How to lower residential rental property management costs

Property management can be full of unexpected costs — from the drop in monthly rent as a unit becomes vacant to the emergency fix you have to do right before a new resident moves in. 

If you implement intentional strategies to reduce these expenses, you can scale your business more predictably. But where should you start?

This article will cover some of the best strategies you can adopt to lower the costs of rental property management. We’ll also look at a tool that allows you to prevent property damage, strengthen resident relationships, and save time and money.

A breakdown of property management costs

Whether you oversee large multifamily properties or single-family homes, gaining a clear understanding of your operating costs is crucial to price your property management fees correctly, spot where you may be able to reduce expenses, and stay profitable in the long run.

Generally, property management expenses fall into 11 categories. Let’s break them down and look at where the costs come from:

• Staff salaries. How much property management staff members’ salaries amount to depends on factors like geographical location, the types of properties you manage, and employees’ level of experience. According to Indeed, an average salary for a property manager is around $60,000, while pay for a full-time maintenance worker might be closer to $40,000.
• Operations. These costs cover the administrative aspects of property management, such as rent collection, tenant correspondence, and maintenance coordination. They also include tasks like responding to new tenant inquiries, managing in-house staff and contractors, and sourcing equipment.
• Maintenance. Maintenance expenses include both routine and emergency work. It might also encompass external areas, including tasks like landscaping, lawn care, snow removal, and tree maintenance.
• Marketing. Quality marketing is essential to ensure that the properties you manage are occupied with happy residents as often as possible. Marketing encompasses work like taking high-quality photos, creating 3D virtual tours, and listing properties on sites like Zillow and Apartments.com. Coordinating open houses and tours for prospective tenants is another (often unconsidered) expense.
• Services. At a minimum, property management companies will pay for property appraisers, accountants, and lawyers to draft leases and handle resident disputes.

• Insurance. Premiums can include everything from fire insurance to liability insurance and other mandatory coverages. There are also specialist insurances to consider, such as tenant discrimination insurance, which covers legal fees and damages relating to claims of unfair treatment.
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• Software. Property management software and tools often make up a big chunk of property management expenses. Depending on the fee structure, providers might charge per unit, per user, or with a one-time flat fee depending on the size of your company.
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• Permits. Depending on the state, you’ll most likely need a general business license to run your business legally. You might also need a real estate brokers license or a specific property management services license. Additional requirements might include obtaining zoning permits or other specialized permits for things like handling security deposits. Your staff may also need to undergo certified training in areas like fair housing laws.
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• Turnover. Tenant turnover is an inevitable part of property management. Associated costs include things like readvertising properties and conducting tours. There’s also screening to consider. Background checks and renter insurance verification take time, as does contacting previous landlords for references. You’ll also need to conduct move-in and move-out inspections, as well as set up relevant accounts and billing methods.

6 strategies to decrease the cost of managing your property portfolio

Target these six areas of your business operations to reduce the expenses of your property management business. H3 1. Automate manual tasksIf your staff members spend hours managing rent roll, compiling reports, and screening tenants manually, your labor costs will grow significantly as your property management business scales. And with less time to focus on helping residents, supporting owners, and assessing the market, they’ll likely miss opportunities to generate extra revenue, too.

Automated property management software allows you to make these key tasks more efficient: 

• Rent roll
• Reporting
• Tenant screening
• Maintenance requests
• Communications with owners and residents
• Accounting

It’s ideal to opt for a property management system that brings all those key functions together. That way, you’ll make your team’s work even more efficient as they won’t have to switch between several different solutions over the course of their work day.

2. Implement tenant retention programs 

Good communication practices are one thing, but if you really want to keep your tenants happy (and your turnover costs low), you need to implement strategies that proactively address their needs and desires. For instance, your program could focus on:

• Offering renewal incentives that encourage guests to stay in the property, such as discounted rent for the first month after renewal and/or free amenity usage. 
• Providing residents with benefits packages, which might include perks like discount codes for local businesses and insurance support.    
• Implementing a rewards program that awards tenants with points for timely rent payments and referrals.

