How Much is a Property Management Company Worth?

One common question I get from rental property owners who are considering hiring a property management company or who have hired one but are unsure about the fees they are being charged is, how much is a property management company (“property manager”) worth?

Historically, property managers charge a commission of the rent collected or owed during the tenancy. Commonly, management fees range from 8-12%, and property managers tend to give a reduced commission rate for property owners who have multiple properties to be managed.

But what’s occurring more frequently in the modern property management market is that property managers are charging additional fees for specific or added services. Those added fees are usually based on the occurrence of events during their management or on add-on services the property manager provides to the owner or the tenant. 

One landlord recently posed this scenario and question in a popular online forum for landlords, property investors, and property managers:

I’d like to get some input on reasonable vs unreasonable fees for property management. I think most people think that the percentage of rent is the key fee. I disagree. I interviewed a property manager a while back who headlined their fee structure with an 8% of rents fee. But then had: 

– Late fee splits

– Pet fee splits / collected by PM

– Leasing fee of 50% for new tenant

– Renewal fee

– Service fee for work done on the property

– Higher fees for certain tenant conditions

– Receives all interest on trust accounts

– Full page of admin fees including resident liability program, benefit package, pet initiation fee, credit reporting fee, tenant lease renewal fee (in addition to renewal fee charged to landlord), lease draft fee, application fee, utility concierge service fee, legal notice service fee. NSF fee, electronic payment fee. 

– $85 per hour fee for broker’s time. 

– Document fee of $50. 

– Eviction fees

– Various fees for advertising the property

– Various rights to broker commission if I sell the property. $1,000 fee if I don’t use them to sell the property. 

– Termination fees equal to 15% of all rents received. 

– Etc. 

In my view, this is WAY worse than a 10% of rents collected fee. Now, the headline of % of rents versus the huge number of ticky tack fees doesn’t really matter in the end if the property manager is good and runs a tight ship, keeping my property well maintained and occupied. But I believe that a fee structure like this is way worse than something simple like: 

“Good” Property Manager Fees:

– 10% of rents

– 50% or $500 lease-up fee

– 25% or $250 lease renewal fee

– 10% GC charge on projects over $1,000 (guarantees they will get 2-3 quotes on jobs of this size).

– $500 – $1,000 flat rate breakup fee, payable only in year 1.

What do you think?

What is the Value of a Property Management Company?

These kinds of fees are increasingly common. The reality is, there is little profit in the property management business. Property management companies that charge only, say, 8-10%, on rent and don’t charge ancillary or per-occasion fees are not bringing in much money to manage the landlord’s property. 

To help the property management company like this stay in the “black’, they are tempted not to hire sufficient staff to provide full and professional service, cut corners to cut costs, not conduct necessary due diligence, approve less-than-qualified applicants just to get a tenant to sign a lease, and other below-par practices, in which case, the landlord may want to stay clear. 

Costs of doing business have increased significantly over the past 20 years and liability has increased notably. In Florida, like other states, you must be a licensed real estate broker or a salaried employee for the owner of an apartment community to manage property for property owners, which adds thousands of dollars a year just to stay licensed: state required license fees, continuing education, liability and errors and omissions insurance, association dues, listing memberships, public-access office, and the list goes on.

Additionally, landlords expect much more from property managers than in past years. Landlords tend to expect stellar performance on:

  • listing
  • screening
  • leasing
  • inspections
  • maintenance
  • lease enforcement
  • communication
  • liability mitigation
  • tenant management
  • market trends
  • technology
  • move-in / move-out process
  • handling/disposing of tenant property
  • resolving disputes
  • vendor relationship and management, etc.

The Cost of Quality Property Management: Weighing Fees and Services

As the standards and expectations rise, so do the burdens imposed on property management companies. Therefore, the cost of doing business requires and demands that the property manager charge more and various fees just to stay in business–never mind making healthy profit. 

If a landlord finds a property manager that only charges a low commission on rent with no other fees, the landlord may need to think twice about hiring that company. There are some property management companies (which tend to be either very large or very small) that charge a low, flat commission or fee to manage landlords’ properties, so the question is, are they managing the property properly. Landlords won’t necessarily know going into it whether they properly manage properties or not, but they are lured by low fees and are tempted to hire those companies.

The old saying is true: “you get what you pay for”, not to say that all property managers that charge “high” will do an excellent job, but if the landlord is paying very little for property management services, he may end up getting very little in return. 

In conclusion, the true value of a property management company lies not just in the percentage of rent they charge but in the comprehensive services they provide and the quality of their management. While it may be tempting to opt for a company with lower fees, landlords must carefully consider the potential hidden costs and the level of service they will receive. Effective property management requires a significant investment in time, resources, and expertise to ensure that properties are well-maintained, tenants are satisfied, and legal obligations are met. By understanding the full scope of fees and services offered, landlords can make informed decisions and select a property management company that will protect their investment and provide peace of mind. Remember, in property management, as in many things, you often get what you pay for.


Property Management Law Solutions, LLC is a Florida law firm that specializes in landlord-tenant law and is a landlord-only law firm. We provide statewide services including evictions, consultation plans, education and training, membership plans, lease agreement plans and more. If you are a landlord or property manager, contact us today or subscribe to one of our online membership plans.