Are property management fees the same as HOA management fees? If not, what is the difference between the two? Understanding these two fee types is imperative for every homeowner.
In this article:
The Difference Between Property Management Fees and HOA Management Fees
Many people confuse property management and HOA management, but the two are starkly different. Property management is the daily supervision and management of a rental property — be it residential or commercial. HOA management, on the other hand, refers to the management of homeowners associations.
The tasks of property managers include but are not limited to the following:
- Advertising vacant rental units
- Conducting property showings
- Overseeing tenant applications
- Screening potential tenants
- Handling the lease agreement
- Ensuring compliance with lease terms
- Collecting and depositing rent
- Coordinating maintenance, cleaning, repairs
- Resolving tenant complaints
The tasks of HOA managers include but are not limited to the following:
- Ensuring the maintenance of common areas
- Coordinating with vendors
- Attending board meetings
- Collecting dues
- Helping with budget planning and execution
- Sending notices on behalf of the board
- Communicating with homeowners
- Ensuring compliance with the law and governing documents
- Advising the HOA board
That being said, the difference between property management fees and HOA management fees has to do with the service being paid for. Typical property management fees cover property management services, whereas HOA management fees cover HOA management services. Both types of services, though, can be performed by a company or an independent manager.
Factors That Affect Property Management Company Fees
Property management is not a one-size-fits-all type of service. When it comes to property management fee calculation, there are a number of factors that can increase or decrease the amount.
- Location. A luxury apartment located in a high-end neighborhood will naturally command a higher rental rate. As such, a property manager may adjust their fees accordingly.
- Size. It is harder to manage a large rental property, so the fee tends to be more expensive the bigger the place.
- Type. Some companies or managers charge a different rate depending on the type of property — single-family home, commercial property, condo unit, apartment, etc.
- Condition. Older properties usually require more maintenance and repairs, thus equating to a higher fee.
- Services. Companies and managers offer a wide variety of services. If you only need select services, you may end up paying a lower fee. The reverse is true if you need a more comprehensive extent of services.
All of these factors, except maybe the condition of the property, can also affect HOA management fees. Homeowners association management can come in the form of full-service management, remote management, or simple consulting services. Obviously, full-service management is more expensive than the other two.
Companies also tend to charge a lower price if you have more properties for them to manage. This is because of how certain administrative tasks scale, allowing companies to charge a discounted price for 10 properties or more.
What Is the Average Property Management Fee for Rental Properties?
How much you ultimately pay each month for property management services will also depend on the company’s fee structure. Some companies or managers charge an ongoing flat fee, while others take a portion of the monthly rent.
Percentage of Rent
This is the most widely used structure among property management companies. In exchange for their services, a company will charge you a certain percentage of the rent. Average property management fees structured this way sit between 8 and 12 percent of the gross rent.
For instance, if the monthly rent for one rental property is $10,000 and the rate is 6 percent, then according to the property management fee calculator, the company gets to keep $600.
Of course, there is a difference between charging a percentage of the rent collected and rent due. Rent collected is the actual amount the company collected from tenants, while rent due is the monthly rent that tenants should pay. Your contract should specify that the fee is for rent collected. Otherwise, you would need to pay your property manager even if tenants fail to pay their rent.
In contrast, there are some companies or managers that charge a flat rate. When you go with flat fee property management, you will need to pay a set amount every month. A single-family home may command $100 a month, though it will really depend on the extent of the services, the size of the property, and other factors.
Other Home or Condo Property Management Fees to Know
Apart from the actual management fee, companies and managers may also charge separate sums for extra services. Some will try to hide this breakdown from you and intentionally skirt the topic. Many homeowners only find out about these extra fees after they have signed the contract. Thus, it is essential to ask each candidate for their full property management price list.
Here are the other fees you should look out for:
Initial Setup Fees
Some companies will charge you an initial fee designed to cover the costs of setting up an account with them, inspecting the property, and notifying tenants of the change in management. You should expect to pay about $500 or less for the initial setup fee.
New Tenant Placement Fees
Tenant placement fees cover the costs of marketing your vacant property, screening tenants, constructing the lease agreement, and so on. As with the ongoing management fee, this can come in the form of a flat rate or a percentage of the rent — usually 50 to 100 percent.
If you hire a property management company to manage a vacant unit, they may charge you a vacancy fee. This can range from $50 per unit to as much as an entire month’s rent.
Some management companies have in-house workers who perform maintenance work. In that case, look out for a maintenance fee in your contract. This fee can cost you $20 to $45 per person, typically not including the cost of materials and supplies.
Evictions are common in the rental property realm. But, if you want the company or your manager to evict a tenant for you, it will cost you a few hundred dollars. That does not include any court expenses, too.
Early Termination Fees
Contracts have set lifespans. If you try to end your contract earlier than specified, the company may charge you an early termination fee. This can range from the cost of one month’s services to the cost of the services for the remainder of the contract. Some companies may even take legal action against you for breach of contract.
If you want to avoid such a situation, make sure to check your agreement thoroughly before signing it. See if you can negotiate your way out of an early termination fee. You should also consider shortening the length of your contract to one year. That way, you have the option of renewing it annually.
How Much Are HOA Management Fees?
If you plan on hiring an HOA management company, here are the fees you should keep in mind.
Similar to property management companies, an HOA management company may charge you an initiation fee to get the ball rolling. This can cost you a few thousand dollars up to a whopping $30,000. Of course, it really depends on the size of your association and the services you require.
Monthly Management Fees
Since managing associations usually means managing communities with numerous properties, monthly fees typically rely on a rate per unit. On average, an HOA management company will charge you $10 to $20 per unit per month. They may offer you a discounted price, though, if you meet a certain number of units.
Early Termination Fees
This works similarly to early termination fees in property management contracts. The key to avoiding having to pay this sum is to lock yourself into a shorter contract period. Instead of signing a management contract good for multiple years, start with one and renew from there.
Some companies don’t offer all-inclusive packages. This means they will charge a separate fee for certain services, such as a fixed amount for each time a manager attends a board meeting. There is also something called a transition fee, which covers the cost of transferring from one company to another.
Is Paying Property Management Fees Worth It?
Property management is certainly a difficult undertaking for many homeowners. As such, many choose to outsource the task to a professional. And, with professional services come professional fees. Property management fees may seem unaffordable to you now, but they can be worth it in the end.
As for HOA management, it can be an equally challenging endeavor. If your HOA board wants to seek expert help, start looking for an HOA management company in your area today. Use our comprehensive online directory for fast and accurate results!
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