3. Streamline your marketing plan

When you’re busy trying to fill properties, you can easily get stuck with a scattergun approach to marketing. While many property management companies successfully find residents that way, keeping an eye on your ad spend and getting more precise with your target audience allows you to be more strategic with your marketing and ultimately save more money.

Analyze data to understand where most of your leads come from and allocate your resources accordingly. Then, observe reports consistently to identify which channels deliver the best return on investment (ROI) month over month.

​​4. Negotiate with service providers

Even if you already have long-standing relationships with your maintenance company and insurance providers, that shouldn’t stop you from exploring opportunities to negotiate better contract terms.

Be sure to revise and compare your agreements against market rates periodically. If you spot areas where you’re paying more than the average rate, you may be able to point that fact out and negotiate a better deal for yourself. This is especially true if you’re paying large, flat fees for several properties. 

Equally, by reviewing and negotiating the terms of your insurance policies regularly, you’ll be able to adjust your coverage to better meet your current needs. And if you implement security solutions such as Minut, you may be able to reduce the price you pay. 

5. Implement privacy-first monitoring software 

When you’re managing a large number of units, the risk of property damage increases. And even if you have a network of the best maintenance providers to reach out to, costs can accumulate fast. Risk mitigating, noise and smoke monitoring software like Minut allows you to sidestep these issues entirely by preventing property damage and harm to tenant relationships.   

Our privacy-first noise monitoring solution sends you and your residents texts automatically when noise reaches a certain level. This can prevent parties from escalating — or even happening in the first place — and avoid other residents being impacted. 

Meanwhile, our cigarette smoke monitoring tool gives you early warning potentially serious rule-breaking. In the case where property damage has already occurred, you’ll have proof that you can use in a dispute and/or as a deterrent. 

6. Encourage energy-efficiency   

Encouraging property owners and residents to make energy-efficient decisions can help you lower costs at every level. While tenants can save money on utilities, owners benefit from improved property value and tax incentives, such as the Solar Investment Tax Credit. Meanwhile, you’ll reduce the amount of maintenance work you need to pay for. 

Pro tip: Protect against excessive energy use and related damage with Minut’s temperature and humidity monitoring, and mold-risk analysis feature. 

Save money as you scale 

As your property management business grows, the number one way to keep costs down is to limit unexpected costs. 

As we’ve discussed in this article, that could mean tightening your marketing budget or implementing tenant retention programs. Or, you could install a Minut device to prevent and detect parties and cigarette smoke, which lead to property damage and damaged resident relationships. 

With the right strategies and tools in place, you’ll be able to limit potential issues across your entire portfolio without losing hours each week. 

Frequently asked questions about property management costs

What are the typical fees charged by property management companies?

Most property management companies charge a flat rate monthly management fee of around 8% to 12% of the rental income for their services. Additional fees they might charge include the initial leasing setup fee of either half or a whole month's rent and lease renewal fees (usually between $100 and $300). Maintenance fees are another key factor, and they vary greatly depending on the size, type, and number of properties you manage. They can also charge a tenant placement fee or eviction fees to property owners.

How can I reduce maintenance and repair costs for my rental properties?

The best way to reduce maintenance and repair costs is to implement a strong preventative maintenance schedule and invest in monitoring technology like Minut. Preventative maintenance catches small problems early before they become expensive repairs, while monitoring technology ensures that tenants don’t break the terms of their lease and stops damaging activity from occurring within the property.

What are some cost-effective strategies for marketing rental properties?

Cost-effective strategies for marketing your rental properties include listing them on popular websites like Zillow, Craigslist, and Apartments.com. You can also harness social media platforms like Facebook Marketplace. Or, network with your local community and offer small referral bonuses to attract new tenants.