For property owners, a reliable real estate management company is an essential partner for maintaining stable rental operations. Property management tasks, such as tenant relations and building maintenance, are diverse and time-consuming, making it difficult for owners to handle everything on their own. In fact, approximately 81.5% of property owners report that they outsource some or all of their management tasks to specialized professionals. The primary reasons for outsourcing management to a company include avoiding issues during lease renewals or tenant move-outs, compensating for a lack of knowledge in rental management, providing swift and appropriate responses to building-related issues, and acting as an intermediary in case of disputes. Management companies serve as a strong ally for busy owners, contributing to improved tenant satisfaction and reduced vacancy risks.
However, outsourcing management tasks to a company inevitably incurs costs, with the most notable being the monthly management fees (management fees, management commission, etc.). These fees typically account for a few percent of rental income and are a significant expense for property owners, leading many to seek ways to reduce them. However, choosing a management company solely based on low fees is risky, and it is crucial to assess the balance between the fees and the services provided. This article provides a detailed explanation of the typical management fees paid to property management companies, their breakdown, and the specific services they offer. It also examines key points to consider when selecting a property management company for those prioritizing management fees.
First, we will outline the main services provided by property management companies. Management services can be broadly divided into “tenant-related services” and “building maintenance services,” with specific examples including the following:
These are merely general examples, but they cover a wide range of miscellaneous tasks necessary for rental property management. Attempting to handle all of these tasks oneself would require an enormous amount of time and effort, and poor management quality could lead to early tenant turnover or accidents caused by equipment malfunctions. For this reason, many property owners choose to outsource management to a management company. According to a survey by the Ministry of Land, Infrastructure, Transport and Tourism, the majority of owners entrust management to professional companies in some form, recognizing the value of paying management fees (management commissions) to professionals.
Management fees (management fees, management commission fees) refer to the compensation paid by property owners to real estate management companies when outsourcing the management of their apartments or condominiums. In exchange for this fee, the management company handles various tasks such as tenant communication and building maintenance.
Management fees vary depending on the scope of services outsourced and the type of contract. The following are the most common patterns:
As described above, while management fees may be referred to collectively, there are various contract types, and costs may vary depending on the scope of services outsourced. By selecting only the necessary services to outsource, owners can reduce costs, but this comes with the burden and risks of managing the remaining tasks independently.
The market rate for rental management fees is approximately 5% of the rental income for general management services (full management). Many real estate management companies set their fees on a commission basis, such as “rent × ○%,” with the payment amount increasing proportionally to the number of units and the rent amount. For example, for an apartment with 10 units each renting for 80,000 yen, if the management fee rate is 5%, the monthly management fee would be 40,000 yen, which is 5% of the total rent of 800,000 yen. The following table summarizes the typical fee structures and characteristics for each type of management contract.
Management Commission Type Management Fee Range Main Scope of Services and Features
General Management Commission (Full Management) Approximately 5% of rental income (range: 3–10%) All rental management services, including tenant recruitment, contract management, rent collection, complaint handling, move-out settlements, and building inspections. ※Minimum fees may apply even during vacant periods.
Rent Collection Agency Management Approximately 3% of rental income Only rent collection and delinquency collection are outsourced. Other tenant-related tasks and cleaning are handled by the owner. Costs are lower, but delinquency guarantees are typically not included.
Building Management Only Fixed fee per property (e.g., monthly fee of X yen) Building maintenance services (regular cleaning, equipment inspections, repair arrangements, etc.) are outsourced. Fees are often set on a fixed-rate basis depending on the property size and scope of services (often set separately from management fees).
Sublease contract (rent guarantee): Approximately 10–20% of rent income. Management with vacancy guarantee through bulk leasing. Comprehensive outsourcing from tenant recruitment to building management is possible, but the fee rate is higher as a guarantee fee. ※Depending on the contract terms, the guaranteed rent may be reviewed at regular intervals.
