Q:

How do you estimate property management cost?

A:

Quick Answer

To estimate the costs of managing a property, add in items, such as insurance, homeowner's association fees and property taxes, and add those to an estimate of maintenance and other costs. The total likely ranges between 35 to 80 percent of rent, depending on the condition and type of property.

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Full Answer

Generally, a rental house or duplex costs between 37 and 45 percent of the rent. Homes with more elaborate maintenance requirements and at higher property values come with a higher expense percentage. Vacation rentals can cost as much as 70 to 80 percent in terms of expenses.

When it comes to maintenance, a reliable rule is 1 percent of the property value for each year, so a $300,000 property would yield an estimate of $3,000 per year in maintenance, or $250 per month. However, these expenses do not occur evenly, as they take the form of replacing items, such as a hot water heater or repairing a roof or foundation, so it is important to save during months when no maintenance is necessary.

Property taxes and insurance are easier to estimate, as the tax assessor can provide the precise amount for each calendar year, and insurance agents can provide exact estimates of costs. HOA fees should be easily available through a real estate agent or through the existing property manager.

One final cost involves third-party management, which is necessary for people who want to own an investment property but need to hire someone else to handle all of the management functions. These companies generally charge between 6 and 8 percent of the rent.

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