Property Management 101: Costs, Options, and Your Path to Easier Rentals

There’s more to property management than meets the eye. On the surface it seems straightforward, but the truth is rental homes come with a tangled web of legislation, fine print, and hidden costs. So let’s demystify the details and make this easy.

Before you hire a property manager or even take on the job yourself, this overview will help you understand the ins and outs of property management, your options, and how to simplify your rental experience. 

Understanding property management options for rental homes

Rental homes are unique in that they are both a place of residence and a business. Care and consideration needs to be given to both sides. While the house is an income-producing business for you, it’s still a home, and a place where your residents need to feel like they belong. 

Maintaining the balance between a good business and a good home for your residents takes work. Someone needs to be readily available to manage all communication, take care of everything from marketing to maintenance, manage legal matters, and keep the home occupied to earn income. 

This is why many homeowners hire a property management company to outsource the work to. Before considering this option, here are a few pros and cons.

Pros and cons of hiring a property management company

Pros:

• Frees up your time
  
  
• Provides local expertise and experience in rental home management
  
  
• Helps price your monthly rent for the market
  
  
• They will find and manage your residents for you, handling complex tasks such as tenant screening, rent collection, and managing lease agreements
  
  
• They will have their own list of contractors to manage repairs and maintenance
  
  
• Management of vacancies and turnover 
  
  
• Property management fees can be claimed as a deduction at tax time

Cons:

• Monthly management fees reduce your rental income
  
  
• Monthly fees aren’t all-inclusive with hidden add-ons for lease renewals, eviction help, inspections, and other services
  
  
• Unexpected fees makes it hard to have transparency over your cash flow and real costs
  
  
• Minimal protection from legal costs and fees in the event of an eviction, with most management companies charging extra for help and capping protection at $500 
  
  
• Complaints of poor communication with residents are common
  
  
• You only get paid on time when residents pay on time
  
  
• Only available to speak to during office hours (with voicemail the most common option for an emergency)
  

The reality is when the rental experience feels hard on both sides, poor property management is usually to blame. People renting aren’t treated like valued customers and homeowners get little transparency into the real cost of managing their home. 

This is what Belong is here to change. We want to restore confidence that long-term renting can be both profitable and lovable for homeowners. We offer all the pros of outsourcing the hard work, without the long list of cons. 

Pros of choosing Belong over traditional property management

• Full transparency with one monthly management fee and no hidden extras (also claimable on tax)
  
  
• Guaranteed rent every month, regardless of when residents pay
  
  
• 24/7 customer support to both homeowners and residents
  
  
• Flexible payment options that let you spread the cost of expenses like repairs and landlord insurance
  
  
• Up to $15,000 coverage if we ever need to initiate eviction proceedings for a resident we have placed
  
  
• Smarter rental pricing that uses a clever combination of human smarts and tech algorithms including real-time demand for your home
  
  
• An innovative, tech-forward alternative to property management that is striving to flip an outdated industry on its head
  
  
• 82% of Belong Residents renew their 1-year lease (with no renewal costs for homeowners)
  
  
• Access to over 10,000 contractors in our extensive vendor network

Pros and cons of self-managing a rental

The last property management option is to take on the job yourself. Before taking the DIY approach, here’s some quick pros and cons of self-managing a rental home.

Pros:

• No management fees
  
  
• More control and oversight over the day-to-day operation of your rental home
  
  
• Could be beneficial for tax purposes if you operate as a real estate professional

Cons:

• It can be a hard and stressful job and isn’t for everyone
  
  
• You need the time and availability – not ideal for earning passive income
  
  
• Requires knowledge of federal fair housing laws, state landlord-tenant laws, and local ordinances to avoid getting caught up in legal issues 
  
  
• You will need to find and vet your own residents and keep them happy to reduce vacancies
  
  
• You will have to hire and manage your own contractors, which can be hard to find
  
  
• You will need to chase down late rent payments and inspect for any lease violations
  
  
• You need to stay tapped into the market to keep pricing competitive and maintain occupancy rates
  
  
• It requires a great deal of admin and record keeping skills

What does a property manager do?

