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Many people who manage more than just a few pieces of property may consider turning the day to day operations over to a property management company. Before they choose a company, they will often gather quotes from several competing companies. Unfortunately, if you do not understand what these quotes encompass, there is a good chance that you could make a decision that you will regret. Additionally, you could end up paying substantially more than you expected to. Here is a quick look into what these quotes actually entail.
Property Management Quotes Explained
Property management services can range from an all in one package to only a select few services such as tenant screening. The key is understanding how much each service will cost in order to associate the proper fees with it. Here are the most common fees that you will need to consider.
The setup fee is charged to you to compensate the property manager for their time and resources that will be used before they actually land a tenant, such as property showings and setting up your account. Normally, this fee will be deducted from the tenants first month fee, however some property managers will require this fee to be paid upfront. The setup fee will is often charged as a one time fee per tenant.
Most property management services will charge monthly commission fees. The commission fee is meant to compensate them for the day to day tasks that they must complete throughout the month. Most often, this fee will be in the form of a percentage, however flat rate fees are sometimes used instead.
This fee can vary greatly depending on what property management firm you choose to use. Sometimes they will pay the advertising costs out of your setup fee. They may also leave the costs entirely up to you, or they may split the advertising costs with you. Along with finding out what this fee is, it is important to find out what type of advertising they are doing. There is nothing worse than paying an advertising fee for several months and getting no prospective tenants because their advertising methods are ineffective.
The lease renewal fee is very similar to the setup fee. The only difference is that this fee will be applied when they get your current tenants to renew their lease.
This fee is commonplace, however it is not used by every property management firm. The idea behind this fee is that your property manager has worked hard for X amount of months trying to get you a tenant but has not yet been able to. This fee reimburses them for the time that they spent trying to rent your property, since they invested their time assuming that they would collect monthly commissions once they filled the vacancy.
There are a number of other fees that may be included in your property management quote, however these are the most common. While you should always look at every fee carefully, keep a close eye out for fees that are not listed above because random miscellaneous fees can cost you a lot of extra money if you are not careful.