As the title states, I am curious to know if you should deduct your property management fees from a property's gross or net rental income. Thanks in advance.
You true net rental income takes into account your management fees...
The formula would be: Gross Rental Income - All Fees (Including Management Fees) = Net Income
I think I understand. So if my Gross Rental Income, before any fees were applied, was $2000 a month, and I wanted to plan to set aside 10% per month for property management fees, my monthly management fees would be $200?
Hey Tyler, yes and no. Your management fee will likely be a percentage of the value of your tenants or the equity value of the property. So theoretically yes, but in practice your ‘fees’ section may look different on each property you encounter.
@Tyler Hyma if you’re analyzing a property and that’s your purpose, yes 10% of gross.
You can also call around to local management companies and price them out. Call 3-5, I promise you’ll get a wide range of quotes.
Most charge a percentage of gross rents, some a flat fee per unit. There will be variations in lease up fees for signing a new tenant. Most will have lease renewal fees. Some will keep late fees, others split them, and some will just take their percent like ordinary rent. Some will mark up repairs, some won’t.
Point is, they make their money some where, any deal that seems too good to be true on the surface either is or you’re not seeing where they’re making their money.
Hey! Thanks a lot, guys. That gave me a great perspective on it. And yes, I was wondering for the sake of analyzing deals.
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