Property Management Fees 12 Unit Apartment

14 Replies

Hello Everyone,

  I have a 12 unit apartment under contract and I am looking for a property manager. I would say it is a class B area and a class A building. The rent averages $950 per month. What do you think are fair fees?  The fees I am getting quotes for seem to be more like what I would expect to pay for single family. 

Thanks,

Brad

-% of collected monthly rent

-Leasing fee

@Brad T.

I would shop it around and let us know what you find out. I've seen rates around 3% and there's a website called cozy.co that helps landlords & tenants come together. 

This is one of the problems with buying small. Aside for the % fee, you'll be charged leaseups and R&M coordination fees, and a building as small as that can hardly support these.

Don't buy into low 3% - 6% management fees. One - you get what you pay for, and two - they will eat you with hidden costs. Management on this will run all in 10% - 12%. And, this is the big problem - more than likely, you won't be satisfied with the management!

Good luck!

Sadly, a 12 unit complex in the eyes of a PM company is probably worse than a SFH... more headache / phone calls / issues with the 12 units, but not enough units to make the management fee worth it (50+). You will get what you pay for, this is true. I would budget closer to 12-15% of gross on your pro forma because no matter what the PM % is, they will charge by the hour for everything "above and beyond the norm". If your management fee is 3% - just about EVERYTHING is suddenly "above and beyond the norm". Less so at 6-8%, and less again at 10%, though it will still happen.

Thanks everyone.  Your info has been a great help.  The best guy I have been working with has given me a quote of 8% of collected rent plus 50% of one months rent per new lease.  I think he will do a great job and I feel this is fair compensation.

@Brad T. ,how is the property management working out for you on your 12-unit?  Is it actually working out to the 8% you were quoted, or have there been lots of extras?  I'm looking to buy my first apartment building in Michigan of a similar size, and will need a PM company.

I agree with @Ben Leybovich don't buy into the small single digit rates. You're going to pay somewhere around 10% to 14% for something that small. I'd go with a quality PM too that has no problem being audited. Too easy to start skimming off the top in small mom and pop management companies.

@Tim Gathers The company was doing 8%, but then increased to a flat fee of $99 per unit a couple years after I started using them.  Their lease up fee also went from $500 to $750.  Luckily, the rents are about $1,000 per month on these units.  Any lower and I don't think I could handle the new rates.  They do a great job and I don't have many good options where these apartments are located.

Hi, 

One portfolio we have is 11 units and we pay 6% for management with no renewal fees and just $250 for new rentals, however; this is not normal. I would pencil 10% into your numbers with the hopes of getting it at 8%. If you plan on buying more in this area in the future, ask if there is a sliding scale on fees. For example, our other management company gave us 7% to start and it scales to 6% at 40 units and possibly lower over 100 units.

Thanks, @Brad T. .  $99 per unit per month would definitely be too expensive for the areas where I'm looking to buy. 

By the way, I recently spoke with a PM company that charges both a percentage plus a fixed fee for each unit.  Has anyone out there heard of such an arrangement?

@Brad T.

This definitely depends on the area, however I would expect to pay 8-10%. There are ways you can improve your return in this area though.

For example, if a company is proposing a 6% management fee for example, you could offer them 8% fee but no leasing fee. This way your interests are more aligned, they have more incentive to keep tenants happy and avoid a consistent turnover.

There are many ways to negotiate a management fee but any strategy that aligns interests is always a good tool to have.