Before handing over your property to be managed by a third-party, you probably have one question on your mind, “How much does property management cost?” This is a completely reasonable question and can make or break your decision to hire a property manager. While the question is simple, the answer is a little more complex, but simply put: It depends. Every Salt Lake City property management company sets their own pricing, but most companies tend to fall into one of two categories: flat rate and percentage. There are pros and cons to each option, and it’s important to analyze both before deciding which works best for you. In addition, there are also miscellaneous property management fees that you need to be aware of, as they might surprise you. So, let’s dive into both of these to help you find the right option for your property.
Flat Fee Pricing Structure
As the name suggests, this is a set monthly fee that is paid to your property management for their services. This all-inclusive fee covers all the services provided. This option can be ideal for first-time landlords, but flat fee pricing also has its drawbacks.
The biggest benefit of a flat fee is that it’s the simplest pricing option. The fee is not based on how much income the property is producing. Instead, it is a set amount so, you know exactly what you will be charged every month. You can take comfort knowing that all of the necessary tasks are being handled and that your cost won’t change based on the amount of work being done. With a flat fee, you also don’t have to worry about being charged more based on location. For example, if you rent a property in an affluent area, your property management fees won’t necessarily reflect that. This option provides more control for your investment budget, so you have more financial freedom.
Although it can be nice to have a set fee each month, you are paying the same amount each month regardless of what work is being done. Salt Lake City property management companies know that most of the work takes place when the property is vacant. Once a tenant moves in, your manager is probably doing little more than processing payments and fielding the occasional maintenance call. During these times, you won’t have incoming rent to offset the cost of maintenance. This is motivation to keep the property filled, but vacancies happen and it’s important to keep this in mind when choosing a flat fee pricing structure.
Percentage Pricing Structure
The second option of property management fees is a percentage pricing structure. This simply means that a percentage of the monthly rent is paid to the property management company. These fees range anywhere from 8-12% of the monthly rental income, with additional charges for certain maintenance issues. Of course, there are pros and cons to the percentage pricing structure.
With a percentage structure, you only pay for work that is actually being done on your behalf. You don’t need to worry that you overpaid for the services you actually received. If you have a low maintenance property with good tenants, then you will likely benefit from this type of pricing.
While this option can be more affordable at times, it’s important to remember that your monthly fee will fluctuate with a percentage pricing structure. If your property requires a lot of attention or you have problematic tenants, then your management costs could get out of hand. Before agreeing to percentage property management, it’s important to evaluate your property to determine what really will benefit you.
Other Property Management Fees to Consider
In addition to the property management fee, there are other common fees that can be expected. These vary from company to company, but it’s important to be aware of these so you’re not blindsided.
A vacancy fee is common among percentage pricing structures. Since you aren’t being charged the full amount when there is a vacancy, the property management company may collect a smaller amount from you. Essentially, this is a retainer for their services while the property is vacant.
Arguably the most common fee, this is charged when a new tenant applies for your property. This covers drafting a lease agreement, a background check, and any other services to ensure you’re renting to a quality tenant. This fee should typically be lower and is only charged when a new lease is created.
Since evicting a tenant can be complicated, it’s no surprise that this is a typical fee. In addition to charging an extra fee, it’s beneficial to have an experienced property management company on your side to handle this process. The price for this service varies but it is well worth it.
How Much Does Property Management Cost?
Unfortunately, this isn’t a simple and straightforward answer. There are many factors to consider when hiring a property management company and determining what pricing structure is best for you. At Wolfnest, we evaluate your property and find the right pricing option for your property. We can customize our services to fit your rental. We provide a variety of property management services including:
- SIngle-Family Property Management
- Multi-Family Property Management
- Portfolio Management for Properties
- Tenant Placement
No matter what type of property you own, we have experience managing it and can help you get the most from your rental and pricing structure. Whether it’s percentage or flat rate, there is a right option for every property. As you can see, there are advantages and disadvantages to each type of pricing structure. The option that’s best for you will depend on the specifics of your rental property and your unique management needs. If you don’t know what those needs are, contact our experts today and we are happy to help you get started with your customized property management services!