I currently own a property management company (started it one year ago!) and personally manage our own 22 investment properties. We are in negotiations to sell a chunk of land that has 15 units on it. The buyer "very much would like" me to continue managing them!! Here's my pitch: - Extremely convenient for the buyer to not have to shop around for a PM company - all the infrastructure is in place (tenant accounts, payment portal, maintenance requests, leases, etc) - I hand-picked these tenants. I have high qualifications, so none of them have been a problem at all. They're all on 12 month leases. - My husband's company does maintenance, lawncare, etc so we would continue with that as well (although extra charges for the new owner as far as repair costs, etc). - The tenants know me, they know the system, it is a smooth transition with nothing changing except the person ultimately calling the shots. - I do all my own marketing, social media, listing vacancies on websites, etc (we are at 0% vacancy) - I have intimate knowledge of all previous maintenance and the layouts/highlights of each unit, relationships with subcontractors, and honestly I have personal (PROFESSIONAL) relationships with each one of my tenants. I'm sure I could think of some other benefits to hiring me. But, I think that based on all of those things, plus the pure convenience of having it already set up, is worth the higher end of the spectrum. I am thinking of asking for 12%. I value any input you have to gift me!!!

I'll echo other's sentiment - unfortunately the PM business is somewhat of a commodity, with pretty fierce competition on rates. Sounds like you're nearly 50% above market norms here - there's no harm in aiming high and charging for your value but know that the rate will be a major factor in most investors decisions. One thing you didn't mention was other fees- are lease ups free at 12%? If they start comparing your rate to others make sure they're comparing your apples-to-apples with the flat fees as well. I can't speak to your buyer, just what I would do as the investor in this situation. If it was me I would replace your company, just based on rates, regardless of value provided - its just not worth the 50% premium for me even if your company is really really good, but other investors may have different priorities. For background I'm in Seattle and pay 7% + a lease up fee (I think its $650)

Congrats @Amanda Thompson for starting your own PM firm! I had one in Seattle for a few years, it can be brutal but I truly believe women are wired better than men for the biz. LOL! I also use a PM in Boise for my 26 units, they charge 8 percent. So speaking from experience on both sides, here's some feedback on your points: - Extremely convenient for the buyer to not have to shop around for a PM company -- Not sure many investors wouldn't shop around if someone quoted 12% management fees. Even if a pain for me, I would shop for a better rate. - all the infrastructure is in place (tenant accounts, payment portal, maintenance requests, leases, etc) -- So you want to charge a premium for systems already in place? If anything, that would lead me to believe the transition should be fairly smooth and easy. Nice that you may not be charging them an onboarding fee but I don't see why the increased management fee applies to this aspect. - I hand-picked these tenants. I have high qualifications, so none of them have been a problem at all. They're all on 12 month leases. -- Great! So they are all great tenants, no issues or problems...shouldn't that equate to a lower management fee not a higher one since they are not on the "headache" list. You could charge the buyer a higher renewal fee for retaining such great tenants but again, I don't see the justification for a higher monthly management fee. - My husband's company does maintenance, lawncare, etc so we would continue with that as well (although extra charges for the new owner as far as repair costs, etc). -- Not sure I follow this point. Are you implying that your husband does those things as part of (included in) the management fee? If so, I would see value there. If his company still plans to charge for maintenance and landscaping, still don't see 12% value other than you have a known, reliable vendor. - The tenants know me, they know the system, it is a smooth transition with nothing changing except the person ultimately calling the shots. -- Same as above. So easy transition and no increased work load on your office's part. Again, not seeing the value in 2-4% above your competition. - I do all my own marketing, social media, listing vacancies on websites, etc (we are at 0% vacancy) -- Many PMs can say something similar. I'm not sure of your total unit count but zero vacancy may imply your rents are under market. - I have intimate knowledge of all previous maintenance and the layouts/highlights of each unit, relationships with subcontractors, and honestly I have personal (PROFESSIONAL) relationships with each one of my tenants. -- That's fantastic but my solid PM would be able to say the same for most of that as well, although I don't expect them to have personal (pro) relationships with each. I don't mean to squash your perceived value at 12% but I believe there is too much comparable competition in a market like Boise to shoot that high UNLESS you can prove the value, financially, to the buyer. If you can show you can get rents up 20%, then 12% PM fee is easier to swallow. For example, when I bought my first apartment complex in Boise, the PM offered a flat rate until they reached a higher, target average rent, then the 8% kicked in. That's the beauty of running your own business. No matter what input you get from online, you're open to charge whatever you feel is appropriate based on the level of service you provide. Best wishes in your success!

