3 Property Management Hidden Fees and How to Avoid Them
A property managers job is to take care of your rental as if it were their own and help you save money whenever possible. With that being said there is a bit of conflict of interest when it comes to the hidden fees associated with a company managing your property. As a property owner you know that repairs happen, rehab is necessary periodically and property taxes are always going up. These are cost that are going to come up and there is no way around them, but let’s look at some fees that property management companies charge that can be completely avoided by working with a flat-rate property management company like Loose Leaf Property Management.
1. Leasing Fees / Tenant Placement Fees
Leasing fees and tenant placement fees are the amount of money a property management company charges you when they first rent out your property. Most companies will place the charge for this fee anywhere from to 25% -50% of your first months rent. The first problem with this is your paying your property manager thousands of dollars to simply place the tenant which for the most part on a fairly priced rental in the bay area is the easier part of the job.
Tenant Placement Fees are unnecessary, there is no need to pay your property manager half a month’s rent before they do any work on your unit. If you are paying 5% per month on a $3000 rental your monthly management fee is $150 per month. When you take the $1500 you paid upfront your monthly management fee is actually $275 per month. This is why it’s called a hidden fee, its meant to deceive.
If your property manager is getting paid half a month’s rent every time they rent your property out, chances are they are going to be motived to try and get new renters in your unit every year if possible. This creates more tenant turnover, more money spent on rehab and more vacancy periods than their needs to be. A good tenant can be worth their weight in gold, and it only hurts the property owner if your property manager is motivated to try and get them to move out every year.
2. Maintenance Coordination Fee / Inspection Fees
Maintenance coordination fee is a fee usually around 10% of the invoice amount on maintenance work done on your property. This means your property manager is making more money the more you spend on work done on your property. If you are paying a maintenance coordination fee on top of the work being done plus the monthly management fee you can see why this hidden fee can cost you thousands while being completely unnecessary, this is the reason you hired a property manager in the first place.
Inspection fees are similar to maintenance coordination fee in the sense that they are part of the property managers job and there is no reason to pay extra for them when they are done. In my experience I’ve seen that companies charge up to $100 per inspection. Loose Leaf Property Management includes yearly inspections as part of the management fees, saving you money on the backend.
3. Monthly Management Fees
Monthly management fees may not seem like a hidden fee but as rents go up so does your monthly fee. We know that rents increase on average by about 5% per year meaning your property manager is going to raise their fees every year even though the job stays the same. Charging a percentage of your rent to your property manager creates a situation where the property managers bigger accounts get more attention than the smaller account because they bring in more money. For Loose Leaf Property Management, we treat all of our clients equally because of their investments are important to us. If your rental brings in $20,000 per month or $1000 per month we are going to make sure it is being taken care of the way it should be, no special preferences, no hidden fees just honest management.