The average cost of property management is between 7% and 10% of the monthly rent, according to Kevin Ortner, chief executive officer of Renters Warehouse — a company that manages around 23,000 properties throughout the U.S. However, the total rental property management cost you’ll incur may be higher if there are any additional fees in the contract for things like evicting a tenant or contracting out repairs. 

How property management costs are billed

Costs can be percentage-based, billed at a flat fee or billed per project.

• Percentage-based: a consistent percentage of the monthly rent
• Flat fee: a consistent monthly rate regardless of services
• Per project: a varying cost depending on the services performed during that billing period

Ortner’s company, Renters Warehouse, uses a flat-fee model. Here are the property management fees they charge in their Minneapolis, MN, market for a 12-month lease of a single-family unit (fees are lower for multi-unit management):

While time is the main reason why investors decide to pay a rental management fee, according to Ortner, you should make sure to ask the property management company what fees to expect and how they’re billed before you hire a property manager.

Property management fee breakdown

Rental property management fees can vary quite heavily from one property management company to the next. Here is a breakdown of property management fees you should expect to pay:

Setup fee. This typically runs up to $300 and covers the time involved with setting up a new account.

New tenant fee. For the time, effort and cost involved with signing a new tenant, you may be charged anywhere from 25% to 100% of the first month’s rent.

Advertising fee. In addition to a new tenant fee, you may be charged around $100 to $200 for advertising costs.

Lease renewal fee. If a tenant renews their lease, you may incur a cost up to $200. But, some property management companies charge much less or nothing at all.

Vacancy fee. Most companies don’t charge for vacancies — it’s their job to find a tenant — but some will charge around $50 a month for a vacant property.

Reserve fund fee. For a single-family home, this may be around $200 to $500. It’s used to pay day-to-day expenses like bills and maintenance services.

Maintenance fee. These will vary based on the scope of the project. Ask if all maintenance tasks are run through you first, or if only jobs over a certain amount require your approval.

Eviction fee. You may be charged an hourly rate around $25 to $50 an hour or a flat fee. Property managers will typically charge for serving the eviction notice, dealing with attorneys, appearing in court and other services that take up their time.

Unpaid property management fee. Any past-due invoices for the monthly property management cost may incur a small fee each day — typically around 1.5% of the invoice.

Late service payment fee. Any property management services that aren’t paid for by the due date may incur a fee ranging from 25% to 50%.

Bill payment fee. A property management company may handle your mortgage, HOA, insurance or other regular home expense for a small fee.

Returned check fee. A bounced check from either you or the tenant may result in a charge around $35.

In some cases, the actual rental property management cost may be much higher than the standard monthly cost you’re initially quoted. Ortner says, “It’s important to know what’s included for each fee and to ask, ‘What are they going to do for me for that fee?’ Because it might be worth paying for it if there’s some reasoning behind it.”

Choosing a property management company

Outsourcing property management gives investors a sense of freedom while “getting time back,” according to Ortner. “And being able to spend that time doing the things you want with the people you want to do them with.” Before you choose a property manager, here is what you should know:

A lower cost isn’t always best. A lower upfront cost may reflect poor work quality or more back-end fees or expenses.

All fees can be negotiated. Before making your decision, go through the property management company’s fees and see if there’s room to negotiate certain items.

You can choose to manage some of the responsibilities yourself or hire a property manager to handle all of the responsibilities. According to Ortner, the level of assistance an investor pays for comes down to how involved they want to be. “It’s more of a communication cadence — what kind of approvals are they going to see, or are they just going to get a statement at the end of the month that shows what happened on their property?” If you do decide to handle some or all of the landlord responsibilities, Zillow Rental Manager provides online property management tools to easily list your rental, screen applicants, manage tenants and collect rent — all in one place.

For more articles, tips and trends about property management, property maintenance and being a landlord, visit our Rental Resource Center.