Is 12% Management fee outrageous?

Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

4y

If you include lawn maintenance and snow removal, and you handle vacancy professionally, I think this is great.

I'd pay 12% for a property manager who kept my vacancy to an absolute minimum. I don't want to see units sitting, however, and would require that at 12%, if you let any unit sit vacant for more than 30 days, that I have the option to move that unit to a new PM with no termination fee, and no questions asked.

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Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

4y

How much are you charging for lease renewals and placing new tenants? I'd negotiate the lawncare as separate. 12% is on the higher end, but if the lease renewals and placing tenant costs are lower, then it might balance out in the end. 12% plus a full month's rent to place a new tenant would be too high for me. My units rent for over $1000 a month. If they rented for $500 or 600, perhaps. Or charge a flat fee for placing new tenants. I'd also expect a bit of a discount for 15 units in one location.

3 Reply

Bjorn AhlbladPro Member

Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes

4y

@Amanda Thompson 12% is not outlandish, 10% is quite normal and we have inflation which everyone knows. Besides if you start low you can't go up so start high and you can come down if you choose-right?

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Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

4y

@Amanda Thompson

I think it depends on full scope of work and also what the gross rents are. Gross rents if $2k per unit is far different than $500.

Also what are your renewal fees, do you charge if unit is vacant and also new lease fees?

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

4y

If the rent is $500-$600 and there’s no placement or renewal fees you might get that. In the land of $1500_$2500 rents 8% plus $150 fee is more common. If the tenants are horrible having the PM is worth 12% (as long as the tenant pool is horrible and not the PM’s choices.) . If they are great 8% is gravy.

Ps. I hate move in/ renewal fees. It’s put the PM and landlord at opposing goals. When their “reward” for finding a new tenant is $150 while losing out on 8% while vacant you get more 8-15 year tenants. If their reward is a months rent, suddenly new turnover is their friend.

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

4y

@Amanda Thompson no one's brought up the point of an investor expecting a discount due to 15 units.

Another potential determining factor is what Class of property/tenant are these?

We charge a higher percentage rate for Class C than we do for Class A, due to the additional time required.

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

4y

Quote from @Amanda Thompson:

Are you licensed and insured? When managing for others, you need the proper licensing and insurance.

I would also point out you are exposing yourself to liability for others when you only have one year of experience. How well do you know the law? How well do you understand trust accounting, reporting, maintenance of records, privacy laws, etc?

Managing for others is not the same as managing for yourself. I would also like to point out that management really isn't very profitable with just 15 units after considering your expenses and liability. It's stacking nickels to make dollars, so you really need around 100 units under management to make a decent living.

Just some thoughts from someone that doesn't know you or your situation. :)

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Amanda Thompson

OP

Property Manager · Boise, ID · Member since 2021 · 119 posts · 48 votes

4y

Quote from @Scott Trench:

If you include lawn maintenance and snow removal, and you handle vacancy professionally, I think this is great.

I'd pay 12% for a property manager who kept my vacancy to an absolute minimum. I don't want to see units sitting, however, and would require that at 12%, if you let any unit sit vacant for more than 30 days, that I have the option to move that unit to a new PM with no termination fee, and no questions asked.

I think I would probably either not charge them for vacant units, or charge for only one month and if for some reason it doesn't get filled, then they would not pay until it is filled. The market here is crazy though, so I doubt we will have any vacancies. Thank you for the advice! What exactly do you mean by handling vacancies professionally?