※The above are general guidelines, and actual fee rates may vary widely depending on the property's location, age, number of units under management, and scope of services provided, ranging from less than 3% to over 10%. For example, in urban areas, some management companies may offer rates as low as 3% due to competition, while in rural areas or for special properties, rates of 7–8% are also common. Additionally, there are no legal limits or regulations regarding management fee settings, and they can be freely determined through mutual agreement between the owner and the management company. As a result, some companies have recently adopted fixed-rate management plans, such as “a fixed monthly fee per unit,” and in extreme cases, some companies even claim to offer “zero management fees.” Fixed-rate plans are particularly common in rural areas or low-rent areas, where they aim to attract owners of high-rent properties by offering a fixed fee regardless of rent, thereby creating a sense of affordability.
The difference between the percentage-based system and the flat-rate system is that the former is proportional to income, meaning the burden varies depending on property revenue. On the other hand, the flat-rate system involves a fixed amount regardless of income, so while it offers significant benefits for high-rent properties where the burden ratio is smaller, it may become relatively expensive for low-rent properties. For example, for a room with a monthly rent of 30,000 yen, a flat-rate management fee of 3,000 yen per unit would result in an effective fee rate of 10%. Therefore, whether a flat-rate system or a commission-based system is better depends on the conditions of the property, and it cannot be generalized that one is necessarily more advantageous than the other. What is important is what services are included in the management fee. Even if the rate is the same, the impression of whether it is expensive or affordable can vary depending on the scope of services provided. It is essential to clarify the services included in the management fee and any additional fees before signing the contract.
Regarding the breakdown of management fees, it is important to note that the costs incurred when outsourcing management to a management company are not limited to management fees. Services not included in the monthly management fee are charged separately on a case-by-case basis. Typical examples include advertising fees and brokerage fees for tenant recruitment, renewal fees at the time of contract renewal, restoration costs upon tenant move-out, and legal inspection fees for the building. For example, when selecting a new tenant, it is common to pay a success fee of approximately 0.5 to 1 month's rent to the management company (or brokerage company). At the time of contract renewal, many cases involve collecting approximately 0.5 month's rent as a renewal processing fee from either the owner or the tenant. Additionally, restoration costs after move-out and maintenance expenses for facilities during long-term tenancy are estimated on a case-by-case basis and can amount to several hundred thousand yen depending on the scope of work. Regular building cleaning and facility inspections are sometimes included in management fees for small-scale properties, but for larger properties with elevators or water tanks, many companies require a separate “building management fee” as a fixed monthly charge. As such, the breakdown of management fees cannot be understood simply by looking at the rates alone, and it is essential to consider the total costs that may arise.
When selecting a management company, it is important to avoid making decisions based solely on the amount of management fees quoted. Instead, it is crucial to evaluate the company's service quality, track record, and response capabilities comprehensively. Here are some specific points to check.
By considering all of the above points, it is important to choose a company that you can confidently say will provide services commensurate with the fees and protect the revenue and value of your property. Even if the management fees are slightly higher, a company with excellent tenant support and tenant placement can lead to long-term benefits for the owner. Conversely, if the management fees are low but service quality deteriorates, leading to increased vacancies, this would be counterproductive.
Owners who aim to keep management fees as low as possible should pay particular attention to the following points when comparing companies.
First, do not focus solely on the management fee rate; consider the overall cost. There have been cases where companies with low management fees ended up having higher total costs due to other expenses being more expensive. For example, one property owner switched from a company with a 5% management fee to one with a 3% fee, resulting in lower monthly expenses. However, the costs for restoring the property to its original condition upon move-out and maintenance expenses were higher than before, ultimately reducing the net profit. In such cases, it is impossible to determine whether the change was truly beneficial without comparing the total costs, including management fees and other expenses (such as restoration costs, emergency response fees, and advertising fees). Before signing a contract, simulate the annual management costs based on the plans presented by each company. Consider past move-in/move-out frequencies and repair history to identify potential additional costs hidden behind low fees.
