What is a Leasing Fee? A Comprehensive Guide for Landlords
As a landlord – especially a new one – you might be struggling with understanding the various fees that may or may not be included when a new tenant signs onto a rental property. They can vary so much, so figuring out which ones are fair to include, which ones are expected, and which ones perhaps go too far can be a dicey situation. One such fee is the leasing fee, which some properties add onto a lease and others do not. So what should you do?
Being one of the top Fairfax property management companies, we understand how it can get confusing when it seems like there isn’t one way in which all landlords and property managers address their fees. One major factor is that different states and regions have different regulations and standards for these types of fees. Let’s dive into this particular fee and address whether it is something that should be part of your normal pricing structure.
Table of Contents
What is a Leasing Fee?
So what is it? A leasing fee is a one-time charge by a landlord or property management company to cover the various costs associated with finding a new resident for the property. This fee covers a variety of services that go into the leasing process, including marketing the property, setting up and coordinating showings, screening potential residents, and attorney fees.
A leasing fee is also sometimes known as a lease up fee or a tenant placement fee.
How Leasing Fees Are Calculated
Leasing fees usually come in the form of either a percentage-based fee or flat fee. The more common one in many areas is a percentage-based leasing fee. In this case, landlords or property managers will charge a fee based on a percentage of the monthly rent. This often equates to half to one full month’s rent.
The other leasing fee that tenants may occasionally see is a flat lease fee, where landlords or property managers charge a flat rate. This rate may be a specific sum like $250-$500.
FAQ
Why do property management companies charge a leasing fee?
You may wonder why there is such a thing as a lease fee. Ultimately, landlords and property managers have to account for their various expenses. In some cases, they may increase rental rates to account for these expenses, while at other times placing a one-time fee on an expense like this seems more straightforward and even beneficial to tenants. They hope that tenants will stay in their unit for a very long time, in which case a one-time lease fee doesn’t seem like very much.
What are some services covered under leasing fees?
Any time a landlord plans to add a fee to tenants, it is always important to think carefully about it. Fees should be fair and consistent with expectations in the market. Putting specific fees on tenants can actually be seen as transparent, since it helps separate rent from specific outside expenses that perhaps should not be considered as a part of the monthly rent expense. A leasing fee is often one of those outside costs. So it is helpful to educate tenants on why that fee exists.
It is also helpful to educate tenants on what is included in this leasing fee. Being a landlord or providing property management services is just that: a service. So listing the numerous services that are provided that account for this fee helps tenants understand it. It certainly can cut down on complaints. So what are the services that are typically covered in this fee? They often include:
- Advertising the property, including listing fees
- Showing the property to prospective tenants, including occasional video/technology expenses
- Screening prospective tenants and conducting background checks, usually through a third-party service
- Executing the lease documents
- Conducting a move-in inspection
As a landlord, how can I frame fees as necessary to add value for tenants?
As we just did, you can explain to tenants that a separate fee can be more transparent to renters. Managing property has expenses that owners naturally have to account for. Having those costs absorbed into the rent and be a permanent rent increase is not helpful to renters in the long term. So in many ways, a leasing fee can be a healthy way of landlords and owners to manage those particular costs.
Look to BMG for Help
You probably need help. Managing property – especially a portfolio of them – is not an easy task. The benefits of qualified property management far outweigh the initial stress of choosing the best prospect. At Bay Property Management Group, our team of industry experts focuses on full-service rental management. This allows owners to sit back and enjoy the benefits of rental ownership without the daily hassles.
Our competitive and transparent rates for property management in Fairfax are some of the best in the industry, and we pride ourselves on delivering top-notch customer service. To learn more about our extensive services or to schedule a free-no-obligation rental home analysis to see your income potential, give us a call today.