1 Reply

Amanda Thompson

OP

Property Manager · Boise, ID · Member since 2021 · 119 posts · 48 votes

4y

Quote from @Theresa Harris:

How much are you charging for lease renewals and placing new tenants? I'd negotiate the lawncare as separate. 12% is on the higher end, but if the lease renewals and placing tenant costs are lower, then it might balance out in the end. 12% plus a full month's rent to place a new tenant would be too high for me. My units rent for over $1000 a month. If they rented for $500 or 600, perhaps. Or charge a flat fee for placing new tenants. I'd also expect a bit of a discount for 15 units in one location.

I would include things like lease renewal fees, or placing tenants within the 12%. Like, I would not charge extra for those things, they'd be included. Our rents are $2400/mo and $2200/mo depending on the size of the unit. Thank you!

1 Reply

Amanda Thompson

OP

Property Manager · Boise, ID · Member since 2021 · 119 posts · 48 votes

4y

Quote from @Chris Seveney:

@Amanda Thompson

I think it depends on full scope of work and also what the gross rents are. Gross rents if $2k per unit is far different than $500.

Also what are your renewal fees, do you charge if unit is vacant and also new lease fees?

Good point! I answered a few of those questions in my last reply to someone, if you want to take a peek. I'd be offering a pretty full-service system for them!

1 Reply

Amanda Thompson

OP

Property Manager · Boise, ID · Member since 2021 · 119 posts · 48 votes

4y

Quote from @Bill B.:

If the rent is $500-$600 and there’s no placement or renewal fees you might get that. In the land of $1500_$2500 rents 8% plus $150 fee is more common. If the tenants are horrible having the PM is worth 12% (as long as the tenant pool is horrible and not the PM’s choices.) . If they are great 8% is gravy.

Ps. I hate move in/ renewal fees. It’s put the PM and landlord at opposing goals. When their “reward” for finding a new tenant is $150 while losing out on 8% while vacant you get more 8-15 year tenants. If their reward is a months rent, suddenly new turnover is their friend.

I totally agree with you about the nickel & diming of different fees. I would charge the 12% with no other fees. Our rents are $2400 and $2200, plus monthly pet rents. I hand picked all these tenants, and they are awesome.I have been managing the whole thing for a year.

1 Reply

Amanda Thompson

OP

Property Manager · Boise, ID · Member since 2021 · 119 posts · 48 votes

4y

Quote from @Drew Sygit:

@Amanda Thompson no one's brought up the point of an investor expecting a discount due to 15 units.

Another potential determining factor is what Class of property/tenant are these?

We charge a higher percentage rate for Class C than we do for Class A, due to the additional time required.

I'm not sure why they would get a discount for me doing more work. ;) I'm not sure about what the classes refer to, but the units are all 1-year-old, high-end duplex homes, which I have been managing since they were all brand new and vacant. :) I have high qualifications, so I chose all tenants and they're all great.

0 Reply

Amanda Thompson

OP

Property Manager · Boise, ID · Member since 2021 · 119 posts · 48 votes

4y

Quote from @Nathan Gesner:

Quote from @Amanda Thompson:

Are you licensed and insured? When managing for others, you need the proper licensing and insurance.

I would also point out you are exposing yourself to liability for others when you only have one year of experience. How well do you know the law? How well do you understand trust accounting, reporting, maintenance of records, privacy laws, etc?

Managing for others is not the same as managing for yourself. I would also like to point out that management really isn't very profitable with just 15 units after considering your expenses and liability. It's stacking nickels to make dollars, so you really need around 100 units under management to make a decent living.

Just some thoughts from someone that doesn't know you or your situation. :)

Those are all very valid points, thank you. I have learned so much after basically being thrown into this a year ago. This is basically a side gig for me, so I don't technically need to make a living on it, but I do expect to be paid for my time and the extras my company would provide. In Idaho there are no licensing requirements, but my company is LLC and is also insured. I have a legal service I can ask questions to, and a lawyer in case I need an eviction (hasn't happened yet). I didn't really expect to grow my business into managing for others, but now it's an option so I'm just weighing the pros and cons. :) My husband is a builder/developer, and we keep his builds as rentals, so there are more down the pipeline (including 8 more that will be available this fall). I truly appreciate the issues you bring up!

