How to Calculate Property Management Fees

If you are a real estate property owner, you may or may not hire a professional property manager. Of course, if you manage your own properties, you can save the management fees that a property manager would charge. Those fees typically range from 8-12%. Even if you manage your own, it is best practice to calculate those fees into your financials from the beginning.

How To Calculate Property Manager Fees

So how do property managers calculate their fees? We know the % range but for what income accounts does that apply to? All accounts? Are there any additional fees? What about income accounts that are not subject to any fees? Can there be a minimum fee? What about a mixture of percent and a split?

As you can see there are many ways to calculate fees for managing rental properties. Without an electronic way to track these, calculating fees on paper would be nothing less than a nightmare.

Good Property Management Software

A good property management software will do all these calculations automatically with no input from the user. For example, suppose you want to do the following:

1)      Rent Income – Subject to 10% management fee

2)      Application Fee – not subject to any fee but all goes to the property manager

3)      Pet Fee–Not subject to any fee and all goes to the property owner

4)      Association Fee – Split between Manager and Owner (50/50)

5)      Other Income – Split between Manager and Owner (30/70)

6)      Add additional management fees

7)      Have a minimum management fee

8)      Have a flat management fee as opposed to a percentage

Property Management Software must be able to handle all these types of fee breakdowns. In addition to handling these types of fees, it must produce a management fee report on an automatic basis to all owners.

Here is a sample of a property management report

What’s the cost of software for managing properties?

What would you pay for just this feature alone? This type of functionality is worth it’s weight in gold. Think of the amount of time it would take to calculate these for 1 owner, let alone 100 owners. Suppose it takes 1 hour to calculate fees per owner each month. Suppose you manage properties for 50 owners. That equates to 50 hours a month of your time just generating a management fee report (which produces an invoice to the owner). If you average paying $15 an hour for your staff, that is $750 that you (as the property manager) pay in payroll just for this task. So would you pay $30 a month to automate this?That’s not counting all the other benefits going electronic provides.

With the right property management software, you can set the fee splits and %’s for each income account then set the management fee report to automatically email every month (or other interval) to the owners. The property manager should then not ever have to manually send or calculate another report for property owners.

Property Management Software doesn’t cost you anything when you consider the time it saves

About PropertyZar

PropertyZar is a real estate technology company specifically in the web-based property management software for owners and professional property managers. Learn more www.PropertyZar.com

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