Setting your property management fees

Geoff Roberts
Geoff Roberts | 4 min. read

Published on February 23, 2009

As is the case with any employment scenario, when it comes to hiring a property manager, landlords walk a fine line between ensuring they hire the best help possible and obtaining the most competitive price. Particularly because property management is not a one-size-fits-all kind of field, setting your property management fee at a rate that is both profitable for you and appealing to potential customers can be tricky. While standard property management fees today are set at 10 percent of a unit’s monthly rent rate (and go down to as low as 6 percent), there are a few things you should consider before setting your fee for any given project.

Percentage-based fees, flat fees, and per-project billing
Some property managers find a percentage fee works best, while others charge on a flat fee (see minimum charges below) or per project basis. In a case where you charge the landlord a percentage-based fee (let’s say 10 percent of a unit’s monthly rental price) for your services or a flat fee for all of your services on a monthly basis, the landlord can easily add your fee to his projected monthly expenses, building it into the rental unit price. Property managers can do likewise, relying on a set amount of income per customer on a monthly basis.

Sounds simple—so why consider alternate methods? Particularly in the case of landlords who are only looking to commission a certain, irregular set of tasks such as assistance in renting out or advertising units (as opposed to day-to-day repairs and maintenance) or maintenance and repair work, an hourly or project fee may be a better alternative.

Minimum charges
Particularly in cases where a property is large or work-intensive enough that you will have to think twice about taking on additional clients in order to adequately service that single employer, you may want to consider setting a minimum monthly charge or a flat fee. For example, if a complex has 35 units renting at $1,000 per unit, you will be paid a minimum payment of $2,500 per month regardless of vacancies.  Some property managers work on a straight flat fee while others may add on additional charges once vacancy rates dip below a certain level. For example, in the case above you might be paid an additional 10 percent per unit on top of the $2,500 per month when 28 units or more are filled.

Specify included tasks
As mentioned above, different property owners will require different levels of assistance with their units. While, in some cases, property management may be a near full-time job, in others there may be little more work to do than renting out the unit and collecting monthly rent checks on behalf of the property owner. To ensure you are being fairly compensated and that your client remains satisfied with your work, be sure to clearly define the tasks you will be performing during fee negotiation.

Also be sure to discuss an hourly or per-job payment scheme for any additional work not included in your regular duties. Obviously, you can’t plan for everything but setting some basic guidelines up front will serve you well in the future.

Know the going rate
Because property owners are really watching their bottom line right now, property managers are working hard to entice new customers. One way of doing this is by offering incentives. For example, some property management companies are not requiring unit advertising and marketing payment fees from property owners until the unit is actually rented out.

With incentives like this being given on a more regular basis, make sure you are aware of the services, fees, and incentives other local property managers are currently offering. While you want to make the money you deserve, you also want to make sure that you are remaining competitive and abreast of current market trends.

With all of this in mind, remember that before you can even begin to worry about figuring out your fee schedule, you have to identify potential clients. When doing this, be sure to advertise not only your prices but also the other intangibles you offer. Remember that in many cases you will be representing the property owner to tenants and vendors as well as looking out for his business interests. It’s crucial that a property owner find someone that represents him well—someone who is approachable, efficient, pro-active, and budget minded. Make sure you let potential clients know that you possess all of these qualities—and then demonstrate them on a regular basis.

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Geoff Roberts

Geoff is a marketer, surfer, musician, and writer. He lives in San Diego, CA.

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