How many units does it take to support a PM?

Question

How many apartment units will it take to support a full time property manager? SOmebody who can collect rents, turn units over and coordinate repairs. I've heard anywhere from 50 to 100 for one person.

Bill S. · Answer

A few assumptions, a "regular" hired gun PM runs 10% of monthly rent plus 1 months rent at turnover for securing a new tenant. Good ones make 6 figures. If you are hiring an employee then the number would be different than if you hire an independent contractor.

Here (Denver Metro) for example the average rent is about $1,000 per month. Manager fee would be about 10% or $100 per month per unit. You would also have turnovers which run one months rent and assume an average tenancy of 3 years (probably long) then you would have $333 per year ($1,000 every 3 years) on average per unit in turnover costs for PM. This translates to roughly $1,500 per year per unit. Paying someone $20 per hour would result in about $35 per hour of expenses due to taxes and benefits. The cost to you would be about $70,000 per year (assuming 2,000 work hours in a year). The breakeven point would be about 47 units ($70K/$1.5K). I was told by someone in the PM business it's fairly easy to handle 50 units with one person. It's also fairly difficult to do a good job with one person when you have more than 100 units.

Now obviously if you change the numbers you change the outcome.

Paul Khazansky · Answer

i think 80 units is a bare minimum, unless you are located in a pricy market such as Seattle, where you may be generating enough revenue with fewer units

William Robison · Answer

I suppose you are asking about hiring your own manager versus hiring a property management company.  I think a lot would have to do with the location and tenant quality, as well as turnover rate.  I believe that the 50-100 rule stands accurate, with the right support team.

Check your local state rules.  It likely states that you can hire a person to assist your business of managing property, but if you use an independent, they should have a brokers license.  If the person is not an employee, but yet a contract employee, you may be running close to the line.

An experienced team can go a long way to help you.

All the best.

Joel Owens · Answer

A good discussion.

The number of units that go up with one property the PM management fee goes down. WHY? Because the PM company can generate a certain revenue off of one location and property and save time for the return.

You can do off site, on site, or possibly hire your own employees as mentioned.

Anything 50 units or more I generally see 5 to 6% as the going PM rate. 4 units and below is 10% normally. 5 to 10 units is 9 to 8 or so, above 10 units it goes about 8 to 6 rate for 11 to 49 units.

Now this isn't a hard and fast rule. A lot depends on rent per unit you are getting an quality of the area. Even with more units if the area is depressed and rents per unit is low expect management PM fee to be much higher than 5 to 6.

I have also seen it where one property owner owns say 800 units spread out amongst 20 properties of various sizes in the same county. Even though some properties are 15 units they still have a PM fee of 5% overall because the PM company manages all 800 units within a 4 mile radius etc.

The bigger issue than PM with number of units is the onsite repair person. I consider this person just as or more important than the PM. You can't afford a full time competent repair person with a low number of units. So you either have to do them yourself, pay retail trade rates which will kill your cash flow, or have a partial repair person that is fixing your small complex but also working other small jobs and complexes to make ends meat.

You really want a size where you can afford that full time repair person that knows every inch of that property and how to fix things and where to get the parts. It makes the tenants happy to keep the place up and reduces turnover and also keeps small items that are maintenance into becoming thousands of dollars of repairs from neglect.

Paul Khazansky · Answer

Just to be clear, when I said 80 units, I meant an on-site property manager. You can certainly afford to have an off-site property manager with a handful of units.

Joe Fairless · Answer

@Mike Dricken I agree with @Paul Khazansky with an estimate of about 80 units or so depending on the market. Personally, even if I have a 30-unit building I'd still use a property mgmt company and make less money.

That said, it depends on the deal. For example, a client of mine just closed on a 6-unit and he's using a property mgmt company and the #s still make sense.

How many units does it take to support a PM?

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