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The Hidden Fees of Property Management And What To Look For

The Hidden Fees of Property Management And What To Look For

Hiring a professional property manager for your Los Angeles can be one of the smartest decisions you make for your investment. However, while doing so, you also need to take a detailed look at the fee structure of the company you are considering working with, or you may end up facing some hefty costs at the end of the month.

It is essential to know which management fees are mandatory and which ones are avoidable. If you accidentally overlook some hidden costs of property management, you may have to bear losses that could stand in the way of the stable growth of your profits.

Here are the typical property management charges that non-professionals may not know and the things you should look for within those.

Property Management Fees In Los Angeles County

Property management fees is the amount of money that you pay to your property manager, typically on a monthly basis, in return for the services that they provide like leasing, screening tenants, or managing your real estate assets. Here is an overview of what standard Los Angeles property management fees includes and additional hidden costs.

  • Online Profile Setup Costs

Most companies charge a fee for the initial setup, which includes putting your profile and the company details on their system and setting up online profiles. While this is a crucial step, the costs are not more than $500. If a company is charging more than that, check what additional services they are providing to justify the cost. You don’t want to pay extra unnecessarily.

  • Monthly Management Charges

Companies in Los Angeles typically charge a monthly management fee for services like marketing, rent collection, emergency services, and maintenance. These can be either in the form of a flat fee, anything from $100, or a percentage fee, ordinarily between 8%-12% of the monthly rent. All-inclusive packages cost more. 

You might also have to pay certain charges at different stages of management, like leasing or evictions. This is a grey area. Companies that charge high monthly management fees might lead you to assume that they don’t charge much for other services, which may not be the case. Despite the monthly charges, there are pricing overheads you need to consider.

  • Leasing Fees

Leasing can be a long and tedious process as it includes advertising, tenant screening, scheduling showings, drafting legally compliant leases, placing tenants, and ensuring that they are retained, over and over.

Hence, property managers charge either a flat fee, which can be as high as $500, or the entire first month’s rent for tenant placement. Note that if they hire professional photographers or marketers to promote your rental without informing you, you may incur extra costs here.

  • Late Fees

Some companies charge separately for handling late rental payments. This also can be in the form of a flat fee, or nearly 5%-10% of the rent. If mentioned in the agreement, these companies can also hold the late payment fees. Study the rent collection process properly to avoid any additional charges.

  • Advertising Fees

Advertising is typically covered in the tenant placement charges, but some companies charge separate advertising fees. These can be anything from $30 onwards. Besides, if a company works in association with popular advertising agencies, they can charge you more for promoting your Los Angeles home.

  • Inspection Costs

All management companies do not include inspection costs within the monthly management fee. Some companies may charge separately for routine and quarterly inspections.

  • Maintenance 

Extra maintenance fees can include urgent tenant requests to fix issues like burst pipes, broken heaters, or leakages. These are usually regarding purchase of new equipment, or hiring maintenance specialists if the damage is severe. As a general rule of thumb, the company clears this with you before proceeding with the repairs.

Some other maintenance expenses to consider include:

a) Preventative Maintenance 

When you work with experts, they are going to tell you what steps to take for preventative maintenance, like replacing some parts of working appliances, deep cleaning the furniture and systems, and repainting walls and furniture, to keep your house in good condition. While it can save you great renovation costs, in the long run, it could seem like an avoidable cost for the time being. 

b) Labor Charges

Landlords often assume that the maintenance fee includes all the costs involved. Ordinarily, however, when labor is involved in any refurbishment or updating, you have to pay for labor charges that are separate from the contractor fees. Labor charges in Los Angeles are approximately $12-$38* per hour. If the company sends a professional repairs person, they may also charge a high flat fee. You need to talk to your property management company and check their list of maintenance service providers.
*As of March 2022. Source

c) Extra Materials

As an LA landlord, you need to document every single expense of your property. Even for a small repair, you are going to need to pay for the extra materials, like the nails, a new switch, or a doorknob. The bigger the fixes, the higher the costs of extra materials.

  • Reserve Repair Funds

Nearly all management companies collect a fund of a minimum of $200 from landlords to save it up for unexpected costs like an urgent installment of new roofs or replacing a refrigerator. The risk involved is that the property managers have access to these funds and might end up using those for any minor repairs without your approval. 

This creates a problem when the home needs urgent repairs. You might be under the impression that you have money saved in the reserve repair funds but will have to pay for the repairs out of your pocket.

  • Vacancy Costs for the Los Angeles Property 

Property managers have to keep an eye on an unoccupied rental very carefully. They protect vacant homes from early deterioration, thefts, vandalism, squatters, and other risks. Hence, even though there are no tenants to manage, they will charge a monthly management fee or a lesser management fee to look after an unoccupied rental.

  • Early Cancellation Penalty

Practically all management company contracts have an early termination clause. This means that if you break your agreement with the property management company before the contract ends, you are liable to pay cancellation charges.

Factors Affecting Property Management Fees In Los Angeles 

These are the factors that you should look for, as they directly affect the pricing of your property management.

  • Location

If your property is located in expensive neighborhoods like Paradise Cove Bluffs or Beverly Park, the management charges can be equally high. On the other hand, if it is located in a relatively affordable neighborhood like Loz Feliz or Encino, you can expect lower property management fees.

  • Type Of Los Angeles Property

Handling residential properties is very different from managing commercial units. The screening process is distinct, and the management involves a separate approach. While commercial property managers typically charge 4%-12% of the monthly rent, residential property owners can charge anything between 8% to 12%. The local market pricing trends suggest that the management costs are much higher for vacation rentals and other luxury properties than other standard residential homes. 

  • Size of the Property

The size of your house is a determining factor. The management tasks and the resulting charges are less for smaller properties like single-family homes than multi-family properties. For example, the property management costs for a four-bedroom single-family will most likely be lesser than a 12-unit multi-family apartment.

  • Condition Of Your Los Angeles Property

Fixer-upper properties and old properties require a lot of attention and maintenance. They may even take additional time to rent out. Hence, management fees can be higher for such properties as compared to relatively newer homes in good condition. 

  • Services Included In Your Package

The total cost comes down to what services you choose in your property management package. If you are an out-of-state investor, you might need your manager to take up more responsibilities and so the costs may increase. On the other hand, if you are an experienced landlord and dedicate more time to managing your home and tenants, you might not require all the management services.

It is essential to do conduct in-depth market research about property management pricing trends before making any decision. To protect your investment from unreasonably high management costs, choose a trusted property management company like Bell Properties.

Property ManagementWe have been managing Los Angeles properties since 2005 and our pricing structure is very straightforward. Our plans, like the Tenant Placement, the Full-Service Management plan, and the Premium Service Management plan are based on Radical Truth and Radical Transparency principles. We believe in full transparency and ensure that each and every cent you spend is spent wisely.

For more information on property management costs, or to get a free rental analysis, contact us at Bell Properties.