EARNINGS

EARNINGS

Management fees can be either a flat amount per month, a percentage of the gross rents collected, or a
combination of the two. Property managers usually base their fees on a percentage of the gross rents collected.
This may vary from 3 percent on large structures to as high as 20 percent on individual houses or small
buildings. In some resort areas with high turnover rates and short terms of occupancy, as much as 50 percent of
the gross rent is charged as a fee for renting a property. In addition to the fees collected on rentals, the property
manager frequently receives additional compensation for the renewal of leases and for supervising major
repairs or alterations.

Salaries for supervisors in a management company, resident managers, and office building managers depend
largely upon local conditions and vary with geographical areas of the country, size of the city, and the size of
the building. Additionally, care must be taken to comply with the minimum wage law.

Management Contract

It is good business practice for a property manager to have a written contract with the property owner which
clearly sets forth the responsibilities of both parties. This should include the terms and period of the contract,
the policies pertaining to the management of the premises, management fees, and the authority and powers that
are given by the owner to the agent. Standard management agreement forms are available covering the
management of rental properties. Building managers should have a special agency contract drawn up by a
qualified legal adviser.

As an agent, the property manager is subject to all of the legal restrictions generally imposed upon an agent, as
well as those specifically included in the contract. Such obligations include good faith and loyalty to the
principal, performance of all duties with skill, care and due diligence, full disclosure of all pertinent facts,
avoidance of commingling of funds, and refraining from personal profits without the principal’s full knowledge
and consent. The agent must be familiar with the laws concerning real estate licensing, contracts, agency, fair
housing, employment, property protection, insurance and tenant/landlord relationships.

The preparation of leases, tax reports and other matters may involve legal and accounting services beyond the

province of the property manager. In such cases, professional counsel should be obtained. On the other hand, it
is the property manager who normally engages maintenance workers, contractors, subcontractors, and others.
The property manager must get the full name, address, and proper tax identification numbers from all such
individuals. When and if their annual compensation meets or exceeds the taxable amount, the proper IRS 1099
form must be sent to these individuals and to the appropriate governmental agencies.