Investment property managers typically offer a range of rates between 5-8% for residential rental properties in San Diego.
COMMON FEE STRUCTURES CHARGED BY RESIDENTIAL AND COMMERCIAL REAL ESTATE FIRMS IN SAN DIEGO
Typically San Diego real estate investors can expect to pay a monthly management fee as well as a leasing/tenant placement fee ranging from $400-500. In addition, some sort of maintenance fee is billed for repairs which is normally a set hourly rate between $50-60/hour.
The second most common structure includes a small property management fee or discounted fee, coupled with several extra or add on fees. An example would be a start-up, new customer or transition fees. Leasing fees for these companies are generally low or nothing at all. Unfortunately, cash flow for the properties managed under this structure is affected. With this property management structure rentals usually sit vacant longer and often incur mounting vacancy loss.
The third fee structure is opportunistic Realtors or Agents who provide “low effort management and aggressive leasing”. Leasing or tenant placement fees are usually equal to one half of the rental rate they achieve for their clients. You may even see some Agents charge a leasing fee equal to a full month rent which is very high. They charge a low monthly fee since they aren’t managing well, and typically their knowledge of property maintenance and upkeep is subpar.
TYPICAL SAN DIEGO PROPERTY MANAGEMENT FEES
Understanding the different fees charges is important while interviewing managers. Here are a few to become familiar with.
Set Up Fee or New Property Fee
A good number of companies charge this fee to set up your account in a property manager’s system.
Property Management Fee
This fee is the monthly cost that pays for the routine and recurring management services for your property.
Project Management or Supervisory Fee
This might be to oversee large repair project outside of normal maintenance typically between 10-15% of the total cost of the job and most often related to major insurance claims and water damage.
Marketing and Advertising Fee
Some companies maintain a low management fee low but then charge extra for running ads.
Tenant Placement or Leasing Fee
The leasing fee is a commission earned after a property is leased to a tenant.
Lease Renewal or Lease Extension Fee
An add on fee or renewal fee, which assessed after a lease is renewed and the existing tenant is retained.
Maintenance Surcharge or Markup
When a maintenance fee is charged for parts or materials, the company will charge for a percentage for the maintenance item to be completed. For example, on a $100 repair, they will retain 10 percent.
Administration or Office Supplies and Postage Fee
This could also show up as a postage fee, administration fee or an accounting fee. This is for no recurring or non-ordinary expenses related to the property or the client.
Trip Charge Fee
Charged for excessive, repeat or non-routine management trips to the property. This fee is becoming more and more common as traffic time and transportation costs have increased across San Diego County. Often times this fee will be charged to the tenant.
Some property managers will charge you a cancellation fee when you want to be released from your contract. Typically most property managers will allow the contract to be terminated using a 30 day notice from either property manager or the rental property owner.
PAY FOR PERFORMANCE
When deciding which fee structure is best suited for you and your property(ies), it is valuable to consider which management style or structure will work for you in the short and long term. Like any product or service, you pay for what you get. Your manager has a financial incentive to make sure the rents are at market or above market so that they may earn the highest property management fee. Leasing fees are also performance based. If a lease is successful, the manager gets a leasing commission and the ability to start collecting recurring property management income. This is the case for management of residential apartments in San Diego as well as single family homes.