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A Guide to Property Management Fees

For many landlords, it’s worth paying a property management cost per month or year for the peace of mind that comes with knowing somebody competent is looking after your property and making sure that everything runs smoothly. Property management fees cover a range of services including but not limited to finding tenants for your property through marketing on various platforms, conducting property inspections, carrying out routine property maintenance, collecting rent payments, chasing late payments, conducting necessary evictions, and dealing with emergency call-outs.


While it is worthwhile considering for landlords who might not have the time to deal with all this on their own, property management fees are not always as transparent as they could be and getting clear, concise pricing information can be tricky.


Keep reading for a guide to property management fees from the Upperkey to help landlords get a better idea of the costs involved with handing over the keys to a property manager.


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UpperKey's guide to property management costs will help owners decide what is best for them.

General Property Management Costs

How much does it cost for property management?

There is no one answer as it can vary depending on which company you use and the services that you are paying for. Some property managers offer fixed fee property management, while others have a variable cost for property management depending on the services that you require in a given month or period. Typically, property management fees are charged as a percentage of the rental income that you generate from the property that is being managed.


There are often different packages on offer with varying price points that you can choose from based on what you need. For example, a basic property management package that includes finding tenants and collecting rental payments will be cheaper compared to a full-service package that covers emergency response, repairs and maintenance, and more.


Whether you choose a national agency or a local agency can also impact the price, according to Upperkey in London. On average, a local agency in the UK charges just under 18% of your rental income, while a national agency is slightly higher at just over 19%.


Additional Fees to Be Aware Of

While property management companies offer packages that typically include a range of services for a monthly fee – generally a percentage of the rental income your property brings in – there may be some additional fees to pay that are not included in your regular payment. This is usually the case for one-off or additional tasks that do not need to be done as regularly as the services that are included in your property management package. Some additional services that you may incur extra charges for include:


hand with a graph of property management breakdown: rent colelction, mortage payments, accounting, leasing, depsoits, inspections, maintenance and repairs
There are many facets to property management, each with its own special cost.

Arranging Work

When it comes to arranging work on a property, you will usually incur an additional fee. This may not include regular work depending on the property management package that you have. However, it is likely to be the case when there are additional or serious repairs to be made on a property. On average, you can expect to be charged 10-12% of the invoice cost if your property management company needs to arrange additional work on a property.


What is deemed additional work can vary greatly between different companies, say Upperkey. Because of this, it’s always worth asking further questions about this before you determine if a property management company is going to offer the best value for you.


Tenant Renewal

Low cost property management packages might not always include the cost of finding a new tenant for your property or renewing the current tenancy. When a property manager finds a tenant for your property, there will usually be a set term in the tenancy agreement such as six months or one year. Once the term ends, if you and the tenant are both happy for them to continue renting your property, the property management company might request an additional fee for renewing the tenancy.


This will usually cover the cost of any amendments made to the contract, changes to personal details, and changes in the rental cost as a result of the renewal. To avoid having this fee crop up over time, it’s worth switching to a ‘periodic’ tenancy for a tenant that you are happy with, meaning that there is no set end date unless they choose to move or are evicted.


Contractor Referrals and Reserve Funds

Some property management companies will receive a referral fee from contractors that they use for maintenance or repair work at the properties that they manage. Although this will not usually mean that you have to pay an additional fee to use such contractors, it could result in you paying more than you need to for repairs and maintenance work to be carried out on the property. This is because when the property management company is getting incentives to use certain contractors, they will not have any reason to consider finding a better deal – which means you could miss out on savings.


When it comes to property management costs, most property managers are not prepared to pay the bill for repairing any issues with the property. They will usually request that the money is available upfront by means of a reserve fund so that they can avoid chasing the landlord for payment after the fact. Many property management companies will charge a reserve fund fee, which is a set aside of money that is paid in advance to cover any future damages. This is usually determined based on the property’s value and is typically £200-£1000.


Financial Administration or Paying Bills

As a landlord, you may be faced with additional fees for property financial administration. This is often a service that property management companies will offer separately from their regular property management services giving you the option to decide if you would prefer to pay for the convenience of having financial administration tasks done for you or if you would rather save money by doing it yourself. Some examples of financial administration tasks include monthly financial reporting, tenant deposit dispute handling, reporting to HMRC on your behalf, or service charge payment to freeholders.


In the event of a rental property where the tenant is not responsible for paying their own utility bills, for example, if the property is an HMO, then making sure that bills are paid on time may be a service that the property management company offers. This will usually incur an additional property management fee that is typically around 1-4% of the bill amount.


Evictions

Evictions are something that you cannot hide from in the rental property industry. They can get complicated and expensive, and you may need to use a range of professionals including solicitors, bailiffs, and even the court. There is often a lot of stress and hard work involved in evicting a tenant successfully, especially if the tenant is no longer making rental payments. Because of this, many property managers prefer to have an experienced property management company to support them through the evictions process. However, this will incur additional costs.


An eviction notice generally costs around £150, while a court order will set you back £850. If you need to instruct bailiffs to evict the tenant from the property, then you can expect to pay a fee of around £250.


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For straightfoward property management, UpperKey is the solution with guaranteed rent and no extra fees.

Are There Any Hidden Property Management Charges to Look Out For?

Since the property management industry is not the most transparent when it comes to fees, it’s natural that many landlords worry about the possibility of hidden charges. One of the most common is charges for works that are classed as being outside the scope of the agreement that you have with the property management company.


For example, you may be charged a small percentage on top of the invoice paid to the contractor for the convenience of having the property management arrange works for you that fall outside the scope. However, this can vary a lot depending on the property management company you use.


The Upperkey advises landlords to always get as much information as they can on what the property management company considers to be outside the scope of the agreement for arranging work on the property. Some companies may start charging additional fees after a small cap of just a few hundred pounds, meaning that emergency repairs or necessary maintenance work might end up falling outside of the scope, ultimately costing you more than you expected.


For many landlords, property management is a lifesaver, allowing them to get on with their lives while their property is in safe hands. However, before you find the right property management company for you, it’s important to understand how much you’ll pay and what the fees cover.