Being well-informed about your rental property and your property management company’s fees will be highly beneficial to you as a Tampa rental property owner.
If you are considering hiring a property manager, you’ll want to familiarize yourself with all of the fees a property manager might charge for managing your investment property. Property management companies nationwide charge fees that vary depending on the type of management services they provide.
As professional Tampa property managers, we understand that property management fees can get confusing. One fee that tends to get misconstrued in the property management industry is a lease renewal fee. In this post, we’ll share our knowledge about lease renewal fees and why a property management company might charge such a fee.
Common Property Management Fees
If you’ve been researching property management companies to find the best fit for you, you’ve likely come across many of the same property management terms or property management fees. Although each property management company varies, most property managers charge similar fees. The most common property management fees are:
- Property Management Leasing Fee
If you’re looking for a tenant to rent your vacant home, you will need your property management company to list your property for rent. Before moving in, prospective tenants must be screened to ensure they are responsible and quality tenants. Tenant screening may include a variety of processes such as checking credit history, debt to income ratio, nationwide eviction search, background check, income and employment verification, and previous two years’ rental verification.
Most property management companies typically charge this as a one-time fee, costing 50-75% of one month’s rent. Some companies may even charge one full month’s rent.
When interviewing potential property managers, asking how much they charge for finding and placing quality tenants is essential. If you need clarification about the company’s tenant leasing fee, be sure to ask questions; some may have a flat fee, and others may charge a percentage of the rental rate.
What does a Tampa property management company usually include in its leasing fee?
- Listing the property for rent
- Marketing the unit with photos and description
- Showing the vacant property
- Screening applications
- Lease signing
- Move-in inspection
- Monthly Property Management Fee
The most common property management fee is the monthly management fee. A monthly management fee will be a monthly recurring fee that property managers charge for handling all aspects of your investment property.
Most Tampa property management companies typically charge between 8-12% of the monthly rental income. Monthly property management fees may vary depending on the property’s type, location, and size.
Since each property management company is different, their services may vary, which could also impact the monthly property management fee. Please speak with your prospective property manager to discuss their specific services and any additional costs that may come with certain services.
- Lease Renewal Fee
Another common property management fee is the lease renewal fee. The property manager charges this fee for handling all the administrative tasks associated with securing a lease agreement renewal from your tenant for an additional year.
How much do Property Managers Charge for Lease Renewals?
Depending on the property management company, a lease renewal fee will be charged as a flat or a percentage-based fee.
- Flat Fee Lease Renewal: A flat fee is a fixed price for a lease renewal, regardless of the rental amount or other factors. This flat fee typically ranges from $250-$500.
- Percentage-Based Renewal Fee: Alternatively, some Tampa property managers may charge a percentage of the rental amount for lease renewals. This fee typically ranges from 25% to 75% of the rental amount. For example, if the monthly rental amount is $1,500 and the property manager charges a 50% lease renewal fee, the renewal fee for that particular property will be $750.
Which Lease Renewal Fee is Best for Your Rental Investment Property?
As a full-service property management company, we strongly recommend selecting a property management company that is driven by performance incentives and results. A lease renewal fee serves as motivation to retain high-quality tenants. This will ensure that your property manager prioritizes finding tenants they feel are best suited and most responsible to rent your property, from the beginning.
In addition, it is important to be cautious of companies that charge a low flat renewal fee. This often indicates that because their renewal fee is low, other services may be more expensive. Be sure to evaluate all of the company’s fees before choosing which property manager to work with.
Why Do Property Managers Charge This Fee?
It’s common for property owners to misunderstand the importance of lease renewal fees charged by a property manager. It is a common misconception that lease renewal comes with a simple agreement between the tenants and property managers to keep everything the same. However, our years of property management experience can tell you this is not the case.
When a tenant decides to renew a lease, a property manager must complete multiple processes, including:
- Conducting An Updated Rental Analysis:
As you may know, the real estate market in Tampa is constantly changing. The value of your property has the potential to change in just one year. To maximize your profits, performing an updated rental analysis is crucial.
- Offering a New Renewal Rate:
After completing the rental analysis, your property management company will determine whether the rental rate will change or stay the same. Before continuing the renewal process, your tenant must agree to this new rental rate.
- Preparing a New Lease Agreement
Although it is the same tenant and property, preparing a new lease agreement is still required. This new lease agreement will include the updated rental rate and any other regulations that may have changed. When a lease agreement expires, it is required to create a new one to ensure that each party understands its responsibilities.
- Following Up With Tenants
Following up with tenants is an important measure to take when a lease renewal is initiated. A lease cannot begin before the tenant signs the new lease agreement.
Some companies, such as our full-service Tampa property management company, will inspect the property before renewing the lease agreement. This is an extra precaution that property managers may take to ensure the current tenants take care of the property before agreeing to let them live there for an additional year.
Tampa Property Manager Summary
Lease renewal fees charged by property managers can be an encouraging incentive to maintain a well-functioning rental property with minimal vacancies. However, it’s important to remember that fees vary depending on the property management company. It is crucial to understand the specific fees that the property management company charges before hiring them.
Contact us, The Listing Real Estate Management, to learn more about our Tampa property management services. At The Listing Real Estate Management, we’re your boutique property management company, here as a resource to you and your rental property.