So... you're looking to get into the house rental game. You have a property you feel would be a great fit for renting out and making a bit of extra money.
Maybe your job required you to move to a city that's just far enough away that you can't commute daily from the home you currently own.
Perhaps your dream home finally went on the market, so you've purchased it and now aren't sure what to do with the other home.
Whatever the case might be, you're probably considering hiring a rental management company to watch over it. Here are some costs and factors you should expect with hiring one so that you consider whether it's worth it for you.
Ah yes, the infamous setup fee, the first fee that you'll pay after hiring a service and beginning the rental management process.
The good news is that it's only a one-time fee... you'll never have to pay for it again. It's generally only a few hundred dollars and gets everything installed for your account in the company's system.
There are also a few other things it includes such as the initial consultation, an inspection of the home's current condition, and getting you set up (imagine that!) with a property manager who you'll be primarily working with.
While it can be a bit annoying to have to pay anything upfront, it's an important piece to the process. It helps everything run smoothly from there on out. It also helps fill a need that you have for a particular service.
One fee that you will not stop owing to the rental management company that you hire is the monthly fee that comes with any standard contract.
While you most likely expected to owe a monthly portion to the company you hire, you'll want to know how much you should expect to pay.
Generally, you should expect to owe the property manager and their company anywhere between 10 to 13-percent of the monthly rent that's being charged to your tenants.
There will also more than likely be an expense on top of that, which is typically around $100.
Now, the good news is that you can set it up to never actually see that money being taken out. That way, it's almost as if it never existed and will help ease the tension between you and the property management company.
While it may seem like a lot to owe each month, your property manager will be doing most of the heavy lifting for your property and helping you avoid doing so.
Because of that, only owing them 10-percent of your monthly rent will seem like a fair compensation!
One of the most important aspects of hiring a rental management company is finding one that will prioritize the proper maintenance of your property.
Anytime your home is used it will require updates, renovations, repairs, etc. It's no different than if you were occupying the home yourself.
As such, you should happily pay this fee and protect the integrity of your home's value and longterm success.
The price range of this fee is entirely dependant on key factors like the house's age, size, and current condition.
A best practice would be to store away 10 to 15-percent of the monthly rent payment you receive towards saving for maintenance. It's an inevitable fee that will likely be around 13-percent of what you receive annually for rent payment.
New Tenant Placement Fee
Finding a new tenant with the needs that your property can fill for them isn't as easy as it sounds.
As such, you can expect to pay what's called a new tenant placement fee. This will take care of things such as the advertising, showings, and application process for each eligible prospective tenant.
The fee depends on the company you hire. Some charge a flat fee, while others charge a median of 50-percent of the first month's rent. Be sure to ask your property management company which they charge for.
Lease Renewal Fee
There are a few reasons why you may be paying this to the rental management company that you hire.
For one, it rewards their efforts for finding tenants that produce longterm payments for you. But also, it covers things such as studying the market for rent changes and working out the deal to keep the tenants happy.
That's no easy task, so if they're keeping your tenants satisfied, they deserve this fee.
Some companies charge a flat fee, some charge a percentage of the renewed monthly fee, and some don't charge it at all.
Late Payment Fee
This last fee shouldn't come as a surprise to you. As the property management company conducts business for you, being paid on-time for their efforts is of the utmost importance.
They need to make sure the cash flow for their business is optimized. It's how they make sure to have the funds for things like advertising your property and making any necessary renovations to the home.
Make sure you're in constant communication with your property manager and you'll avoid ever making a late payment.
Find the Ideal Rental Management Company for Your Property
Now that you've seen most of the costs associated with hiring a rental management company, you may also realize the importance of having one.
Hiring one ensures your property is managed by those with experience and know-how to get you the most money as possible and keep your home in tip-top shape.
Be sure to read our other articles pertaining to helpful information on topics such as this one and others just like it.