If you own minimal rental properties, you can manage them yourself. However, as your portfolio grows, responsibilities grow, and you may want to hire a property manager. However, it’s important to hire the right one. You can expect to pay from 4% to 10% of gross monthly rental income in property management fees.
If you’re considering managing the property yourself and need a good tenant screening tool, we recommend Avail. It offers a full range of financial and background checks to help you choose the best applicants. Basic plans are free for one unit, and you can get a 30-day free trial.
What Is a Property Manager?
Property management companies manage one or more rental properties for landlords who want to outsource their day-to-day operations. Property managers can be real estate brokers, individuals, companies, or on-site resident managers. Property management companies handle residential, commercial, and industrial properties, and sometimes land, specializing in one or more of these types of properties.
What Property Managers Do
Property managers provide services such as screening tenants, managing routine and preventative maintenance, collecting rents, handling tenants, and bill paying. When considering how to hire a property manager, it’s essential to know which services are included in the monthly property management fees, from which services you can choose, and which carry additional fees beyond regular monthly fees.
As a landlord, you have numerous responsibilities to your tenants, and it can be tricky. Hiring a property manager can save you time and money by handling tenant-related matters. They will perform background checks, market and show vacant units to prospective tenants, process evictions, arrange cleanouts of items left behind by tenants, execute leases and other legal documents, and respond to complaints and emergencies.
Property managers typically manage routine and preventative maintenance and repairs, including opening and closing seasonal rentals. Routine maintenance involves seasonal cleanup, raking leaves, hauling away debris, shoveling snow and ice, mowing lawns, weeding gardens, and light landscaping. They will conduct regular inspections of both the interior and exterior of your rental property and will respond to emergency calls from tenants. They also will coordinate scheduling and meeting with subcontractors and vendors to do the repairs.
Property managers collect rental income and have a process to ensure that rent is paid on time. Additionally, they manage security deposits and other escrow payments, such as last month’s rent. They also set and adjust rental amounts based on current real estate rental market data, making sure your units are priced competitively. Typically, they handle bill paying, managing your monthly budget, and can sometimes help you with filing taxes.
Who Needs to Hire a Property Manager?
Hiring a property manager can be a good idea if you own a lot of rental properties, want to be less hands-on, or you live far from your rental properties. In these cases, a property manager can save you time and money despite paying property management fees. If you’re inexperienced or live in a highly regulated rental market, you also may want to hire a property manager.
Five reasons to hire a property manager include:
- Owning multiple properties: Trying to manage multiple properties at the same time is a challenge. When you hire a property manager, they’ll have the tools and infrastructure to support multi-property management.
- Less hands-on: Hiring a property manager frees up your time for other things. A property manager will take care of the building’s operations. If you want to have some level of involvement, discuss this before signing a contract with a property management company.
- Maintenance and repairs skills: If you’re too busy, or don’t have maintenance and repairs skills, hiring a property manager will save you money due to neglected maintenance or poorly done work. They will coordinate to make sure work is done in a timely and professional manner.
- Inexperienced landlords in highly regulated areas: With so many landlord-tenant laws that vary from state to state, if you’re inexperienced, you may want to hire a property manager to avoid potential legal action. Laws sometimes change quickly, and property managers stay on top of it.
- You can afford it: Hiring a property manager can save you time and money. Make sure you can afford it. If you have not yet purchased rental property, budget property management fees into your projected expenses. If you already own rental property and want to hire a property manager, review your financials to discover a way to afford it.
- You live far from your property: A property manager who lives near your property can perform routine inspections, respond to tenant emergencies, and make sure your property is secure. They typically know the local laws and regulations, which can protect you from potential litigation.
When to Hire a Property Manager
You may want to hire a property manager in the very early stages of growing your portfolio. As you stabilize each property and buy additional properties, hiring a property manager can free up time for you to focus on securing financing, building your investment property portfolio, and increasing profits.
It also might make sense to hire a property manager before you secure tenants because they might be able to fill vacancies faster, and it is less disruptive to tenants than if you add a manager later on.
