Property Management Fee Structures

Everything You Need to Know About Property Management Fees

One of the biggest questions new owners ask when considering management options for their rental business is “How do property managers get paid?” Whether you own a group of single-family rentals or a large multifamily portfolio, understanding how property management companies make money and structure fees is essential.

In this article, we’ll explain the most common types of property management fees, how they’re structured, and how much property management companies make depending on portfolio size and service offerings.

What Do Property Management Companies Do?

How do property management companies make money, and how do property managers get paid? A property management company exists as the bridge between landlords and tenants, and it handles the daily operations that keep your rental businesses running smoothly. These companies take on the responsibilities that often overwhelm property owners, allowing them to focus on scaling their real estate investments instead of fielding late-night maintenance calls or chasing down rent payments.

Common services that affect how property managers get paid typically include:

1. Tenant Screening & Leasing: Advertising vacancies, showing units, reviewing applications, running background checks, and signing leases.
2. Rent Collection & Accounting: Managing rent payments, tracking late fees, maintaining financial records, and providing owners with detailed income and expense reports.
3. Maintenance & Repairs: Coordinating with trusted vendors, overseeing routine maintenance, and responding quickly to tenant repair requests to preserve property value.
4. Legal Compliance: Ensuring all activities comply with local and state landlord-tenant laws, handling eviction notices properly, and maintaining accurate documentation.
5. Inspections & Property Upkeep: Conducting move-in, move-out, and annual inspections to verify property condition and hold tenants accountable for damage.
6. Tenant Relations: Managing communication between landlords and tenants, addressing complaints, enforcing lease terms, and maintaining a positive rental experience for all parties.

By taking on these responsibilities, property managers help landlords save time, reduce stress, and maintain consistent rental income while earning revenue through well-structured and fair fees.

How Do Property Managers Get Paid?

A property management fee is any charge billed to property owners for managing, maintaining, or improving their rental property. These fees cover everything from marketing vacant properties to handling late-night maintenance calls. While the exact structure can differ from one company to another, the core idea is the same. They’re charging you for the time, expertise, and systems that keep your rental operations running smoothly.

While the idea sounds straightforward, there’s a wide range of fees that can apply depending on the company, the property type, and the services provided. Most management companies earn their income through a blend of recurring and one-time fees, which together make up the company’s total cash flow. The most common fees in the industry are management fees, leasing or tenant placement fees, onboarding fees, lease-renewal fees, and maintenance-related fees. Each of these plays a specific role in helping property managers create predictable, sustainable income, overall affecting how property managers get paid.

Monthly Management Fees

Monthly management fees are the backbone of most property management businesses. They’re usually recurring charges paid by landlords to ensure their rentals are consistently maintained and that their tenants' needs are appropriately addressed. This may include collecting rent, processing payments, coordinating repairs, conducting regular inspections, or fielding tenant inquiries.

Companies approach these fees differently depending on their preferences. Some prefer a flat monthly rate, while others base it on a percentage of monthly rent collected, typically between 8% and 12%. Flat fees offer predictability for owners, but percentage-based structures tie compensation directly to performance, rewarding companies that minimize vacancies and maximize rent collection.

Pricing isn’t one-size-fits-all, though. Market conditions, property type, and workload all influence how much managers charge. A downtown high-rise or large multi-unit building might justify higher fees than a small rental home in a quiet neighborhood.

Leasing Fees

Leasing fees are paid when a property manager finds and places a new tenant. This one-time fee covers the advertising, showings, application reviews, background checks, and move-in inspections that go into filling a vacancy. Because marketing and screening take time and resources, most companies charge either a flat fee or a percentage of one month’s rent.

Some property managers also offer performance guarantees. For example, refunding part of the leasing fee if the new tenant breaks their lease within a certain time frame. It’s an incentive for managers to find long-term, reliable renters and a confidence boost for property owners investing in professional leasing help.

Maintenance & Repair Coordination

Maintenance oversight is one of the most time-consuming parts of property management, but it’s also a large revenue stream. Managers typically coordinate with vendors, schedule work orders, approve invoices, and follow up to ensure quality repairs.

