One of the first questions that people ask us is "How much do you charge to manage a property? What is the fee structure for property management?" Different property managers charge different fees so let's break it down for you.
We at Chesapeake Property Management, Inc. are committed to professionalism and transparency. Our job is to give you "peace of mind" so that you can move on with your life. And we want a fee structure that is simple, straightforward and uncomplicated.
We represent hundreds of landlords that are located all over the world. And we are honored to represent many Department of Defense landlords who trust us completely with their assets while they are overseas. The last thing they need is to wonder how their property management invoice was calculated, why there are mysterious fees or why the numbers don't make sense.
So here it is... our fee structure:
For property management services, our monthly fee is 10% of the monthly rent or a minimum of $150 per month, whichever is greater.
And that is it. No hidden fees. No fine print. No surprises.
Yes, I know that some of our competitors charge lower monthly fees (we call these "teaser fees") and then hide some of their additional fees in the fine print. Every company has to make money somehow so how do they do it? What is in the fine print?
What Fees Do Many Property Managers Hide in the Fine Print?
Look for the following possible fees and charges in the fine print of the property management agreements you are considering:
1. Is there a "service fee" per repair?
Do they charge a service fee per repair? Meaning that every time the property management company calls out a contractor for a repair at your property, the property management company adds on a "service fee."
Think about this, the more repairs on your property, the more money the property management company makes. Why would they try to be efficient in scheduling your repairs or try to troubleshoot issues themselves if they make money off of each scheduled repair? And, if you are paying them a monthly fee for property management services, why are they charging you for repairs? Isn't that what should be included in the monthly fee? We believe this to be a major conflict of interest and don't charge service fees for repairs.
2. Does the property management company mark up repair invoices?
Do they "mark up" repair invoices? This differs from a service fee in that if the contractor charges the homeowner $200 for a repair, the property management company may charge a 10% "mark up" fee and bill you $220. $200 to the contractor and $20 to the property management company.
Many property management companies are in cahoots with their contractors. Just like #1, this is a conflict. The more repairs charged to you, the more money everyone makes... except you. And how can you possibly budget every month when your property management fees are dependent on so many variables? Forget it. If the property management fee structure is not straightforward and simple, walk away.
3. Who is doing the repairs on your rental property?
Who is doing the repairs on your rental property? Are they reputable? Licensed? Insured? How are they vetted? Read this clause very carefully. Sometimes the property management company will hire an in house, unlicensed contractor and then mark up the invoice to reflect how much a licensed contractor would have charged you. So, the property management company pays the "wholesale/discounted" fee and they charge you the "retail" fee. Huh? What? This is crazy and dangerous.
You expose yourself to a lot of liability because you have unlicensed contractors doing the work on your property and, possibly, putting your tenants in an unsafe home. This is against the law and very dangerous. Know who is doing the repairs on your property and protect yourself.
4. What does the property management company charge you if your tenant decides to stay longer than the initial term of the lease?
Do they charge you if a tenant stays longer than the initial term of the lease? So even if a tenant stays and the property management company incurs no marketing expenses, does the company charge you a fee? A prospective landlord asked me this question last week and he was shocked to learn that no, we don't charge you if we don't do any work.
How can these companies live with themselves by charging you for "work" that they don't do? If a tenant stays, great! We all win. No need to charge you for work that we don't have to do. That is just crazy and wrong.
5. What other fees might you be charged?
Do they charge you other fees? I don't even know what these companies drum up so read the fine print very carefully. We will be headed down to the NARPM convention in Atlanta later this month and this is where we learn about all of the crazy fees that some of our competitors charge. We will update this post as we learn more.
6. Are you required to give the property management company power of attorney?
Is your property management company asking you to give them a power of attorney so that they can sign all documents for you? Yikes! I have addressed this before. This removes all oversight from you and is very dangerous. So the property management company can hire all kinds of contractors on your behalf, mark up invoices, and not be required to get your input at all. This one really scares me.
And with today's technology, there is no reason for you to be so "out of the loop" regarding your rental property. Documents, emails, texts can easily be sent back and forth so that you know what is going on and we get your input (unless it is an emergency).
If a property management company keeps you in the dark and does not communicate with you on a continuous basis, watch out.
7. Are you offered online access to all rental property expenses incurred on your behalf as a landlord?
Do you have a landlord portal where every invoice is itemized? This is a good one. Guess what? If you can't understand your invoices, neither can your tax accountant. And that means you will not be able to deduct and depreciate everything that you are entitled to. We have had many accountants tell their clients when describing us,
"Finally, a property management company that is transparent and itemizes every fee such that you can now take advantage of all depreciation and deductions that you are entitled to."
If fees are hidden or seem shady, you can't deduct it. Your accountant does not want to be associated with shady fees.
In addition, make sure that your landlord portal will be kept up to date on a continuous basis so that, if you spot a problem, you can handle it ASAP, instead of months later. Many landlords call us after working with other companies and they are completely "out of the loop" regarding their accounts. They have no idea what they are being charged, have no copies of invoices and don't know who did the repairs. This is crazy. Your asset, your liability and you deserve a right to know what is happening with your property.
If you work with us, every invoice will be in your portal with the name of the contractor, their phone number and their MHIC number. We want you to know what is going on and you can call us anytime with questions about your account.
8. Have you carefully read through the fine print of your property management agreement?
Just read everything! Since I don't often read the property management agreements of my competitors, I honestly don't know everything you should look for. I only know what new landlords tell me that they have seen. Just be aware. If it looks too good to be true, it probably is.
If you can't understand the fee structure, neither can your accountant. If your fees vary every month and you don't get good explanations, walk away.
9. Have you checked the references and online reviews of the property management company you are considering?
Integrity and reputation really matter. I cannot stress enough that an inexperienced property manager can cost you thousands of dollars in the future. Don't be tempted by the low monthly teaser fee. Think about the future.
If this property manager does not know what they are doing, has high turnover among their team and has low (or no) standards, is this really worth it? How could this come back to haunt you? Lawsuits by tenants, fines by the local jurisdiction, HOA fines and neighbor complaints, shoddy repairs, poor customer service. This is scary and expensive and you want to avoid it at all costs.
So, pay a fair monthly fee up front. Deduct your property management fees. And go with the company with the best reputation to give you "peace of mind" and get you where you are going.
Give us a call anytime. We are here to help. No pressure, I promise.