When Not to Hire a Property Manager
If you enjoy the duties of being a landlord, have the time to manage your rental property, have only one or two properties, and/or you live nearby, it may be better for you to manage them yourself. If you want to hire a property manager but can’t afford the property management fees, you may want to manage your properties until you can afford to hire a property manager.
Depending on where your property is located, you may not need to hire a property manager if you only need certain services like tenant screening, In that case, you may want to consider other types of property management such as online software.
You can find and screen tenants from home using online software and screening tools like Avail but meeting face-to-face with a prospective tenant can tell you whether a prospective tenant will fit in with the other tenants in the building. Avail allows you to list properties, screen tenants, create leases, and collect rent payments online. With plans starting at $0 for your first unit, getting started with Avail is super easy.
Types of Property Management
It seems as if there’s a different type of property management for every different type of property, from single-family residential through commercial. If you hire a property manager, you should make sure they have experience in managing your specific property type. For example, a property management company that only has experience with residential real estate would typically not be a good choice for managing a strip mall.
As an investor, you may own one type of property, or you may have a mixed portfolio. Before you hire a property manager, it’s good to know what the different types of property managers are, what are the property management fees, and which services are included in the fees.
Common Types of Property Management
Property Management Type
What They Include
Residential Property Managers
Market property, find tenants, routine maintenance, emergency response, and collect rents
Commercial Property Managers
Manage business tenants, commercial leases, on-site maintenance, collect rents, and bill pay
Resort & Recreation Properties
Resorts, campgrounds, AirBnBs, RV parks. Manages accounting, rentals, advertising, and travel websites
Senior Living Properties
Handle elderly residents’ needs, maintenance and repairs, operations and facilities management
Interact with parents, address behavioral issues, collect student rent, cleaning, maintenance, and repairs
Maintain & repair amenities and common areas, collect fees, enforce rules, and manage expenses
Create policies and procedures, determine rates, hire & train employees, handle cleanout sales, advertising
New Construction Property Managers
Daily oversight, administration, and project management services
Some types of property management services overlap with others. For example, while a five or more unit apartment building is often considered a commercial property from a lending perspective, it typically falls under residential property management services due to the nature of its occupants. While a condominium is usually residential property, you can also hire a property manager experienced in homeowner’s associations (HOA) property management.
Residential Property Management
Residential property includes single-family housing, duplexes and townhouses, condominiums, apartment buildings, and any property that provides a primary residence to its occupants. Residential property managers market and advertise vacancies, screen applicants, show vacant units, perform regular inspections, handle leases, security deposits, collect rent, and coordinate repairs and routine maintenance. Residential property management fees typically range from 6% to 10%.
Commercial Property Management
Commercial property includes residential of five or more units, office space, storefronts, strip malls, retail centers, restaurants, storage units, warehouses, and most spaces used for commercial or industrial purposes. Large commercial investment properties are a good investment but require more work to manage and maintain in comparison with smaller residential rental properties.
Commercial property management companies have processes for screening applicants, finding and securing quality tenants, handling tenant inquiries, collecting rents, and managing commercial leases, which are often more complicated than residential leases. Commercial property managers generally know the laws pertaining to both commercial properties and commercial property tenants.
Resort & Recreational Property Management
Resort and recreational management companies manage resorts, campgrounds, marinas, RV parks, boat slips, and other types of resort and recreational investment properties including seasonal and vacation rentals that owners advertise on sites like Airbnb and VRBO. They maintain buildings, grounds, amenities, clear hiking trails, increase boat slip rentals, and assist campers and lodgers. They also can winterize, open and close seasonal rentals, and perform inspections to ensure the property is secure.
Typically, they advertise the properties they manage on travel websites and respond to travelers and travel agents’ inquiries. Recreational property managers can also assist with accounting and bill paying. Depending on the type of resort or recreational property, fees can be up to 40% of the monthly property income for campgrounds and larger-scale properties and around 15% for Airbnb and individual seasonal rentals.
Senior Living Property Management
Senior living property managers prioritize the comfort of senior residents while managing facilities and operations. They help create wellness programs to enhance the resident’s lives. They also understand federal, state, and local regulatory compliance laws and provide risk management to spot problems before they arise. Senior living property managers typically charge 3% to 7% of gross revenue plus a replacement reserves fee of $360 to $650 paid annually to cover tenant turnover.