Some companies include this coordination in their main management fee, while others add a small markup to maintenance invoices to account for their time and effort. Larger firms with in-house teams might instead charge a fixed labor rate per job. However the structure looks, transparency is important. Landlords should know exactly how maintenance costs are billed and what’s included.

Early Termination Fees

Early termination fees protect the property manager’s business if a client ends the contract before the agreed date. Breaking a contract early often means lost revenue and time spent onboarding the client. This is why the fee is present to offset the loss. These charges are usually a flat rate and are usually below $50-$1000, although larger or longer-term contracts may be set at higher amounts.

Making this policy clear in the property management agreement prevents disputes down the line and keeps both parties on the same page.

Lease Renewal Fees

When a tenant decides to renew their lease, some companies charge a lease-renewal fee to handle the paperwork and negotiation. While it might seem like a small task, it still requires reviewing rent increases, updating lease language, and ensuring compliance with current local housing laws.

This fee is often modest, usually $100 to $400 per renewal, but for management companies overseeing dozens of units, it can add up. Other managers choose not to charge it separately, folding it into their general service fees instead.

Setup and Onboarding Fees

Before management officially begins, many companies charge an onboarding or setup fee. This one-time charge helps cover the administrative work required to bring a new property into the system, including things like creating digital accounts, inspecting the property, evaluating existing leases, and gathering necessary documentation. The onboarding fee covers these initial costs.

These fees can vary widely depending on the number of properties being added and how much preparation is needed. Some firms charge per property or per unit, while others roll the cost into their management fees as an incentive for new clients.

The Role of Property Management Software

Modern property management depends on smart, integrated tools that simplify operations and save time. Platforms like Innago give landlords and property managers the ability to collect rent online, screen potential tenants, manage maintenance requests, and generate accounting and expense reports all in one place. Automating these processes not only saves time but also cuts down on administrative costs, helping property managers operate more efficiently without sacrificing quality.

One of Innago's greatest benefits is that it offers a completely free service for landlords and property managers. Instead of charging subscription or setup fees, there is a $2 fee for tenants when making online ACH rent payments, along with other minor tenant-paid fees for services like background checks and income verification. This model enables property managers to leverage advanced software without incurring additional costs, providing a budget-friendly alternative to other systems that impose high charges.

Conclusion

If you’ve ever wondered, “How do property managers make money?” or, “How much do property management companies make?”, you now understand that running a successful rental business with the help of a property management company begins with understanding how property managers structure and justify their fees. With some patience and experience, this newfound understanding will hopefully turn into a successful agreement and cooperation between you and your property management company.

FAQs

How do property managers determine their fees?

Property managers typically set fees based on several factors, including the type of property, market conditions, and the range of services provided. On average, monthly management fees range from 8% to 12% of collected rent. Some companies prefer a flat rate to offer predictability to property owners.

What is included in monthly management fees?

Monthly management fees cover a variety of services, such as rent collection, tenant communications, repair coordination, and property inspections. It’s important to clarify with your property manager exactly what services are included in this fee.

Are leasing fees a one-time charge?

Yes, leasing fees are usually a one-time charge paid when a property manager secures new tenants. This fee covers advertising, showings, application processing, and move-in inspections.

What are early termination fees?

Early termination fees protect property management businesses if a contract is ended prematurely. These fees compensate for lost revenue and time spent onboarding. Generally, they are flat rates, ranging from $50 to $1000 depending on contract terms.

How are lease-renewal fees structured?

Lease-renewal fees apply when a tenant renews their lease. This fee covers paperwork, negotiation, and compliance checks. It is typically between $100 and $400 but may vary based on the management company’s policy.

Do property managers mark up maintenance costs?

Some property managers add a markup to maintenance invoices to cover coordination efforts, while others include this service in their main management fee. Transparency about maintenance billing is importabt.

What is the purpose of setup and onboarding fees?

Setup and onboarding fees cover initial administrative tasks required to integrate new properties into the management system. This includes creating digital accounts and assessing existing leases.

How does Innago’s software benefit property managers?

Innago provides a comprehensive property management platform that is free to landlords, with a small fee for tenants using online ACH rent payments. This software saves time and cuts administrative costs by automating processes like rent collection and maintenance management.