Question on management fees

[Dan O'Neill]

Looking for some perspective on management fee. Some background: I toured a 15 unit property with a pm rep and the company worked up a budget for the property based on something similar they manage. The budget has 10% management fee which is expected but then there’s a separate line item for site manager payroll at 5k. This is for the person in the area which oversees about 100 units for the management company already. This would put the true cost of management at almost 17%. Is this normal?

[Matt Moreland]

Dan,

A typical property management fee could range anywhere from 4-10% of gross rents (larger properties get the better rates due to the economy of scale) in addition to a per door bookkeeping fee, let's say $5/door. Since the property manager is not on-site, it is not uncommon to see a small separate payroll fee. 

If the 15 unit property in question is collecting $7500 in rent each month, then a pretty common PM fee for said property would be in the ballpark of $825/month (($7500*.1)+($5*15) = $825). No matter how the numbers add up, 17% is a little steep unless the service is heads above the rest. 

I hope everything works out well for you, let me know if you have any questions!