Are you considering hiring a condo or HOA management company for your building? It’ll cost you, but the benefits are well worth it. A property management company will take care of all the monotonous tasks involved in the daily management of your condo building.
This includes marketing vacant units and screening potential tenants; maintaining the common areas of the property; taking care of legal documents like service agreements and lease agreements and performing regular inspections.
Below we have a comprehensive guide to help you figure out roughly how much it’ll cost to hire a condo management company based on where you live. Read on for more.
How Much Does it Cost to Hire a Condo Management Company?
The answer to this question depends on several important factors, such as:
The number of units in your building
The amount you pay for a property management company is contingent on the number of units within your building. A large complex with tens of units is much more demanding and collects more fees than a condo building with 10 or 20 units.
Remember that most companies will charge you per unit and the average cost per unit depends on the province you’re in. For example, in Toronto, Ontario the cost per unit of hiring a management company is $46.33 Meanwhile, management companies in Boston, Massachusetts charge an average of $20 per unit. Here are a few more examples:
It’s worth noting here that some companies charge based on a specific percentage, like 10% of the fees collected from each unit, for example. The more units the management company has to manage, the lower the percentage they’ll charge you as part of their basic fee.
The management company’s preferred pricing structure
Some property management companies charge a flat rate while others charge you a percentage of the rent or fees collected each month. It’s hard to determine which option is the best because you have to consider your unique situation.
It’s also important to pay attention to the language the company uses in your agreement when referring to their fee structure. For instance, if they say they will charge you “Percentage of Rent or fees Due” it means you’re required to pay them the same amount each month irrespective of vacant units. This is obviously a bad deal and you should avoid it at all costs.
Alternatively, the company might require you to pay them based on “Percentage of fees Collected”. This means the company will only deduct a percentage of fees collected from occupied units while excluding vacant units.
The latter arrangement provides the company with an extra incentive to work hard and make sure that units are always occupied.
Then there’s the “flat fee” arrangement. This means you have to pay the management company the same amount, regardless of how many units are in your building.
A flat fee is a good deal for anyone that owns a few units. That’s because you’ll probably end up paying about $20 to $50 per unit each month depending on your location. If the maintenance fee per unit is $500 per month, that’s only 10% of your earnings. But, if your condo is a large building with lots of units, then you should avoid paying a flat fee for a condo management company.
Rather hire a company that charges you a percentage of your monthly fees collected, based on the number of units you have. For instance, some companies will charge you 10% per unit if you have 20 units but will reduce the percentage to 6% per month if you have about 50 or 60 units.
But, if you’re renting out an expensive property with only a few tenants, then you’ll do well to stick with a flat fee rate.
Apart from the baseline fee, there are a few auxiliary charges that might contribute to the cost of hiring a condo management company.
This is an amount that the condo management company charges you to manage the eviction process. It usually costs about $200 to $500 per case. You see, most states require evictions to go through court. This means you must pay the sheriff’s fee, court fees, paperwork and admin expenses that come with evicting a tenant. Rather save yourself the trouble and pay your management company an eviction fee so they can do all the work on your behalf. It’s definitely worth it.
Leasing fee (AKA vacancy or placement fee):
Why does a management company charge a leasing fee? It’s to cover costs such as advertising the unit, showing it to prospective tenants and paying the real estate agent’s commission. You could always avoid paying this fee by filling the vacancies yourself. But, you must make a special provision for it in your agreement with the management company.
Some management companies come with on-site maintenance staff conveniently available to your tenants 24/7. This is like having a handyman on retainer and it’s a very convenient solution for you and your tenants alike. Alternatively, you may hire a management company that requires you to pay an upfront emergency maintenance fund but we wouldn’t recommend that option.
Reserve fund fee:
A condo management company usually charges this fee to cover emergency expenses like a broken A/C or plumbing. That way, you won’t have to worry about paying extra for emergency repairs and refurbishments.
Pay Your Bills Fee:
The company might charge you this fee to cover things like monthly association costs, insurance, mortgage fees, etc. This is a great way to avoid late payment fees and will save you a lot of money in the long run.
Early cancellation fee:
You may cancel your account with a property management company prior to the end of your contract. This is normal and can happen because of several reasons. Perhaps you’re not happy with their maintenance rates, or you feel they’re too slow to fill vacancies. Either way, you should be able to ditch your management company whenever you like by paying a pre-determined cancellation fee.
Fees to avoid
Some of the fees that management companies charge are unnecessary and avoidable. For instance:
- Lease renewal fee: Avoid this fee because it means the company is charging you to renew a lease agreement using documents they have on hand already.
- Setup fee: They also refer to this as an onboarding fee. It means the company is charging you just to sign up with them. This is one of the “hidden fees” you’ll encounter from companies that charge lower rates.
- Late payment fee: You can avoid paying this fee by making sure you pay on time for all the services rendered by the management company.
What Type of Condo Management Company Should You Hire?
The first piece of advice we’ll give you is to not hire the first company you come across. Keep your options open and do your research to find different providers. Consider the standard rate in your market and see if you can get a good deal based on the number of units you have.
Just remember that there’s no such thing as “cheap” in this industry. If a company offers you a discount or a good deal up front, they’ll recoup that cost in the long run. For instance, they might charge you extra fees like the ones we mentioned above.
Choosing how to manage a condo is a big decision, whether using a management company or taking the self-managed route. It’s an investment that shouldn’t be taken lightly. Do your due diligence on the property management company you want to hire. Make sure they have enough staff to manage your units effectively and efficiently. Aside from the price, service is the most important consideration to make when looking for a condo management company.
Shop around and call several companies until you find an option you’re truly satisfied with.
How much does your building pay for property management? Let us know in the comments below.