Riverside, California, is home to many property management companies. There are over 20 of us out there who provide full-service property management and are more than happy to charge you top-of-the-line.
In this blog post, I will let you see my extensive research on every property management company in Riverside, breaking down their fees and what they are for from a property management perspective.
Breaking Down Property Management Fees:
The fees associated with property management can be far and wide, but here are the five most common fees, along with a bonus section that gives you some insight into other parts of fees that deal with optional programs.
Management Fee:
First, the most crucial fee in property management is the Management fee. This fee is for all common property management services, such as tenant communication, rent collection, our online portals, and prompt communication.
Companies in the Riverside area charge around 7-10% for management fees, an average of 8.5%, and a $150 minimum. PMI Riverside is currently at a 7% management fee.
Leasing Fee:
Leasing fees are the 2nd most essential in property management, and this fee is for all of the work done during the leasing process. So this includes tenant screening, marketing your property, showing the property, and coordinating any repairs needed before the property can be rent-ready.
The leasing fee is either a percentage of the first month's rent or a flat fee. The rate can vary depending on the company, but you might see anywhere between 35%-50%. Some packages have a 100% leasing fee, but it is uncommon. For flat fees, you can expect about $500-$1000. PMI Riverside currently charges a $500 leasing fee.
Set Up Fee:
Most property management companies in Riverside and the surrounding areas will charge what is known as a setup fee; this fee is all of the work that goes into writing a Property Management Agreement, placing all of your documents into the portal, and getting you into the portal. This takes over an hour's time, if not more.
Companies usually charge about $150-$250 for a property setup fee. PMI Riverside does not currently charge for that service, but that may change as we grow and increasingly add employees and owners. It will likely be around $100 or $150 if it does, but I don't foresee that being in our fees.
Renewal Fee:
A Lease Renewal is another fee that most companies will charge. So, when the lease agreement expires, a property manager will contact both owner and tenant to let them know and figure out what to do from there. If both parties agree to renew the contract, the management company will create a new lease agreement stating that.
Depending on the company, this fee can be anywhere from $150-$250. PMI Riverside charges a $200 lease renewal fee.
Maintenance Coordination:
Maintenance coordination can be extremely tedious, especially when dealing with tenants who dislike communication or busy vendors. This is why the coordination of maintenance is commonly seen as a fee outside of the management fee.
The industry standard currently has a 10% maintenance coordination fee. This means that the property management company will receive 10% of the maintenance cost; for example, if a toilet goes out and you have to replace it, you will be paying for the maintenance and coordination.
PMI Riverside does not currently charge for maintenance coordination, nor do we realistically plan on doing so anytime soon; we stand by the traditional viewpoint that maintenance is IN the scope of the management fee services, and until we build our own maintenance company, it will stay that way.
Ancillary Fees:
The next one is the final fees you may receive, known as ancillary fees in the business. This is basically all of the management company's programs, for example, an owner's benefit package or an eviction guarantee. These fees may be mandatory or optional, depending on the company.
Usually, those types of fees will not run you more than $50 a month per fee; however, given the variance of this subject, that price may change. PMI Riverside currently does not offer any Ancillary Fees. Still, we are looking into what the Owner's Benefits Package could do for our owners. I am excited to see if it could help some of our clients. If we were to have an owner's benefit package, it would be optional and at a price less than the industry standard.
If you would like to look at our fees, please click here
What Factors Influence Property Management Costs?:
Several factors influence property management costs, whether it be a NARPM conference that someone attends (National Association of Residential Property Managers) or just the growing influence of things like inflation and hiring costs.
When a management company grows, it will likely introduce programs that give the owner a choice of specific plans with different fees. Their main goal is to get you to purchase the most significant cost for the program. That way, they maintain their profitability and bottom line.
Comparing Pricing Models:
There are currently three pricing models for management fees in the property management industry: a flat fee, a percentage fee, and a new form of fee structure called "hybrid pricing."
Flat Fee:
A flat fee is a dollar amount charged to the owner, for example, $200 a month, which is recommended for anyone looking to have optimized profitability. This is a benefit for the higher income properties but a massive con to those under $2,000, which is why many companies try to stray away from this.
Percentage Fee:
A percentage fee is a percentage of the monthly rent charged to the owner; for example, our fee is 7% per month. This is an attempt to balance the fee for the owners of both high and low-income properties.
Hybrid Pricing:
This fee is the one you guys will most likely be confused about because it differs significantly from the others. It is a fee that is BOTH a percentage and a flat fee. For example, this would look like a 5% fee + a $50 flat fee. The goal of this fee is to ensure that every owner is given a fair price while also increasing the management company's profitability. My personal and professional opinion on this is that this fee is more confusing to explain to an owner and seemingly more work for us on the backend.
Transparency and Accountability:
Ask questions! Even if you are what we refer to as an "accidental landlord," which means that you did not intentionally purchase a property to rent it out, you should always look out for yourself and understand that there is a NEED for transparency from the management company. You have been given a fantastic opportunity to provide yourself with financial freedom, meaning you need to get as much profit as possible to become an "intentional investor."
Finding the Right Balance:
While you want to find a management company for a low price, you need to understand that there is a balance to things. Remember, you get what you pay for, so you must find a balanced price that gives you exceptional and reasonable value. I wouldn't personally recommend someone who charges you 4% or someone who charges 12%.
Balance is key!
Things to Look Out For:
Look out for the companies that mandate ancillary services and fees. California is an OPT-IN state, meaning that you must agree to all services the company provides, and the same goes for your tenants. From my understanding, property management companies can not legally mandate ancillary services, such as an eviction guarantee for an extra monthly fee. All they can do is give you guys the option to purchase the program, and I recommend looking into the flier and "between the lines."
Final Thoughts:
My goal with this blog post and all future content is to create a place for the Riverside homeowner to understand both sides of property management. My goal is to educate everyone in this community about the industry secrets and the actual work that goes into property management.
If you're a Riverside property owner looking into property management and would like to talk with me, I have opened up my calendar for the next few weeks. I am offering a FREE consultation call to anyone curious about renting their property in the Riverside area.
