These 7 hidden property manager fees are costing landlords millions
Belong breaks down 7 property manager fees that get hidden in the fine print and are costing landlords millions.
Comparison shopping for property management fees can be a minefield. You may think you're getting a great deal with a low management fee, only to pay more as the add-ons mount up. This is because traditional property management companies often hide their fees or charge for items that feel essential.
Excessive fees in rental housing have become such a problem that the Biden-Harris administration is taking on the issue to lower costs impacting rental housing. From 2024, landlords and property managers who try to slug residents for exorbitant application fees, late fees, admin fees, or costs for services that aren't provided, could find themselves in hot water if their local jurisdiction outlaws it. As a homeowner, you should be cautious of fees that could be unlawful or are costing your residents more than they can afford.
The best way to protect yourself (and your residents) is to rent your home with full transparency. Either as a self-managing landlord or by partnering with a modern alternative to property management.
If you're ready to scrutinize what you're really paying for, Belong outlines 7 common property management fees that get hidden in the fine print.
- Cheap property management fees are often accompanied by a long list of extra charges
- Lease renewal fees penalize homeowners for having reliable long-term tenants
- Some eviction protection fees cost homeowners more but don't cover much more than legal filing costs
- The White House is calling for more transparency in rental housing costs — something Belong already offers all homeowners and residents
How much does property management really cost?
Property management fee structures are usually a percentage of the monthly rent, between 4% and 15%. But low percentage costs or even flat-rate fees often come with a long list of service exclusions. Homeowners should be aware of common extras that disguise the true cost of property management.
1. Account set-up fees
Found a new property management company? Welcome, here's your first invoice. Some property managers charge a one-time fee to cover your initial paperwork. This fee is also a disincentive to take your business elsewhere because you've already handed over cash before you've begun. It's unlikely you'll want to do the same again with someone else.
2. Placement fees and application fees
Homeowners who outsource property management should expect to pay a placement fee. This isn't a hidden cost, but it's a cost you should know upfront because it will vary, and as it can be up to 100% of the first month's rent.
In March 2023, the National Consumer Law Center found that 89% of renters surveyed were being charged application fees — anywhere from $25 to $350 — to cover the cost of processing and screening to apply for a property. This makes sense if you're a self-managing landlord. But if your property management company is charging both you and your residents to screen them, this could be double-dipping and considered one of the "junk fees" that the White House is seeking to abolish.
3. Advertising and online marketing fees
Some property management companies charge fees for advertising and marketing your property. Or they include the cost of listing your home online, but charge for photography and video — even though your listing won't get much attention without these basic essentials. Don't assume these costs are in your placement fees without checking the fine print first.
4. Lease renewal fees
Lease renewal can be similar in price to placement fees and are one of the more egregious types of hidden fees. It should be a goal to keep a great, reliable resident in place — not something that you're penalized for financially.
5. Eviction fees or 'protection' add-ons
Managing an eviction is a complicated and stressful process. It's one of the big things that homeowners want to outsource. But evictions are rarely covered in standard property management fees.
'Eviction protection' upgrades can be misleading. Not only does eviction protection increase your costs, most still charge for overseeing the eviction process, especially if attending court on your behalf. When we ranked the top-rated property management companies in California, we found that many eviction protection packages only cover filing fees. Or they impose strict limitations that can leave you out of pocket.
6. Vacancy fees
Vacancy fees penalize homeowners for having an empty home. Some property managers ask for one month's rent to compensate for their need to find a tenant for your property. Vacancy fees can also be a monthly cost charged to the homeowner for every month the unit does not have a tenant. In this case, that fee may start at $50 and can exceed $100.
7. Early termination fee
Does your property management contract have a length? You could face an early termination fee if you want to leave. Some contracts have a notice period, making it harder to take your business elsewhere. Before signing a contract, find out what happens if you're unhappy with your services.