Average Property Management Fee for Rental Properties in 2024

Property managers are an important part of owning and operating rental properties. They handle all aspects of managing the property – from finding tenants, collecting rent payments, responding to maintenance requests, and more. This frees up landlords to focus on high-level strategy and expanding their real estate portfolio instead of day-to-day property oversight.

But property management services come at a cost in the form of property management fees. As a landlord, it’s crucial to understand what the average property management fee is so you can budget accordingly and choose a property management company that offers competitive rates.

Key Takeaways

  • Typical property management fee structures include percentage of rent (8-12%), flat monthly fees ($100-$300 per unit), or a hybrid model
  • Average rates for 2024 are around 10% of rent for percentage fees or $150 per month + 8% of rent for hybrid pricing
  • Property characteristics like type, size, class, and location impact average fee rates
  • Full-service property management packages have premium pricing over scheduling-only concierge services
  • Estimate total monthly costs by multiplying rent x percentage fee + flat fee per unit

Breaking Down the Typical Property Management Fee Structures

Before looking at average rates, it’s essential to understand the most common ways property management companies charge service fees. The fee structure significantly impacts your total costs so it’s crucial to find the best fit option when negotiating your management contract.

The three primary property management fee structures are:

  1. Percentage of Rent
  2. Flat Fee
  3. Hybrid (Percentage + Flat Fee)

Let’s break these down in more detail:

Percentage of Rent

The most common fee structure charges a percentage of the monthly rent collected. Fees typically range from 8-12% of monthly rent.

The percentage may only apply to collected rent or earned income. Conversely, the management company might calculate the fee based on the total potential rent – even for vacant units or unpaid rent. This could result in higher costs for landlords so it’s essential to review this closely.

With the percentage fee structure, costs scale directly in line with rent prices. So if your rental income goes up or down, so do your property management costs.

Flat Fee

A flat fee structure charges a fixed dollar amount per unit or property, typically ranging $50 to a few hundred dollars. The flat fee stays consistent regardless of occupancy rates or rental income fluctuations.

Flat fees incentivize property managers to maximize rental income and keep units filled since their compensation is unaffected by rent prices. However, costs are harder to predict for landlords since flat fees do not scale with market rents.

Hybrid Fee Structure

A hybrid fee combines a percentage charge with a flat fee per unit. This helps offset risk for both parties.

For example, a contract could charge $100 per unit per month plus 8% of collected rents. The flat fee covers basic costs for the property manager while the percentage compensates for their leasing and rent collection services.

The hybrid option helps stabilize income for property managers while capping upside risk exposure for landlords. However, it also comes with higher base costs than a pure percentage or flat fee model.

Also read: How Much does it Cost for a Home Inspection

Average Property Management Rates

Now that we’ve reviewed fee structures, what are average property management fees?

The latest market surveys show average property management fees by structure as:

  • Percentage of Rent: 8-12%
  • Flat Monthly Fee: $100-$300 per unit
  • Hybrid: $100+ per unit + 6-8% of rent

Average percentage fees fall around 10%. Flat monthly average rates range from $100 for inexpensive units in small rural markets to over $300 for luxury apartments in major metro areas. Hybrid splits the difference around $200 per unit plus 8% on rent.

In dollar terms, the average single-family home management fee runs around $150 per month. For comparison, multifamily apartments average around $50 per unit monthly. The size and class of the property directly impact average fee rates.

Also read: Section 8 Houses For Rent Private Owners

How Property Type, Location, and Services Impact Fees

As you may have noticed in the average fee data, property managers charge vastly different rates based on factors like:

  • Property type – Single-family vs. multifamily, class A vs class B, size of the building
  • Location – Major metro market vs rural small town
  • Included services – Showings/leasing, maintenance, accounting, tenant relations all impact costs

Let’s analyze these three factors more closely:

1. Property Type Factors

  • Single-family homes command higher base fees than units in large multifamily apartment complexes due to higher tenant turnover and maintenance coordination challenges. Expect at least a 20-30% premium.
  • Similarly Class A luxury and newer properties require less maintenance oversight compared to aging Class B or Class C rentals, leading to lower fee rates.
  • Size also contributes to costs with 50-100 unit apartment complexes charging cheaper per unit pricing than smaller 12-20 unit buildings.