Next, consider the impact on overall revenue. A few percentage points difference in management fees may seem significant at first glance, but it may not make as big a difference when viewed from the perspective of overall rental operations. In extreme cases, the effort to fill one vacant unit often yields greater revenue improvement than reducing the fee rate by 1–2%. Here is a concrete example. Consider a property with 10 units renting at 50,000 yen per month, with one vacant unit. Comparing the scenario where the property is fully occupied with a 5% fee rate and the scenario where the fee rate is 3% but one unit is vacant, the owner's net income is higher in the former case despite the lower fee rate.
Situation (out of 10 units) Management Fee Rate Monthly Rent Income Monthly Management Fee Income After Deducting Fees
1 vacant unit, 9 occupied units 3% 450,000 yen (50,000 yen × 9 units) 13,500 yen 436,500 yen
Fully occupied, 10 units 5% 500,000 yen (50,000 yen × 10 units) 25,000 yen 475,000 yen
(Example: Monthly rent of 50,000 yen, 10 units)
As shown above, paying slightly higher management fees to fill vacancies can result in greater overall profits. Rather than focusing solely on management fees, it is important to focus on the core issues of how to reduce vacancies and increase the property's occupancy rate.
Additionally, it is important to pay attention to the revenue structure of the management company. Companies with extremely low management fees often compensate by charging fees in other areas (such as success fees for securing tenants or construction costs when tenants move out), which may create a conflict of interest between the owner and the management company. Companies whose primary revenue source is management fees have a direct incentive to fill vacancies and maximize rental income, aligning their goals with those of the owner. However, companies that generate revenue through tenant placement or move-out costs may have a profit structure where higher turnover leads to increased profits, which conflicts with the interests of owners seeking long-term tenants. Such companies may lack motivation to improve services for tenants, potentially leading to a vicious cycle where tenant satisfaction declines → short-term move-outs increase → owners bear the burden of high restoration costs and advertising fees. It is important to avoid situations where management fees are low but little money remains in the owner's hands, with the management company being the only beneficiary. Therefore, even when prioritizing management fees, it is essential to verify whether the company's revenue model aligns with your own interests (incentive alignment). Specifically, you can assess whether the company prioritizes “increasing occupancy rates and achieving long-term tenancies” by reviewing their proposal plans or company brochures.
Finally, let's discuss the appropriate comparison process. When comparing multiple management companies, we recommend first collecting quotes and service proposals from as many companies as possible. Do not make a decision based on a single company's proposal; instead, compare multiple companies' plans side by side to fairly evaluate commission rates, scope of services, and performance records, which will also help you understand the market rate. Fortunately, there are now online services that allow you to request materials and consultations from multiple companies at once, so take advantage of these resources. When comparing companies, check the following points:
By comparing multiple companies in this way, you can select the management company that best suits your property. While management fees are important, it is essential to compare companies not just based on cost but also on whether the services provided are worth the cost overall. This approach will ultimately lead to the success of your rental business.
Management fees (management commissions) paid to real estate management companies are an important expense in rental operations, with the standard rate being approximately 5% of rental income. However, it is crucial to make a comprehensive judgment considering not only the percentage difference in fees but also the scope of management services, other costs, and tenant acquisition capabilities. Especially, the quality of management services and tenant acquisition capabilities directly impact revenue, making them key factors to prioritize when focusing on cost-effectiveness. Choosing a company solely based on low costs may lead to hidden costs later or increased vacancies due to poor service quality, which defeats the purpose.
Ultimately, it is important to strike a balance between “low management fees” and “comprehensive services” and choose a reliable management company that contributes to maximizing the owner's profits. We hope this article's insights into market trends and key points to consider will help you find a cost-effective partner. By collaborating closely with the right management company, you can maintain and enhance the value of your valuable real estate assets and achieve stable rental operations.