A property manager’s commission model is key to attracting investors and driving revenue. There are pros and cons to charging either a monthly percentage-based fee or flat fee. How do you figure out which is best for your business?
Property management percentage fee
Most percentage-based property management companies charge between 8 and 12% of the monthly rental income for a single-family home. For example, if you charge 10% commission, you would earn $140 from a rental property that goes for $1,400 per month.
Next is deciding whether to base your management fee on ‘rent due’ or ‘rent collected.’ According to real estate experts from finance website The Balance, ‘rent due’ fees come out of the set monthly rent for each unit, which means a property manager receives the same amount every month even if the unit is vacant or the tenant doesn’t pay in full. ‘Rent collected’ fees are determined by the actual amount the tenant paid.
While a ‘rent collected’ model might be more attractive for your clients, it comes with more risk for you – although that can be balanced out with good tenant screening.
Property management flat fee
Flat fees aren’t pegged to rental rates. Instead, property management companies will charge the same amount every month for their services, with base prices usually ranging anywhere from high double to triple digits per unit.
These fees are good because they’re straightforward and consistent, which frees you from pricing-related queries every month. They also make it easy for you as the property manager to figure out your monthly income. On the other hand, they won’t track a growing rental market, meaning that you might have to pass on price rises to your clients more often to keep up with inflation.
Additional property management fees
Commission is only the start of your property management company’s pricing model. Many businesses will increase their profitability by implementing and charging for additional value-added services, like maintenance, faster settlement, tenant screening, and deposit management.
Similarly, setup fees, tenant placement fees, or lease renewal fees can be billed separately from the standard monthly management fee to bolster income even if rental rates decline.
Get the commission you deserve
Whether you go with a percentage-based commission or a fixed fee, PayProp can adapt to your pricing structure.
Our platform allows you to set and forget (or amend, as needed) unique pricing and settlement rules at the beginning of each tenancy, and automatically allocates your portion of the rent upfront for a hassle-free payday.
With an automated rental payment and reconciliation system like PayProp handling your commission and other payments’ calculation for you, you can focus on delivering high-value service to your customers while minimizing overhead costs. Fees can be added or adjusted at any time to reflect the growth of your business and help you confidently charge what you’re worth.