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The Hidden Costs of Property Management: What Every Investor Should Know

Oct 18

3 min read

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Property Management Cost

Investment in rental properties may look very profitable, but it is very important to understand the real costs of managing a property. While most people always point to management fees as one of the most obvious costs, hidden fees often push down your bottom line. This blog would explore lesser-known fees and expenses, meaning you'd better understand how to travel that landscape with property management.


Table of Contents

Introduction

Understanding Management Fees

The Long-Term Costs of Poor Management

Mitigating Hidden Costs

Conclusion: Choose Transparency with Next Brick


Effective Property Management

Understanding Management Fees

Property management companies typically charge a core management fee, which is usually a percentage of the monthly rent collected. In Portland and Vancouver, this fee typically ranges from 8% to 12% of the monthly rent. While this fee covers basic services like rent collection and tenant management, it’s crucial to read the fine print, as this is just the tip of the iceberg when it comes to property management costs.


Common Hidden Costs


  1. Leasing Fees:

    • What They Are:  Leasing fees include marketing a rental and screening prospects. In most jurisdictions, this fee is equal to a monthly rental.


    • Impact: If your property rents for $1,500, you could be looking at a $1,500 leasing fee with every tenant placement. In high-turnover areas, these costs can add up quickly.


  2. Renewal Fees


    • What They Are: They include renewal charges. These are charges made every time an existing tenant renews his or her lease. This would usually involve paperwork or other forms of administrative work, which could include the negotiation of a new lease and inspecting the property.


    • Impact: In Portland and Vancouver, renewal fees can average around $250, which might surprise landlords who assume renewals are free.


  3. Maintenance Markups


    • What They Are: Most maintenance and repair bills charged by property management companies carry a markup of anywhere from 10% to 30%, which can inflate your costs through the roof.


    • Impact: For example, if a fix cost $200, then adding a 20% markup will add $40 to your ticket, which adds up over time and sucks into your profits.



  4. Administrative and Inspection Fees


    • What They Are: Property management firms may charge various administrative fees, including property inspections, document processing, and payment processing costs.


    • Impact: Although these fees may seem small individually, they can add up to hundreds of dollars annually if not properly accounted for in your budget.


  5. Eviction and Legal Fees


    • What They Are: If tenant eviction proves a regrettable necessity, property managers can charge fees for the eviction process, including court costs and attorneys.


    • Impact:  In Portland, eviction fees can reach up to $200, and there may also be service charges for the receiving of notices or appearance in court.


The Long-Term Costs of Poor Management


While hidden fees can cause a few immediate losses to your profitability, the long-term costs of poor property management tend to be even worse. Poor property management can result in expedited wear and tear on your property, higher vacancy rates, and sometimes some legal issues due to property code violations. When added up over time, they tend to cost you money in repairs and massively contribute to reducing the value of your property.


Mitigating Hidden Costs

To protect your investment and minimize hidden costs, consider these strategies:


  1. Thoroughly Vet Property Management Companies:

    • Take the time to research and review potential property management firms. Look for companies with positive reviews and transparent pricing structures.


  2. Scrutinize Contracts:

    • TReview management contracts line-by-line. Ensure all fees are clearly defined and ask for clarification on any vague language.


  3. Negotiate Terms:

    • Don’t hesitate to negotiate contract terms with property management companies. Ask for an itemized breakdown of all potential fees to avoid surprises.


  4. Regular Monitoring and Reviews:

    • After signing a management contract, continue to monitor the services provided. Schedule regular reviews to discuss any unusual fees and address issues promptly.


Conclusion: Choose Transparency with Next Brick


Property management requires you to be ultra careful about all the costs that are unknown without uncovering hidden dollars, which altogether can nullify all profit you would otherwise observe. At Next Brick, transparency and clarity drive our property management services. This company understands the small nuances of the Portland property management and Vancouver markets, and therefore you will be aware of every cost associated with your investment.


For maximum rental income while minimizing any cost surprises, you can contact Next Brick today. Our dedicated team is here to empower you with a clear and comprehensive understanding of the costs involved in managing your properties, enabling you to make the appropriate decisions that will benefit your investment.



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