How Much Does Property Management Cost?

In our lives, property is something many people own or aspire to own. In the U.K alone, the property market is constantly growing, serving personal purposes and also great income earners for owners. 

In 2021 alone, around 4.4 million private properties were rented across the country.

The rentals and private contracts of these properties will undoubtedly rise since then. Just looking at that figure alone and knowing its rise can seem like a lucrative opportunity for any property owner.

But to know more before buying and renting out properties, you must know the expenses involved first to help you determine if it's worth pursuing. Especially if you want to undergo multiple properties, you'll want to consider hiring a property manager.

To help you make that decision, today, we'll provide you with everything you need to know on how much property managers charge and the management fees associated with them.

How are property management fees calculated? 

When running a property, there are generally two ways in which the fees are determined. As a property manager, you can charge a flat outright fee each month or a percentage of the rent that's been collected. 

What is the monthly rent percentage? 

On average, a property management company has a monthly charge of 8-12% of the typical rent collected. For instance, if you decide to rent your apartment for £2000/$2500 month, the management fee would be £200/$250 if the percentage was 10%. 

Moreover, if your property is empty, some management companies will charge you a fixed fee of what your typical monthly rent would be until a new tenant leases it out. Also, if your property stays vacant, the property management company might undergo more frequent work like inspections each week for break-ins or checks for squatters, costing you a bit more. 

What is a fixed property management fee? 

Alternatively, property management companies provide a fixed fee that works in collaboration with the monthly rental charge. The price is usually determined based on the type of property you own, square footage and the services the management company provides. It s important to note that the fees of management might be changed based on the market and services involved. As a property owner, it may seem enticing at first to pay a company a flat fee; however, they may not fully perform the services to a high standard or help you maximize your income. 

Are there additional fees involved in property management? 

Alongside those two types of property management fees, some hidden costs are involved alongside their pricing. Here are some of the additional fees a property management company may charge:

Vacant property fees 

While we highlighted this briefly earlier, it's essential we mention it again. If you have a vacant property, a company may see it as an additional way for more work. Part of the reason is that as it sits dormant, there could be a range of potential problems that could occur for the new next tenant that moves in.

Some of these problems can arise from utilities, especially if they've been used and remained on after viewings, unexpected water leaks and lights burning out. Similarly, the larger duration your home sits unrented, the higher risk of squatters, break-ins, or it being vandalized. Therefore a property management company at least once a week check this. Often, this charge can be up to a month's rent to cover your vacant property. 

Contract creation fee 

If you're working with a property management company for the first time, they'll tend to charge a one-time fee of around £250/$305. Often this fee covers a cost of the following: 

• Initial inspection of your property
• Account for bookkeeping
• A bank account opened in your name (if required)
• Assistance with tax or business licenses

This fee will probably cover introductory information from the company to cover their materials and inform you how they will communicate. 

Placement of new tenant 

If the company helps place a new tenant on our property, they may ask for an additional fee. The cost often covers tenant screenings, preparation of contracts and costs to help them move in. Often, they will request 50% of the first month's rent from your new tenant. 

Most of the time, you should not be paying several upfront fees in advance. In these circumstances, it's common for them to either charge a first-month rental fee, upfront fee or a percentage of the first month's rent. It should never be the case that you have to pay all three to the company. 

Maintenance and repairs 

At some point in your ownership, whether you have a tenant or not, there's bound to be maintenance problems that occur with your property. To cover your maintenance costs, some companies charge around 1.5 x your monthly rent. 

Their costs tend to be so high because some of the top companies have an extensive network of professional and trusted repairmen. Some of them are often in-house or employed by them full-time. 

Do note that you should always enquire about additional labor or supply costs, like repairmen when interviewing potential property management companies. If you are renovating your property or updating it, they might charge an additional 10% fee for project management to ensure the developments are done properly. 

Regular inspection fees

On average, rental properties often must undergo inspections every 3-6 months. The reason for this is because it helps landlords be able to catch and fix minor problems before they turn into big, expensive and dangerous ones. Inspections also help protect property owners as they determine the tenant is not damaging the rental. 

Depending on the property management company, there might be no inspection charge. However, some might ask for you to pay money for every inspection and receive a lower fee for property management in return. Either way, when an inspection is done, you should get a thorough inspection report, with photos, videos and more included to show the inspections have been conducted. 