Student Housing Managers
Student housing management has unique challenges. Occasionally, behavioral problems occur, such as late-night noise and parties. Student housing managers are equipped to handle these issues. Student housing managers interact with students and parents to collect rents and ensure student safety. They manage the property year-round, including when students leave for winter and summer semester breaks.
Student housing managers find roommates and sometimes assist with helping students buy and sell furniture. They manage cleaning, maintenance, and repairs, and collect rents from individual students. Student housing managers typically charge one-half month’s rent per student to fill vacancies, 8% to 10% in monthly management fees and may require an upfront reserves payment to cover any repairs.
Homeowner’s Association Managers
Residential properties that have homeowners’ associations (HOA) have unique needs. If you hire a property manager for your HOA, you want to make sure their experience includes this type of service. HOA property managers maintain and repair property amenities such as pools and recreation trails, keep common areas clean, safe, and in good repair.
As part of their core services, these managers typically collect HOA fees, enforce governance, and manage capital expenditures for improvements. HOAs usually charge initiation fees between $2,000 and $30,000 plus monthly fee $10 to $20 or more per unit, depending on the type of property, with the larger properties on the higher end.
Self-storage Property Management
Self-storage managers assist with marketing, managing finances, repairs, and maintenance. This includes hiring on-site staff, choosing vendors, creating and administering your rental agreements and forms, and establishing policies and procedures. They also will inspect the property and adhere to tough collections procedures. Self-storage property management company fees typically start at 6% of regular monthly revenue, plus 50% or more of renter insurance fees.
New Construction Property Managers
New construction property managers provide daily oversight, administration, and project management services for existing and new ground-up construction projects. They work with investors through planning, designing, renovating, and capital improvements. Fees for new construction property managers generally are 10% to 15% of the total construction project cost.
How Much Does Property Management Cost?
Depending on the type of property you want to hire a property manager for property management fees can range from $0 for a trial period using online property management software to thousands of dollars for HOAs and new construction management. For typical residential property managers, you can expect to pay between 6% and 10% of gross monthly rental income, plus additional fees for added services.
Types of Property Management Fees
Property Management Service
Property Management Fees
Monthly Management Fee
4% (commercial) to 10% of gross monthly rental income
Repair Reserves Fund
1.5% of gross monthly rental income
Onboarding or Set-up Fee
Up to $300
25%-75% of gross monthly rent
Construction Management Fee
10% to 15% of total construction project cost
How Property Management Fees Work
Property management fees vary depending on the type of property. Monthly management fees for residential properties typically are 6% to 10% while commercial and industrial fees are around 4%. If you own multiple rental properties, and you would like a property management company to manage them for you, they will sometimes offer discounted fees.
Monthly baseline property management fees typically cover the day-to-day operations of your property and include collecting rent, paying bills, communicating with tenants, coordinating repairs, conducting inspections, and responding to emergency maintenance calls. The monthly management fee is usually a percentage of the gross collected rent, but you’ll also find rental property managers who charge flat fees.
In addition to the monthly fees, property management companies may charge set-up fees to establish your account. Typically, they charge additional fees for leasing, vacancies, evictions, advertising, and may require a repair reserve fund to cover maintenance and repairs.
How to Hire a Good Property Manager
To hire a good property manager, there are a few things you will want to consider. Start by getting recommendations from different sources such as other landlords and investors, tenants you know, real estate agents whom you’ve worked with, and any local landlord associations. You can look for testimonials and recommendations on their websites and social media pages.
You can do an online search for reviews on Yelp, Angie’s List, HomeAdvisor, and Thumbtack to read others’ experiences working with them and see what types of services they offer. Look through professional directories such as the National Association of Residential Property Managers (NARPM) or the Institute of Real Estate Management (IREM) to check credentials. Additionally, you can search for complaints at the Better Business Bureau.
Most states require property managers to have a property management or real estate broker’s license. Search your state board of registration to see whether your prospective property manager holds any relevant licenses. Also, see if the company holds other memberships or certifications. In addition to certifications, find out how long they’ve been in business, how many properties they manage each year, and if you can speak to both landlords and tenants they’ve worked with.
