How much does it cost to hire a Property Manager?
Property management fees will vary based on the company you hire. As a baseline, you can expect to pay a monthly management fee equivalent to 5-15% of the rent. This can vary based on the type of services they provide, their other fees and the quality of their service.
Here is a breakdown of some standard fees you can expect:
Management Fee
If you hire a full-service property management company you can expect to pay a percent of the monthly rent. This often ranges between five and fifteen percent depending on the property type, location, and what is included in the fee. In this model, the property management company will be motivated to get the property rented and obtain the highest rent possible as they are getting paid a percentage of the rent. They are in it with you in good times and bad, as rents increase they make more money if rents should fall their fee drops too. When vetting property management companies, be sure to ask them what their management fee includes, is it all-inclusive, or will there be additional fees on top?
Leasing Fee
It is not uncommon for property management companies to charge a fee to find a new tenant, this is usually called a leasing fee and can range from a few hundred dollars to one month’s rent. Again, the property’s location and what is included in the fee will affect the cost. If the company charges a leasing fee you may want to find out the property management company’s average tenancy length, as you would want to avoid companies with a high tenant turn over.
Some companies offer lease only services in which they only charge a leasing fee in exchange for finding and placing a tenant and then you manage the property yourself. This is a good option for people who like to retain control over their properties and who have plenty of time to oversee the management of the property, respond to tenant requests, and are well versed in residential tenancy law.
Flat Fees
Often there may be flat fees for specific tasks such as renewing leases, providing non-resident tax services, or a minimum monthly charge when the property is vacant. Make sure you are clear on what fees apply to your property and when they are charged.
Coordination Fees
Many companies charge a coordination fee for maintenance and repairs. These can range from a percentage of the repair cost to a flat fee added onto each repair. It is important to consider the age and condition of your property if a company charges these types of fees. A brand new property may have few repairs so this type of fee will likely not be a major expense; however an older property or one that has not been well taken care of may require frequent or significant repairs resulting in substantial additional fees. You may want to ask the property management company what their average client spends on repairs in a year to give you a sense of what you can expect.
Minimum Fees
Some companies have a minimum monthly fee even when the property is not rented. At first glance, this may seem like a rip-off, they are charging you but the property is vacant, you’re not making any money why should they, and what’s their motivation to get it rented if they make money anyway.
Upon further reflection though, it removes the temptation to just put “anyone” in the property in order to get it rented and start earning a fee. They will make sure they take the time to select a quality tenant. The minimum fee is usually significantly lower than the management fee, so property management companies would much rather have the property rented than collect the minimum fee.
Additionally, vacant properties usually require more work from property management companies than occupied properties, there are utility bills to pay, lawn or snow removal to coordinate, and vacant property inspections (properties have to be checked frequently to maintain insurance coverage), all of that takes time, so they want to get properties rented.
That said, it is important to ask companies with this kind of fee structure what their vacancy rate currently is, and what their average vacancy rate is, to give you an idea of how often you will likely have to pay this.
Taxes
What is the best part of paying for a professional property management company? In most jurisdictions, the costs are tax-deductible! So not only do you get someone to take care of all the challenges of owning a rental property, it actually helps reduce the amount of taxes you pay.
In Summary
When deciding whether the cost of professional property management is right for you, you should consider the value of your time. What is an afternoon with your kids worth, an uninterrupted date night with your spouse or partner, what is the freedom to go on holiday without worrying about your tenant worth to you? You can always earn more money, you can never earn back more time.
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Written By Jamie Palmer, President/Broker of Power Properties Ltd.
Jamie Palmer is the President and Broker of Power Properties. He holds a Certified Property Manager (CPM®) designation, the highest designation in Property Management in North America. He earned an Honors degree from the University of Toronto, and he has over two decades of experience in property management.
About Power Properties Ltd.
Founded in 1980, Power Properties has been providing hassle-free property management services to property owners, property investors and non-residents with homes in Calgary, Alberta for over 40 years. Our full-service property management includes everything from move in to move out, so you don’t have to worry about the day-to-day operations of your rental property. With a team of licensed professionals, years of experience, and award-winning service, you can rest assured that your property is in good hands.
