The importance of Return On Investment (ROI) when asking how much a Property Manager charges.
Property Management Cost and ROI
How much do property managers charge to manage residential rental property? This is a great question, and you may find various ways property managers in the St Louis area charge for management services. Property management fees can vary based on several factors, including the type of property, its location, and the services provided by the management company. Some of the typical fees are a monthly property management fee, leasing fee, repair & maintenance fees, and others like setup and onboarding.
Monthly Management Fee
On average, property management fees in the St Louis area can vary from 8% to 12% of the monthly rent. In addition some property management firms may charge a percentage of the first months rent to cover leasing and advertising fees. It is important to look at your contract closely to ensure that there are no hidden fees and everything is lined out.
Leasing Fee
Property management companies often charge a leasing fee when they find new tenants for a rental property. This fee typically ranges from 50% to 100% of one month’s rent. It covers the costs associated with marketing the property, screening potential tenants, and preparing lease agreements. Each property management company will have its own team and processes (including tenant screening) which can dramatically affect the outcome of tenant placement.
Maintenance and Repair Fees
Some property management companies charge additional fees for coordinating maintenance and repairs on behalf of the property owner. These fees can vary depending on the extent of the work required and whether the management company has in-house maintenance staff or contracts with external vendors.
Maybe a More Important Question
Another (and maybe more important) question to ask is “What is my ROI if I use XYZ property management company?”
A lot of the answer to this question depends on the type of rental property you have and what you want to achieve with your rental property. Are you looking strictly for cash flow, or are you more concerned with asset protection and appreciation?
Maximize Cash Flow
Cash flow refers to the net cash a property generates after accounting for all expenses, including mortgage payments, property taxes, insurance, maintenance, and other operational costs. For a cash flow-focused investor, the goal is to have a positive cash flow each month—essentially making money consistently from rental income. This approach can potentialy lead to cutting corners on upgrades and repairs that may be necessary for tenant retention and asset protection. Also, with recent trends of increased home prices coupled with higher interest rates, this strategy has become more difficult for new investment properties as outlined in a recent BiggerPockets article.
Positioning for Appreciation
Appreciation refers to the increase in the property’s value over time. With this strategy, the investor is more focused on asset protection and long-term appreciation. The goal is to purchase a property in a market that is likely to appreciate over time thereby providing a substantial return on investment. It is also imperative to make appropriate repairs and upgrades over the life of that investment. It is recommended that property owners keep from 1 to 3 months rent in reserves for maintenance costs. Often times when new tenants move into a property, something is likely to go wrong. This is not the time to panic, rather, this is the time to fix issues for a positive tenancy.
Proper Alignment with your Property Management Company
You can achieve both positive cashflow and asset appreciation depending on where your property is located and the approach you take to maintaining and managing your asset. Although we know cash flow is vitally important, we advise against maximizing immediate cashflow at the expense of asset protection and long-term appreciation. At Keyrenter St Louis West, our goal is to align with property owners who desire an appreciating asset and have the wherewithal to make proper investments in upgrades, repairs and maintenance to attract and keep quality tenants who will in turn take better care of their investment with less turnover. With this approach, you can have an appreciating asset and improving cashflow.
So, How Much do Property Managers Charge?
The real answer at the end of the day is it depends. You want to make sure you are working with a reputable property management company with up front pricing and a knowledge of the industry. You may find property management companies that charge flat fees, but don’t necessarily advertise or walk through your property. You may find property management companies that say they charge 6%, but when your monthly statement comes you have multiple other ancillary charges.
Ask yourself, do I want the least expensive alternative? Realize that if a company is charging you bare-bones fees, they might not have the resources to provide the quality of service you desire. Will they be able to pay for and keep the reliably quality contractors needed? Will they be able to keep the appropriate team in place to properly lease your property with quality tenants? Will they have the technology, robust systems and apps such as AppFolio and portals for proper communication and seamless management?
Choosing the Right Property Management Company
When selecting a property management company, it’s essential to consider factors beyond just the fees. Look for a company with a good reputation, experience managing properties similar to yours, and a track record of providing excellent service to property owners and tenants alike.
Don’t hesitate to ask for references or testimonials from other property owners who have worked with the management company. A reliable property management company should be transparent about their fees and willing to answer any questions you may have. Keyrenter prides itself on transparent pricing and the most professional service available.
In conclusion, understanding property management fees in the St Louis area is essential for property owners looking to enlist the services of a property management company. By familiarizing yourself with the typical fees charged and considering factors such as property type, location, and level of service, you can make informed decisions and find a management company that meets your needs and budget. Remember to carefully review contracts and fee structures before signing on the dotted line.
From Marketing, to Leasing, to renting, walkthroughs and all the rest, you can count on Keyrenter St Louis West to be your partner in management to maximize your ROI. Contact us today for a free rental analysis, or to discuss your property management needs.