Unveiling Hidden Costs: What You Need to Ask About Property Management Contracts

Asking the Right Questions

During your initial call and contract review, make sure you talk about more than just the obvious numbers, like the management fee. You should have a clear understanding of the fee structure so that you can project your costs. Here are some optional fees that property managers may charge:

• Maintenance coordination fees
• Lease renewal fees
• Technology fees
• Vacancy fees
• Marketing fees
• General admin fees
• Project management fees
• Mark-ups on maintenance work
• Inspection fees
• Legal fees
• Contract termination fee

Ask upfront if there are any hidden fees or fees not listed explicitly in the management contract. If you notice a company dodging these questions, unable to provide complete answers, or giving responses that don't feel right to you, don't be afraid to ask again. A reliable property management company will happily address your questions and concerns directly.

Justified vs Unjustified Fees

It's helpful to understand the difference between essential fees and those that may be superfluous. A management fee and tenant placement fee are standard charges that nearly every property manager charges. Early contract termination fees, lease renewal fees, and project management fees are the norm, as well. However, these should all be clearly outlined at the outset.

These essential fees can vary between companies. There is likely a standard management fee in your market. Interviewing several property managers will give you a sense of the norm. Some companies have a lower base fee, which you should not take at face value. This can mean there’s a higher number of secondary or hidden fees that make a lower management fee possible. Conversely, companies that charge higher baseline fees should be able to show their value. At Nest, those value adds include dedicated leasing agents, in-house general counsel, in-house licensed contractors, and no maintenance mark-ups. Our management fee allows us to employ local talent and staff at a high employee-to-property ratio so we can be detailed in our care of properties.

Fees above and beyond the essential fees should be simple for a property manager to explain. If any of them feel unnecessary, be sure to get a satisfactory justification, or, you can try asking for their removal. 

Conclusion

In conclusion, homeowners should choose their property management partner carefully and be clear about the costs associated with the management services. Understanding the fee structure, choosing an experienced property manager, and setting clear expectations, and transparency is crucial to avoid hidden costs. Of course, there are always unanticipated costs associated with owning a property, but management fees should not fall into that category!

For more happy home content, we suggest checking out our blog on Self Managing vs Property Management.