Regardless of what option you choose, all rental home management involves the same cycle of tasks. From getting the home ready for residents to leasing and then managing turnover, here’s a quick rundown of what that entails: 

Before the home is rented

To get started, you need a home that is move-in ready. Initial tasks include:

• Making any necessary repairs and cleaning
  
  
• Setting the right price for monthly rent
  
  
• Photography and video of the home for promotion
  
  
• Marketing and listing on real estate websites
  
  
• Organizing home tours/showings 
  
  
• Pre-lease inspection
  
  
• Documentation of wear and tear 
  
  
• Finding and vetting applicants
  
  
• Background and credit checks
  
  
• Managing documentation (which may also include secure disposal of personal data)
  
  
• Creating and signing a lease agreement

When a lease agreement is in place

When you have found and vetted your applicants, you’ll have tasks for the ongoing operation of your rental home, including:

• Managing communication with the residents
  
  
• Receiving and actioning maintenance reports
  
  
• Managing relationships with contractors for repairs as needed
  
  
• Ensuring the home is secure and habitable for residents
  
  
• Abiding by federal, state, and local landlord-tenant laws
  
  
• Providing legal notice to enter the home
  
  
• Managing income and chasing down any late rent payments
  
  
• Inspecting the home for damage and/or lease violations
  
  
• Managing evictions if necessary

At the end of a lease

When a lease agreement expires you will need to renew, or replace the residents. End of lease tasks include:  

• Reviewing rent and managing legal price increases
  
  
• Managing lease renewal
  
  
• Inspecting the home and managing any maintenance issues or requests
  
  
• Providing written notice for inspections and/or showings
  
  
• Overseeing move out procedures if residents leave the home
  
  
• Inspecting for damage and documenting expenses for any security deposit claims
  
  
• Getting the home ready to go back on the market
  
  
• Maintaining the home during any vacancies
  
  
• Replacing the residents, starting the process again

What does a property manager cost?

Property management companies charge a percentage of the rent collected from your home. This varies between companies and locations, but most property management fees range between 6-12% of your monthly rental price. 

If your home was rented at $3,000 per month, you’re likely to pay between $150 - $360 per month in management fees. 

But, don’t high-five yourself too quickly if you spot a bargain. There’s a huge discrepancy in what property management companies offer for that price. For example, a lower 6% fee may mean more extra charges on top.  

Common property management fees additional to the monthly rate include:

• Placement fee: Up to 100% of the first months rent

• Initial setup fee: $250 - $500

• Inspection fees: $0 - $150 per inspection

• Pricing analysis fees: $0 - $100

• Photoshoots: $100 - $500+

• 3D and/or virtual tours: $1,000+

• Advertising fees for online listings: $150

• Lease renewal fee: $200+
  
  
• Fee to prepare or send tax documents: $150
  
  
• Communication after hours or during holiday periods: 25% surcharge on rates
  
  
• “Lease up fee” when residents turnover: up to 50% of a month’s rent
  
  
• Eviction protection: Extra cost or higher monthly rate with limits for claims

Let’s say your home is worth $3,000 per month rent and your property manager charges a fee of 7% ($210 per month) and a 100% placement fee. But this company also charges a setup fee of $250 and $100 each for two inspections. You also opted for video tours and paid $500. They charged you $150 each year to send documents you needed for tax claims. They charged $250 when a resident renewed their lease, but an end of lease fee was due when they moved out the following year. This fee was 50% of a month’s rent. 

Over this 24 month period with one placement, a 7% fee would total $8,040 from your rental income of $72,000. But with the extra fees, this adds up to $11,040. So the true cost is actually closer to 15% all in. 

This is why Belong focuses on transparency. We offer a single monthly fee and placement fee (unlock pricing for your city here). No fees for setup, lease renewals, marketing, eviction support or anything essential to running your home smoothly. 

‘Rent due’ vs ‘rent collected’ fees

There are two terms used in rental contracts for when your property management fees are due. If your property management fees are based on ‘rent due’, that means fees are due on the date rent is. This includes if the home is vacant or your residents are late to pay, so you could owe fees without earning income to cover it. 

If the fee is based on ‘rent collected’, you are paying a fee out of the income received. This is a safer option and will motivate your property manager to handle issues quickly in order to get paid. 

The third and safest option is Belong’s alternative: guaranteed rent. We put homeowners in control of their cash flow with the option to receive rental income at the same time every month, or an entire year upfront, regardless of when residents pay. 

Simplify your rental experience with Belong

With Belong, managing your rental home has never been easier. We’re simplifying the rental experience and helping more homeowners reach their financial goals with innovative services that support everyone.

Visit our homeowner's page to learn more about how our modern, tech-enabled services are helping people ditch property management in cities across the US including Austin, San Antonio, Tampa, Raleigh/Durham, Dallas/Fort Worth, Houston, Miami and more. 

Disclaimer: This article should not be considered financial or legal advice. It’s important to consult with a professional and consider your personal financial situation when making decisions about how to manage a rental property.