What is Property Management?
Property management is the operation, oversight, and administration of residential or commercial rental properties on behalf of the owner. Property managers handle tenant relations, rent collection, maintenance coordination, lease enforcement, tenant screening, evictions, accounting, and legal compliance. They serve as the intermediary between the property owner and the tenants.
Property management can be self-managed (the owner handles everything) or outsourced to a professional property management company. The decision depends on portfolio size, owner expertise, geographic proximity to the properties, and the owner's desire for hands-off passive income versus active involvement.
Property management fees
- Monthly management fee: 8-12% of collected rent (single-family), 4-8% (multifamily)
- Leasing fee: 50-100% of one month's rent for finding and placing a new tenant
- Maintenance markup: 10-20% above contractor cost on maintenance work
- Lease renewal fee: $100-$300 per renewal (some companies waive this)
- Eviction fee: $200-$500 plus legal costs
When to hire a property manager
Consider professional management when you own more than 5-10 units and the time commitment is unsustainable, the properties are not near where you live, you value your time at more than the management cost, you lack expertise in tenant law and maintenance, or you want truly passive income.
Property management and deal analysis
Whether or not you plan to self-manage, always include management fees in your deal analysis. If the deal only works when self-managed, your returns depend on your continued personal involvement. Including the management fee (typically 10% of gross rent) ensures the deal is viable even if your circumstances change. For wholesalers marketing deals to out-of-state investors, management costs are essential information in your deal packages.