The flat fee landlord is attempting to hold on to more of his or her earnings when hiring and paying a management company to look after their properties. Most property owners that hire a management company to take care of their rentals are aware of the costs they will incur with the arrangement. That is the specific reason behind flat fee landlord concepts existing. Instead of paying a percentage of the monthly rent, some would prefer to pay a standardized fee. Instead of that fee rising as the rents rise, it remains the same.
Standard Fees Paid to a Management Company
Basic Management Fee which is usually a percentage of the rent. This is paid unless you negotiated for a flat fee.
Leasing Fees
Lease Renewal Fees
Late Payment Fee
Reserve Fund Fee
Set-Up Fee
Paying the Owner’s Bills for the Premises Fee
Lease Violation Fee
Early Cancellation Fee
Vacancy Fee
Returned Check Fees
Pet Fees
Extra Duties Miscellaneous Fees
Fees for vending machines and laundry
Sales commission for property for sale
Advertising Fees
The management company will get paid between 6 to 12% of the property’s monthly rent. This may vary depending on whether the property is commercial or residential and on the type of property: single family home, condo, co-op, townhome, or apartment. You will only want to pay your company for what is collected, so never sign a deal that states, “percentage of rent due”.
Generally, the flat fee is a good deal for owners, but it depends on how it calculates in the end. Too high and the owner ends up paying more than the typical 6 to 12% of rent received. As an owner, you should calculate percentage as well as flat fee to determine if you’re paying too much. If you are, negotiate the rate down to something more acceptable.
For single-family homes, the standard rate is a 10% management fee. Depending on the value of your home, some will attempt to collect a higher rate. In such situations, try to pay a flat fee if possible. Always be prepared to negotiate with the management company for more acceptable rates.
To keep your losses at a minimum set certain limit. The leasing fee should never change no matter how long it takes to fill the vacancy. Offer incentives to the company to find long-term tenants. Include the provision, that if you find the tenant, there will be no leasing fee. Avoid a separate advertising fee, include the cost in the leasing fee.
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