Managing properties is a complicated business already, but if you’re not well educated about the different sorts of fees and charges you can incur during the process, you’re well on the road to making things difficult for yourself. As a property manager, you need to navigate these pathways and ensure that you have a deep understanding of the financial side of things so you know exactly what you’re getting in return for all your time, effort, and resources that you’re investing. If this sounds like something you’re interested in learning about, hop on board, and let’s dive into the complex world of fees and charges in property management!
Management Fees
Management fees are the core of the operations in a property management business. These fees determine the percentage of rent you will charge to your clients to oversee the property. Choosing the right management fee for your property is crucial, as your rate needs to be attractive to potential customers. If the rate is too high, your customers might opt for a cheaper alternative, and if they are too low, they might view that as a reflection of poor quality. Alongside balancing that line, you also need to reflect fair compensation for the work you have put in to make your business thrive. Aside from covering tangible costs that you incur while operating the company, you also need to consider the value of the efforts that you’re investing in. The sum you receive from this fee is going to sustain your operations for the business’s lifetime.
Lease Fees
Leasing fees are the gateway transaction between you and your client that determines what percentage of rent you will take as your one-time fee for your service. Once again, it would be best if you balanced competitiveness with the reflection of your efforts while deciding the rate. This is where you showcase your competency in finding the right tenant for the right property at the right time. Keep in mind that the lease fee is the beginning of your relationship with the tenant, not the end. The rate you set is going to set the tone for your bonds, so make sure it’s well-researched and thought out before you make a move.
Renewal Fees
This one is all about sustaining that relationship you have built with your tenants. Renewing a lease is a complicated process as you’re focusing on deepening your connection with the client, extending the contract, and ensuring client satisfaction all in one. It’s a tricky situation where you need to ensure that your client is retained, but at the same time, the terms of the lease better reflect the current market trends. Renewal fees refer to the percentage of the rent you’ll charge for the investment of your time and skillful negotiation as well.
Late Fees
Late payments are a problem that every business faces at least once in their lifetime. If your tenant refuses to pay on time, you need to work out an action plan to recover your money. This involves deciding whether you’ll pay the late fees yourself, split them with the tenant, or transfer them entirely to the tenant. The process needs to be as transparent as possible so that your clients avoid overdue payments and pay on time.
Application Fees
When you start receiving applications from potential tenants who are interested in viewing and visiting your property, you often incur several costs in the process. These include background checks, credit checks, administrative costs, ID verification, and any software you need to streamline the process. Hence, it’s fair to charge a reasonable fee that covers this cost.
Administration Fees
A subset of application fees, administration fees often pile up when you conduct activities, such as starting a new lease or generating a renewal demand effort. As both these processes require significant work at the backend for a seamless transition of property, it’s reasonable to charge administration fees that can help pay for the time and effort you’ve put in.
Tech Fees
In today’s digital world, it’s virtually impossible to go without using the latest technology in the market. Businesses that don’t opt for new technological advancements and software are often left behind by more tech-savvy businesses that immediately adapt to the new mode. Charging a tech fee can not only cover the costs of hardware and software but can also help you provide training to your staff to use those tools responsibly to manage and promote your business better.
Advertising Fees
No matter what your method of marketing and advertising is, at one point or another, you will incur some form of cost that will need to be paid. This might crop up as paid social media marketing campaigns on Facebook or Instagram or the charges of having your company name on the billboards lining the highways. Depending on the type of market you aim to acquire, your advertisement methods will vary. Hence, charging an advertising fee can always lend a helping hand in promoting your business more effectively.
Pet Fees
You also need to consider the fees you will charge for any pets allowed on the property. Some property managers charge a one-time fee, while others request a recurring monthly charge. It typically depends on the type of pet the tenant wants to bring in, their size, and history based on veterinarian documents and past experiences in homes. This is often considered to be a part of the revenue that is enjoyed by property managers.
Insurance Fees
Securing insurance for tenants is a crucial step in protecting property investments, and hence, most property managers implement a reasonable insurance fee. This fee covers the basic administrative costs associated with the process and also compensates the manager for their effort and expenses. While it may seem like a debatable charge at first, the necessity of having a secure and well-protected rental space often wins over. Having insurance fees is, therefore, both expected and justifiable.
Resident Benefit Package
This package is the beginning of a new wave of services that offer a comprehensive bundle of perks, such as insurance, delivery of filters, credit building, and more. Tenants “subscribe” to these packages by paying a monthly fee for all these added benefits, resulting in a new revenue stream for property managers. It’s a win-win situation for both the tenants and the property managers, as the former gets to enjoy added value while the latter enjoys more financial compensation for their work.
Rent Guarantee Insurance
Another package that might be of interest to tenants and property managers alike is offering rent guarantee insurance. This is an excellent option for property owners who prefer financial security, but it’s worth noting that the terms of agreements often lead to a pitfall where one party benefits at the expense of the other. Therefore, this process needs to be incredibly transparent, with a focus on understanding what the agreement stands for and what will not be acceptable behavior.
To sum it all up, there’s a whole host of fees and charges that you need to consider if you’re working as a property manager. You need to ensure that throughout the process, you communicate clearly with your clients and are as transparent in your dealings as possible.
And if you need any assistance in dealing with your accounts, you can head on over to Hawk and drop us a call or message. We’re incredibly passionate about helping property managers work through their bookkeeping, accounting, and financial tasks by providing support, counseling, administration, and other related services.
We’re looking forward to working with you!
If you can’t get enough of the wondrous world of property management, accounting, and finance, check out these articles next:
The Challenges of Past-Due Accounting
Your Ultimate Guide To Real Estate Accounting Terminology