2. Location Market Factors

  • Property managers in expensive major metro markets like NYC, San Francisco, LA charge premium rates due to higher rents and salaries.
  • Conversely, small rural markets have significantly lower per unit pricing and percentage fee rates.

3. Services Offered Factors

  • Full-service property managers that handle showings, maintenance, accounting, and tenant relations charge higher rates than scheduling-only concierge services. However, they also provide more value.
  • Premium features like automated rent collection, online portals, and integrated property performance analytics also come at a higher cost.

As you price compare property management options, carefully analyze the service inclusions side-by-side. While one company might charge a lower percentage fee, hidden additional costs for à la carte services could eat into your bottom line rental income.

Also read: 10 Best Ways to Finding Cheap 2-Bedroom Houses For Rent

Estimating Property Management Costs

As a rental investor, you need a practical way to estimate property management costs based on average 2024 rate data. Here is a quick 3-step formula:

Step 1. Determine the Monthly Rent for your rental property

For example, a 3-bed 2-bath home rents for $2,000 per month

Step 2. Multiply Monthly Rent by the Average Fee Percentage

Using a 10% average management fee:
$2,000 per month rent * 10% = $200 per month fee

Step 3. Add Any Additional Flat Rate Fees

For single-family homes $150 per month is average:

$200 (10% of rent)+ $150 (flat-rate) = $350 total monthly property management fee

Run the math both for your current rents and projected future rental rates. This will make it easy to budget operating costs and evaluate real estate investing returns.

Most property managers only require 60 days notice before rate changes go into effect. So if market rents increase you can expect proportional fee hikes for percentage of rent models. Factor this into your projections.

Tips to Negotiate Property Management Contracts

The average 10% management fee provides a baseline for cost expectations. However, savvy landlords can often negotiate discounts depending on situation factors.

Here are tips to negotiate lower property management rates:

  • Seek bids from newer property management firms looking to grow market share
  • Offer batch discounts if you hire one company to oversee multiple properties
  • Inquire about lower rates for long-term contracts covering multiple years
  • Offer referrals to other investors in your network in exchange for 10-20% off fees
  • Consider lower-cost non-traditional property managers like real estate agents willing to take this on

Many property managers increased rates heading into 2023 due to historically high inflation. As overall prices start to stabilize, this gives you leverage to lock-in discounts for 2024 contracts.

On the flip side, guaranteeing a multi-year deal provides revenue stability that warrants a discount from the property company perspective. Explore these creative structures during your negotiations.

The Bottom Line

As you can see, accurately projecting property management costs requires analyzing many variables from fee structures, property type, location, and services. Typical 2024 rates fall around 10% of rent plus $150 per month for single-family homes. But your actual costs could vary 20%+ from this average baseline.

Carefully vetting multiple vendors, comparing service offerings, and negotiating competitive pricing can yield significant long-term savings that directly flow to your bottom line returns. Just be sure to still prioritize experience and performance as well as pricing during your decision process.

FAQs

What is the average property management fee for a single-family home?

For a single-family rental home, expect to pay around 10% of monthly rent plus $150 per month in flat fees on average. So a $2,000 rental would incur ~$350 per month in property management fees.

How do property management rates for multifamily compare?

Multifamily apartments average around $50 per unit in monthly flat fees plus 8% of collected rental income due to economies of scale. The percentage fee may be based on potential rent or occupied units depending on contract terms.

How often can a property management company raise rates?

Most property management contracts allow for rate adjustments on 60 days notice. Expect fee hikes in line with market rent appreciation, typically once per year. Contracts longer than 12 months may guarantee set rates for the full term.

What discounts can I negotiate on pricing?

Common discounts include 10-20% off for multi-year contracts, batch pricing per unit for owners with multiple properties, and reduced fees in exchange for tenant referrals to the management firm.

Should I only consider property managers with the lowest rates?

While cost is crucial, also carefully evaluate experience managing similar properties, online systems and technology, maintenance coordination, tenant screening processes, payment flexibility and overall responsiveness during the vendor selection process.

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