0 Reply

Amanda Thompson

OP

Property Manager · Boise, ID · Member since 2021 · 119 posts · 48 votes

4y

THANK YOU!!!! Thank you for your honest feedback and very thoughtful questions!!

0 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

4y

I wish you can manage my rental. I will increase to 13% :)

3 Reply

Justin Moy

Investor · Kansas City, MO · Member since 2020 · 400 posts · 278 votes

4y

I don't think 12% is outrageous but it also depends on the other finances. What are you taking for lease renewals / new leases? If you're stacking on the fees (1st months rent for new leases + 12%, + 75% of renewals) then I may be hesitant. If lawn and snow is taken care of either in that 12% or at a very high discount, then that right there could possibly make up the additional ~2% (I'd expect most 15-unit properties to run about 10% for management).

At the end of the day it's not really about the management %, it's about ROI on money and time. Lay out all the way you save them money and time and I doubt the 2% extra will be a large deal for additional certainty and less headaches.

1 Reply

Luther Wilson IIIPro Member

Real Estate Broker · Kansas City, MO · Member since 2017 · 537 posts · 292 votes

4y

Cheers, @Amanda Thompson. We’ve been starting at 12.5% for ours! Depending on the locations and # of doors - we’d be somewhat flexible on it. It’s up to you how you want to make it shake… If you’re gonna stand firm then I’d imagine you’re confident that you could get the business elsewhere. Or perhaps if you really want to keep those 15 doors - you might just have to see what you could work out with the potential new owner? 🙂 PM doesn’t get enough love lol. There’s a lot that goes into it and a lotta investors don’t get it until they try to do it own their own OOS and they get smoked. Anyway, yeah, see what you can work out!

2 Reply

Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

4y

@Amanda Thompson that was the rate a few years ago we paid with no lease renewal or lease up fees. It was sort of a standard in the area with 9 month student and then summer rentals. Honestly though if this is a side gig for you I would ask if you could handle urgent issues for me. If you have a day job are you going to give it the attention of a PM who is in the office daily. One of the reasons we fired the PM was unavailability and ditzy office staff, and they were a full time office.

0% vacancy after 1 year only? that really isn't a big deal, several years maybe. I would pitch service so what is your responsiveness? I would pitch standards, not hand picked tenants but high tenant standards, aggressive monitoring and filling of units with qualified tenants. Put together your performance metrics.

3 Reply

Lane Kawaoka

Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes

4y

It depends on the price of the property. In higher rent areas 6-9% might be fair but for sub 100k properties 10-12% and 100% of first months rent is the range.

LOL every thing is negotiable if you can find something else.

1 Reply

Thomas J.

Raliegh, NC · Member since 2018 · 50 posts · 19 votes

4y

I'm not sure why no one has proposed this before......

include the management agreement in the offer to purchase contract

1 Reply

Matt M.

Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes

4y

So would you charge to place a new tenant? If so, how much?

2 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

4y

Standard property management fee is 8%. 12% is a 50% increase in price over standard. You're not charging a little premium for better service.. youd be charging drastically higher. Chances of investors paying a 50% premium over standard prices is almost a zero chance of happening.

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Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

I will always pay more for superior service. 12% is reasonable IF you are the best PM out there.

3 Reply

John Kirkman

Joshua Tree, CA · Member since 2018 · 7 posts · 3 votes

4y

I had several properties at Snowshoe WV years ago and the management company there charged 40% plus housekeeping.. beach house in Duck NC fee was 10% plus housekeeping plus pool and hot tub.. If you’re bringing in a ton of business fee is very reasonable? Haven’t done any residential just resort

0 Reply

Bud Gaffney

Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes

4y

Nope it's not!

1 Reply

Is 12% Management fee outrageous?

Is 12% Management fee outrageous?

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