Evictions 

While it may not be usual circumstances, there might be instances where you have to evict a tenant of yours if they don't pay their rent, disturb your neighbors or destroy your property. If you're hiring a large property management company, they may be able to have the expertise to manage your evictions for you. 

If not, some will work with a law firm to help you evict your tenant. In this case, usually, they charge a fixed eviction fee alongside legal fees; this could cost anything from £500/$612 upwards. Moreover, if the eviction gets taken to court, and they award you a judgment, a fee of 50% will usually be collected from the company and attorneys. 

Termination of contract 

Sometimes there might be instances where a contract is terminated at early notice. This could be where you've broken the agreement, or the tenant has. If this is the case, an early contract termination will need to be created and there is a fee for this by the management company. The fees for this can vary and cost between one month of rental and being sued for contract breach. 

Factors that cause property fees to rise 

It's important to know that when working with a property management company, their fees will rise over time. Ultimately, the amount of work required by the property management company to help keep your property in top quality condition and help maximize your income will cause the fees to increase. The main factors that can influence the cost of these fees are the following:

Condition of your property 

The age of your property might affect how much your property might cost. For instance, if you have a new property or it's recently been renovated, the maintenance costs might be lower than an old one. Whereas if you've got an old property, you might need more repairs and maintenance. 

Property size 

The size of your property could significantly impact what the company charges. It all depends on the number of units, bedrooms, square footage and more. The more properties and the larger the square footage, the higher the cost. 

Location

If you live in a prime location, like a city, a property management company will likely charge a lot more money than a rural area. Similarly, if your neighborhood has a high rating and is close to transport, schools, shopping facilities and more, it will likely cost more to use these companies. 

Full service or ad hoc pricing 

Property management companies often charge a smaller monthly fee for as few services as possible. Often these minimal fees will include basic services like rent collection and dealing with maintenance requests. They may charge a pay-as-you-go price for each service if you require anything else like repairs, inspections, lease renewals and more. 

What is the role of a property manager?

Before you fully take on a property manager, you must know what they do. It's only when you know their role and services can you make a financial decision before hiring one. To give you a greater idea, here are the typical things a property manager will do:

Complies with laws and regulations

A property manager can remove any stress and headaches regarding legal stuff. As they're an expert in landlord and tenant laws, they know how to deal with them and who to use when legal action is required. 

Deal with maintenance requests

They help save your tenants from getting frustrated with your property and save you money by handling maintenance requests. Instead of you having to reply directly to your tenant and finding a repairman, they often deal with their request and have someone straight out to fix the problem.

Helps show and lease vacant properties

A property manager can help you with any financial burden you might have by stopping your vacant property for a long time. Instead of having to market your property extensively, you can get a property manager to help you lure in new tenants and renew an existing lease. 

Collect and deposit your rent

A property manager can collect, deposit and handle your payments for your properties. Sometimes they will team up with websites or apps to help you get more money for your property quickly. They also help deal with any payment problems, collections and evictions. Basically, they help streamline your tasks and make dealing with money straightforward. 

How to find the best property manager for you?

When looking for a property management company, it might seem a little bit daunting to find the right one. But, just know managing a rental property on your own can take up a lot of time, making your day quite busy and tedious. The time a property manager can take from you can save you a lot of money in the long term.

To help you with your search, here are some ideas on how to find a good company: 

• Ask for referrals from inspectors, real estate agents, lenders, other property letters and much more. You might even find some referrals from forums or groups on social media.
• Run a search online: Another way to find them is to look for property managers in your area by a quick google search.

Before you search for them, it's also important that you know exactly what you want them to do. Therefore you must make a checklist of what you want from the company before finding a property manager. This will help you get a quick quotation for your property.

Conclusion 

Overall, property managers can help you run a property in many ways. The services involved can save you time, stress and legal issues when dealing with one or several of your properties. You could receive significant help with laws, regulations, maintenance, money collection, evictions, contracts and more.

Remember when looking for a property management company, you may get different quotations. The reason for this is, some may charge money based on the size of your property, condition of your property and if it’s empty or not. However, instead of spending hours looking on the internet or depending on getting various quotes for property management services, try them out for yourself. At Hospira we review your property and provide you with reliable and honest quotations for our services.