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How do property management companies work?

The property management companies process

Starting out in real estate investing involves a learning curve. A great property management company can help owners learn a lot about how to be successful in the local real estate market, but many prospective landlords hesitate to reach out. Their number one question is often: How do property management companies work?

Here’s a comprehensive guide to how property management companies work, typical fee structure, and services offered.

Hiring a property management company

Ask these specific questions when hiring a property management company to determine if they offer the services you need, and whether they’re good at what they do:

  • How many properties are you currently managing?
  • What experience do you have managing properties like this one?
  • What are your licenses and certifications? (Then verify.)
  • Have you ever had to evict a tenant? How did/would you handle that?
  • What is your average occupancy rate?
  • How long does it typically take for you to fill a vacant property?

Remember that these questions are just a starting point. You may have additional questions, depending on your property type, location, or other special considerations.

The property management fee structure

After an initial setup fee that covers the creation of marketing plans and other property-specific needs, the primary monthly property management fee can be structured as a flat fee, or as a percentage of rents collected. Fees can range from 7 – 12 percent of gross monthly rent. Typically, property management fees are higher for single-family properties and lower for multifamily properties.

Other fees aren’t monthly, and may include:

  • Tenant placement fee (covers advertising, screening, and lease preparation)
  • Vacancy fee
  • Eviction fee (plus court costs)
  • Early termination fee

The Maintenance Fee is usually included in the monthly management cost and placed into a Reserve Repair Fund to pay for emergency repairs. Landlords sometimes have approval authority for every expense out of this account, but property managers usually require a minimum balance be kept in the reserve at all times.

What can influence property management fees

All of the various property management fees can vary depending on certain property features or influencing factors:

Class A Management offers comprehensive property management services and can customize a package that fits your property, budget, and investment goals. Contact us today to learn more about how your single-family or multifamily property can become the crown jewel in your portfolio. We take pride in offering our clients complete transparency, and we’ll be happy to answer your questions and explain the Class A Management fee structure and provide references to existing clients.