Property Management Fees: 5 Reasons Why The Cheapest Fee Might End Up Costing You The Most

Apr 7, 2022 | Property Management

You know the term, “you get what you pay for?” It’s true for products like televisions, appliances, patio furniture, and more. There are times when you don’t skimp on price. If you are going to spend the money on a new television, you might as well get one with a great picture, sound, and high refresh rate while streaming. 

The same goes for property management fees in North Denver and surrounding areas. You get what you pay for. You might find a company that offers a great base price. However, you receive poor service, are charged additional fees you weren’t aware of, and don’t get the personal attention you deserve. 

Real estate is a significant investment. You want to protect your investment and your cash flow. If your property isn’t in the right hands, it could sit vacant, become trashed, and stop making you money.

Protect your investment by understanding what you get for the property management fees you pay. In most cases, the lowest price is not your best choice. 

How Much Do Property Management Companies Charge?

Before diving in, you need to know how property management companies charge. In most cases, there are two ways to charge fees. These are by a basic percentage of the rent or a flat fee. Know that percentages and fees will vary widely depending on location and company offerings. 

Usually, standard commissions are between 7% and 10%. However, these can be as low as 4% or as high as 15%. To illustrate, if your rental has a monthly rent of $1500 and your property management company charges 10%, you will pay $150 a month. When shopping around, you can compare these rates to flat fees.

What Services Should This Fee Include?

A good property manager should include these services in their basic fee:

  • Accurately determining the rental value of your property
  • Marketing to find potential renters
  • Screening potential renters
  • Performing regular inspections of the property and informing you of the results
  • Ensuring tenants pay rent on-time
  • Coordinating and scheduling repairs and maintenance on the property
  • Dealing with tenant complaints
  • Help with the eviction process if ever necessary

5 Reasons Why The Cheapest Fee Might End Up Costing You the Most

There is much to consider when shopping around for a property management company. Make sure you get a clear picture of the fees charged and what you get for that money. Minimal fees might sound like a money-saving win, but could cost you more in the end.

1. The Company Offers A Low Fee, But You Are Required To Pay For Extra Services

A property management company might lure you in with the promise of a low base price but then charge extra for additional services. Some fees are typical, while some should cause concern. Be sure to understand all expenses before signing a contract. 

Here are some services that should be included, but could cost extra:

  • Administrative fees
  • Insurance claims
  • Lease transfer fees
  • End of year financial statement
  • Letting and lease renewal
  • Tenancy database checks
  • File preparation
  • Maintenance fee
  • Advertising fee
  • Pet fee
  • Returned check fee
  • Eviction fee
  • Vacancy fee

2. The Package Includes Only Limited Services

A package with a low base fee could be very minimal and leave your property vulnerable. Ensure that the company is, at minimum, providing all services listed above. If that list is missing something like performing regular property inspections, this could lead to property damage. If your property managers are not regularly checking in, your tenants could be destroying your property. Paying for repairs costs you time and money. Save in the long-run with services that protect you and your property.

3. The Company Is New And Trying To Attract Clients

When hiring a property management company in the Denver area, you want someone experienced in the industry. A company just starting out might offer low rates to attract clients. 

However, this could leave you dealing with a mess on your own. Say you have a tenant who isn’t paying rent and destroying your property. An inexperienced company may not fully understand the eviction process. This leaves you open to paying for repairs and dealing with months of lost rent.

4. The Company Staff-To-Client Ratio Prevents Them From Offering Personalized Services

If a company gets too big, they might be able to offer lower fees. Be wary of companies that manage large numbers of properties with a small staff. If this is the case, you and your tenants are unlikely to get personalized services. You and your tenants will be left waiting and frustrated. It could be hard to keep tenants, and you will lose rental income. 

5. The Fee Might Raise Because Of Inflation

Before signing a contract, ask about the possibility of rate increases. Once you sign, how long is the rate locked in for? If the company has started out too low, they might raise your rate to an unreasonable level while you are still in your contract to make up for their error.

Balancing Price And Services

When looking for a property management company, you want to balance price and services. You want to know you are getting what you pay for. Don’t chase after low fees, as these can cost you more in the long run.

Instead, find a company that meets your needs while charging a reasonable fee. A good property management company will:

  • Maintain a low vacancy rate
  • Maintain a good tenancy record
  • Get new tenants from referrals
  • Have other professionals reach out to them for advice
  • Be active in the local real estate scene
  • Be a good communicator
  • Have a short response time when dealing with problems

The most important thing is protecting your property and income when you own a rental. When you work with a good property management company, it will pay off even if they charge a higher fee. 

You will have a higher occupancy rate, your property will be taken care of, and you know you have an expert on your side. When you work with an excellent property management company, you can enjoy your cash flow but leave the details to your management company. 

Interested in property management services?

Call HighPoint Property Management today! Our team of experts are looking forward to meeting with you.