Property Manager Interviews
Before you hire a property manager, you want to interview a few of them. Create a list of property management questions that pertain to your type of property. We’ve provided a sample list of questions that should help you get a good sense of the manager’s experience.
8 questions to ask property managers include:
- How many properties do they currently manage?
- What are their property management fees, and what’s included?
- How often they will inspect your property?
- What is their availability and response-time for tenant emergencies?
- How frequently will you receive updates and status reports?
- Are they using online property management software? Is your information secure?
- What accounting systems do they use? When will you get paid?
- What is their employee turnover rate?
In addition to asking these questions, be sure to review a manager’s property management agreement. It’s important to know what is included in the manager’s core services and what add-ons are available.
What to Look for in a Property Manager
You can learn a lot about the property managers you interview by asking the right questions. Interviewing in-person at their location is better than meeting them at your property. By meeting at their location, you can see how they manage their operations. If the office is in disarray or disorganized, you may want to reconsider this company. If staff are inattentive, rude, or you are being pressured to sign an agreement, it’s a good sign to walk away.
If their office is well-managed with courteous, attentive staff, it’s a good start. You also want to look at their portfolio of client properties and see if you can visit a property to see their work in person. Ask if you can speak to some clients and tenants. You want to try to get a full picture of both them and their work.
You don’t want to just hire for a low price. Sometimes, you do get what you pay for. You do want to consider how many different types of fees they charge and what you’ll get for those services. If there are aspects of their services you don’t need, ask if these are flexible.
Ideally, what you’re looking for in a property management company is if the relationship will meet your needs and if they will be a good fit for you and your property before you sign a property management agreement.
Property Management Agreements
When interviewing a property management company, it’s always a good idea to review their property management contract. Make sure you understand what the property manager’s and landlord’s obligations are and how the landlord is protected if the property manager does not fulfill their part of the agreement. You also want to understand what is and is not negotiable so that you can make sure it will fit your budget and your needs.
Within the agreement, carefully review the sections about services offered, fees charged, and what your responsibilities will be during your contractual term. Be sure the company follows fair housing laws. Review the “hold harmless clause” that protects the property manager from liability except in cases where they have been negligent. Be clear on the contract duration and cancellation policy.
Tips for Hiring a Property Management Company
Hiring a property manager to manage your rental property begins with understanding what types of property management companies are available and for which type of property they are best-suited.
Alternatives to Hiring a Property Management Company
In additional to traditional on-the-ground property management companies, there are other types of property managers to consider, such as turnkey properties and online property management software.
Online Property Management Software
Online property management software can assist you in managing your maintenance, handling tenant screening, leasing documents, and more. These are great for do-it-yourself (DIY) landlords. Online property management services offer both comprehensive and a la carte property management services.
Turnkey properties are a good option if you want to buy a property that doesn’t require any upfront maintenance, is fully rented, and comes with its own optional property management service. When considering a turnkey property, make sure the property management company is experienced. Review their property management agreement and interview them to make sure they’re a good fit.
Self-manage Rental Properties
If you’re an owner-occupied, two- to four-unit landlord, you may consider self-managing your rental properties, collecting rents, and handling maintenance. The key is to set up a separate bank account for processing payments and follow the landlord-tenant laws in your state. You also want to screen tenants, since they’ll be living right next to you.
MyRental can screen tenants for evictions, credit reports, criminal records, and previous address online. You can start today with its free online rental application that is quick and easy for your prospective tenants to complete on any device.
Property management companies are a good choice for busy investors who want to be less hands-on or live far from their rental properties. Property management companies manage the day-to-day operations of rental property saving time and, in some cases, money. Depending on the type of property, management companies typically charge between 4% and 10%.
The most important step is deciding who will manage your rental property. If you’re a DIY landlord, you might want to consider Avail. Avail is a residential property management platform where you can advertise vacancies, screen tenants, collect rents, track maintenance, communicate with tenants, and find state-specific digital leases. Pricing for Avail begins at $0 a month for one unit.