Paying A Property Management Company Through Percentages, Projects Or Flat Fees

When it comes to talking about money, most people tend to shy away from the subject. For instance, when you go out to eat, you don’t really want to ask your waitress, “So, what percentage do you think I should tip?” The general rule says we should pay our waiters/waitresses anywhere from 15-25% for a tip. We base the percentage on how well their service was, whether we had refills right away, they remembered our extra sauce, and had a pleasant demeanor. There are also some people that do not bother with percentages and always leave a flat rate tip. Your meal may never reach $50, but you always leave $10 no matter the total. The same idea goes for many other areas of life, including property management fees. When you are looking for a property management company, it is important that you understand and take into consideration the fees you will be paying and the services you should receive for those fees being charged.

What fees should you expect to see from your property management company?

Just like your tip to the server will vary each time you visit depending on your order, service, etc., the same is true for your fees with a property manager. You have a few different payment options that you can work out with your property management company. Here are a few of those options:

  • Percentage of Monthly Rent: A percentage of monthly rent means your property management company gets paid only if you do. This is much like the buffet or fast food service: you only pay for your food. You were not waited on by someone; therefore, no tip is required. So, if your property unit is vacant then there is no need to pay fees for that month. When your property is in use, then you pay a percentage of your monthly total to the property management company. Most companies run between six to ten percent depending on services offered and what you want included in your services package.
  • Per Project Fee: A per project fee may be charges for extra services that you required that month. For instance, the only reason you need to tip while eating is when you go out to eat. If you stayed home, then there is no need for a tip. If a month or two goes by and you have not needed any extra services from your property management company, then there is no need for any per project fees. But if one night a storm hits and a tree needs to be removed, this would be considered an extra project resulting in the extra project fee.
  • Flat Fees: A flat fee means you will be charged the same amount no matter how many units have been rented out. Just like always leaving a $10 tip, your payment rate will always remain the same no matter how many units you have in use that month. The flat fee rate can be great if you feel that your building can be high maintenance. It may be cheaper to play a flat fee and get all the services you need included, rather than paying by a percentage and adding on the extra maintenance services.

What are the services your property manager should be providing?

Whether you are thinking of a flat fee or a monthly percentage, you need to know what kind of services a good property management company should be providing for those fees. Here are a list of services you should be receiving:

  • Collecting Rent, Security Deposits, and Tenant Leases: Your property management company should be taking care of all the nitty-gritty details for you. They will be the ones to send out past due notices, collect and process the rent, keep track of who is paid and who has late fees, and so on. They will also collect the first month’s rent and hold on to security deposits as well as assess at the end how much will be returned to the tenant based on the tenant lease they also prepared and kept filed away.
  • Monthly Statements, Legal Documents, and Tax Papers: A great property management company is your safety net and gives you peace of mind. They will take care of all the legal documents needed in order to protect you from potential lawsuits and IRS audits. They have your back and protect you with all the proper legal filings and also keep track of your money with itemized monthly statements.
  • Maintaining, Fixing, and Inspecting All Properties: Most property management companies have maintenance companies at your disposal. If something goes wrong in the middle of the night, your property management company will have it taken care of while you enjoy a good night’s rest. The property management company will keep your property neat and your lawns and sidewalks will meet your city’s guidelines, avoiding citations. A great property management company will also have regular inspections making sure your building are up to code and nothing has fallen through the cracks.

If you aren’t sure whether a flat fee, percentage-based or per project-based option is best for you, you can schedule a consultation with our office at PPMI to figure out the right one for your properties and specific services needed. We have both flat fees and monthly percentage fees pricing and will work with you to decide which option is best for your company. We offer all of the above services and more to ensure all of our clients needs are covered. Contact us today for information on how we can help your rental properties grow and succeed.

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