Property Management Fees Explained - Cost of Hiring a Property Manager

What are typical property management fees for a rental property? Find out the real cost of hiring a property manager with this complete guide.

RELATED: Should You Hire a Property Manager for Your Rental Property?

How Much Will Property Management Fees Cost You?

As a general rule of thumb, basic management fees will cost you about 5 to 10% of the monthly rent. While this fee structure seems simple enough, there are often many additional (and hidden) costs dwelling under the surface.

Leasing Fee - This is often the biggest add-on cost. If your rental property is vacant, most property managers will charge you 50 to 100% of the first month's rent to find a new tenant. This cost should cover all related costs including advertising fees and tenant credit checks.

Read the terms and conditions carefully when you're dealing with leasing fees - If the tenant leaves or get evicted within 12 months, you shouldn't have to pay a single cent for a replacement tenant.

Set up Fee - A one-time fee for hiring a new property manager. Can cost up to $250, but the good news is that some property managers won't ask for set up fees or waive it for larger rental properties.

Admin Fee - A monthly charge of $5 to $10 levied for paperwork, postage, sundries and other miscellaneous items.

Inspection Fee - Many property managers offer property inspection services as well. You can expect to pay $25 to $100 per inspection. Most managers will insist on having a compulsory inspection at the beginning and end of a lease. This is reasonable as long as they do a good job with the inspection - Their inspection reports should be comprehensive with supporting photos.

Vacancy Fee - Ridiculous as it sounds, some property managers will charge you even when your rental property is vacant. If you find vacancy cost listed in their list of property management fees, then that's a definite red flag.

Whether they impose a token sum (e.g. $50 per month) or audaciously demand full property management fees, it is an unfair practice that gives managers an incentive to leave your property hanging without tenants and rental income.

Example: Management Fees for Two Different Properties

Let's say we have two different rental properties - A single family home that rents for $1,000 per month and a townhouse that rents for $2,500. Assuming that both properties are vacant, how much will it cost to hire a property manager to run them for one year?

For this example, let's assume that the property manager charges the standard rates below:

  • 8% Management fee
  • 50% Leasing fee
  • $5 per month Admin Fee
  • $50 Inspection Fee
  • No Vacancy Fee

Single Family Home
Fees per Year

Fees per Year

= Management Fee + Leasing Fee + Admin Fee + Inspection Fee
= (12 x 8% x $1,000) + (50% x $1,000) + (12 x $5) + $50
= $960 + $500 + $60 + $50
= $1,570

= Management Fee + Leasing Fee + Admin Fee + Inspection Fee
= (12 x 8% x $2,500) + (50% x $2,500) + (12 x $5) + $50
= $2,400 + $1,250 + $60 + $50
= $3,760

The above example also illustrates another point. Total property management cost adds up to 13.1% of the rent for the single family home while it is 12.5% for the townhouse. All things being equal, larger rental properties tend to enjoy relatively lower property management costs.

Managing Tenants