You Get What You Pay For: Lease Signing Fee vs Ten Percent Monthly

Most property managers charge you a percentage of the first month's rent (usually half to two-thirds) to place a tenant in your property and then ten percent a month thereafter to manage the property. My question to you is this: If you could find a property manager who would place tenants for you, but would only charge you the ten percent monthly fee – and no additional fee for finding you a tenant – would you jump on this opportunity to save a bunch of cash?

Surprisingly, I would not. I have had experience with many different property managers with many different fee structures, and I am afraid to say that the old adage is true: you get what you pay for.

Now, I am not saying that you shouldn't be wary of lots of fees. You should. However, the tenant placement fee, though it seems high, is usually a fee worth paying.

Here's how I look at it.

Follow up:

Your property manager doesn't start getting paid until they place a tenant. If all they see is 10% a month, then for a $1000 rental, their payday is $100. If they are getting 50% to occupy your vacancy, then their $500 paycheck is good compensation for the hustling involved in getting your vacancy filled quickly.

The $400 that you save can get quickly devoured in holding costs if it takes your less motivated property manager longer to fill your vacancy. Personally, I don't mind paying a little bit of money to get my vacancy filled faster by a motivated and well organized property manager.

A good property manager is going to have ample marketing out to find prospective tenants and should have your property listed on various online sites that are popular in your local market, including of course, sites like craigslist. They will probably take pictures so that they can have fliers available for prospective tenants. They are going to be available to show your property until someone takes it. They are then going to qualify your tenant, get a lease signed, have the new tenant fill out an initial property inspection form and collect certified funds from them before they are given the key to their new place.

To me, this sounds like a fair amount of work, so I really don't mind paying a tenant placement fee if I know that the job is going to get done.

Until my next post,

James