Average property management fees in the UK usually sit between 10-15% of the monthly rent collected. However, they’ve been known to range from as low as 5% and as high as 20%; it depends on the professional company you are engaging.
Average rent in London
Property management is a big industry in the UK. The average rent in London as of February 2024 is £2,119 per month, reflecting a 6.4% growth over the past year. The cheapest average rent in London can be found in Bexley at £1,520 per month, while the highest average rent is in Kensington and Chelsea at £3,460 per month. It is also noted that rental increases are slowing in the most expensive parts of the city(Zoopla).
Example:
- Monthly Rental Income: £2,000
- Property Management Fee Rate: 10% of monthly rent
Calculation:
Property Management Fee=Monthly Rental Income×Fee Rate
Property Management Fee=£2,000×10%=£200
So, for a property that generates £2,000 in monthly rental income, a property management fee of 10% would amount to £200 per month.
Flat Fee Structure
Example:
- Monthly Rental Income: £2,000
- Property Management Flat Fee: £300 per month
Calculation:
The property management fee is a fixed amount, regardless of the rental income.
Property Management Fee=£300
So, regardless of the property’s monthly rental income, the property management fee would be £300 per month.
Long-term Financial Impact
Let’s calculate the annual cost of property management fees for the above examples and compare them to see how they could affect the profitability of a property:
- Percentage of Rent Structure:
Annual Property Management Fees=£200×12=£2,400
- Flat Fee Structure:
Annual Property Management Fees=£300×12=£3,600
Assuming the rental income remains constant, and there are no additional fees (which can vary by property manager, such as setup fees, lease renewal fees, etc.), the choice between a percentage-based fee and a flat fee can have a significant impact on the annual costs of property management. In this hypothetical scenario, the flat fee structure results in higher annual property management costs (£3,600) compared to the percentage of rent structure (£2,400), affecting the overall profitability of the property. This example demonstrates the importance of carefully considering the structure of property management fees in relation to the monthly rental income and the services provided.
Using a property manager can increase your profit by because they monitor the renting market and local legislations.
The primary distinction between a less expensive and a more costly property manager lies in the range and quality of services they offer, directly impacting the Property Management Fees involved. A budget-friendly property manager might provide a basic suite of services, such as tenant screening, rent collection, and maintenance handling. However, these services might be more formulaic and less personalised, potentially affecting the tenant’s satisfaction and the overall profitability of the property, reflecting on the Property Management Fees.
On the other hand, a pricier property manager typically offers a comprehensive array of services, elevating the Property Management Fees but justifiably so. These services include advanced marketing for the property, superior tenant screening processes, a 24/7 maintenance and emergency response team, legal assistance, and often a more bespoke, hands-on approach to managing the property. This level of service can lead to higher tenant satisfaction, reduced vacancy rates, and potentially higher rental incomes.
Over time, the Property Management Fees associated with a more expensive property manager can be offset by the increased revenue generated from a more profitable property listing. Properties under the stewardship of a high-quality manager tend to attract and retain better tenants who are willing to pay a premium for an enhanced living experience, thereby justifying the higher Property Management Fees. Furthermore, the strategic marketing and upkeep of the property can lead to a higher property value, making it more attractive in the rental market. Thus, while the upfront Property Management Fees might be higher, the long-term financial benefits, including sustained higher occupancy rates and the ability to command higher rents, can absorb and justify these initial expenses. Investing in a premium property management service, therefore, becomes a prudent financial decision, balancing out the Property Management Fees over time.
