least one month’s rent inside.
3. Tenant Placement Fee
The tenant placement fee is a fee that companies charge to find tenants for your property. Tenant placement can be a lengthy and costly process. It usually includes advertising the property, going through applications, screening tenants, move-in inspections, and drafting the lease agreement. On average, landlords should expect to pay a full month’s rent for this service.
4. Vacancy Fee
A vacancy fee is a fee that property managers collect for vacant properties. Even if a property is vacant, it still requires maintenance and upkeep. Instead of charging a monthly management fee for this vacant unit, which is usually a percentage of the rent, companies charge a vacancy fee instead.
5. Lease Renewal Fee
A lease renewal fee is the fee that managers charge to cover the cost of preparing lease renewals. To renew a lease, managers usually send out a lease renewal notice, negotiate with tenants, and prepare a new lease agreement.
6. Eviction Fee
Evictions are a time-consuming and painstaking process. As such, management companies typically charge a fee if a landlord wants them to handle tenant evictions. The fee usually costs a few hundred dollars in addition to related court costs.
7. Early Termination Fee
Finally, the early termination fee is a fee companies charge for terminating an agreement before its expiry. If you want to terminate your contract with your manager before it ends, you will have to pay this fee. The actual dollar amount will depend on the contract’s stipulations, though. And, sometimes, the company can even sue you for breach of contract. To avoid hefty termination costs and liabilities, it is always a good idea to review all contracts before signing them.
Is It Worth It?
Professional property management does not come for free. But, the average property management fee is worth considering everything managers do for you. Just make sure to read through the contract first before signing. This way, you can familiarize yourself with the fee schedule and what services you can expect from your company.
We’ve got you covered if you need a property management company in Florida. Start browsing our online directory today to look for the best one in your area!
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