Lease Up Fees

This is a fee charged to you every time a unit is rented.  The actual cost, varies per management company but we have seen fees as high as half a month’s rent and as low as $500. 

Pros: 

Usually, companies who charge a lease up fee have a lower overall management fee.  Also, companies that charge a lease up fee don’t normally charge a minimum.  This means that when the property is vacant and it is being fixed up in preparation for a new tenant, there is no cost to the owner.  

Cons:

The company is making money due to a vacancy.  We find that this method, even though widely used, is not totally in line with your interests as a property owner.  Turnover is a large cost to an owner but a small cost to a management company.  Large lease up fees really mitigates any financial risk to the management company.  There is less of an incentive to procure long term tenants.  Tenant turnover is a very high cost to you and should be avoided at all costs. 

Example:

We will do a little math here to show you the actual cost of a lease up fee.  This is assuming your rent $2000 and the lease up fee is 50% and the normal management fee is 6%.  The actual cost of the management fee would be 10.16% with turnover every 12 months, 8.7% for every turnover every 18 months and 8.08% for every 24 month.

To figure out your actual management fee, just take the lease up fee, divide by the length of occupancy, add it to your regular management fee and divide by the cost of rent.   

We, at Belmont Shore Land Company, do not use a lease up fee because we believe that our income should be tied to the landlords and that we should incentivize keeping the property occupied at a good rent.  Although we choose not to use a lease up fee and don’t view them as unethical, we believe that everyone should know the true cost of their management fees.   

Related: 11 Common Mistakes Made By Rental House Owners

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