How much to get paid for property management

22 Replies

hi, I have several apartment buildings that I manage on my own, but recently a friend of mine asked me if he can invest with me,  so as a good friend I agreed he should put in half of the money for a residential apartment building.

but now I realized that since I will be the one managing the property, I will need to take a fee for myself, so I was wondering how it should work. .. from what I heard and I see online  anything between 5-12% of the gross rent, or $80-100 per unit, and all these prices are in in a very wide range.... so I would like to know what are the real average numbers.

also I see it can get very technical like when I renovate an apartment whether there are turnovers, late fees, renting out apartments etc. .

so I em wondering if someone can give me an exact run down exactly  how to work it out, thank you

(I know done wool ask what  I wanna include, but that's exactly my question what could/should I include etc. Etc.)

[PLEASE NOTE: WHEN I SAY 10% OBVIOUSLY I WILL ONLY TAKE 5% FROM MY FRIEND SINCE I AM A 50% PARTNER AND I AM ALSO PA YING HALF OF THE PM FEE....]

Originally posted by @John Underwood :

Normally about 10% so if you are 50% owner I would say 5% would be fair for your friend to pay to you.

 1p% as I mentioned is a number I hear a lot, but in fact I hear of a lot of property managers  that  only charge like 6%?!

Originally posted by @John Underwood :

Normally about 10% so if you are 50% owner I would say 5% would be fair for your friend to pay to you.

 If he is doing 100% of the management, shouldn't he get the full rate?  After all, he is managing 100% of the units.

His 50% ownership would net him half the profits, but the management is a billable expense for which the owning entity is hiring him to do.  

Not sure of the tax implications, but that's how I would see it.  

Talk to your friend.  maybe you want to split the duties between the properties, so he does A, B and C and you do properties D, E and F.

If you do all of it, 50% of the regular cost seems fair as the other 50% would just go back to you and come from your half of the profit.

Originally posted by @Theresa Harris :

Talk to your friend.  maybe you want to split the duties between the properties, so he does A, B and C and you do properties D, E and F.

If you do all of it, 50% of the regular cost seems fair as the other 50% would just go back to you and come from your half of the profit.

My question was,  how much pm fees are. ....

@Sami Gren  

1) PM fees vary. As you said anything between 5% and 12% is common. It is for you and your partner to work out the rate. It sounds like you just want us to pick a rate for you so you can tell your friend what someone else says the going rate is. Ok then, tell them Steve said it's 10%. (I like 10% because I can do the math in head easily.)

2) Why are you managing SEVERAL apartment buildings? How many units are we talking here? Do you just not like property management companies? Do you have control issues? Do you not want to scale up? Or perhaps your cash flow can't support the extra 10% expense?

3) You brought in your friend because you think that's what "good friends" do? Bad business decisionBad friendship decision. Did you ask any of your advisors when you made that decision?

Originally posted by @Theresa Harris :

@Sami Gren  8-10% of the rent for managing it.  Renovations are another kettle of fish altogether.  Talk to your partner to see what their thoughts are as he now has his money in the property and he may not have thought about management fees.

As you will see in my original post, there is no sign of a conflict between me and my partner on how much my fee should be. We both agree that I should get a fee

My question is, since I wanna be fair, I want to know what the average is.

Originally posted by @Steve Hall :

@Sami Gren 

1) PM fees vary. As you said anything between 5% and 12% is common. It is for you and your partner to work out the rate. It sounds like you just want us to pick a rate for you so you can tell your friend what someone else says the going rate is. Ok then, tell them Steve said it's 10%. (I like 10% because I can do the math in head easily.)

2) Why are you managing SEVERAL apartment buildings? How many units are we talking here? Do you just not like property management companies? Do you have control issues? Do you not want to scale up? Or perhaps your cash flow can't support the extra 10% expense?

3) You brought in your friend because you think that's what "good friends" do? Bad business decisionBad friendship decision. Did you ask any of your advisors when you made that decision?

I am very unclear on what you were writing in paragraph 2 and 3, but it sounds that you are quite fresh to real estate, and you are influenced by READING without actual experience, so as a person that likes to help my colleagues (as you  mentioned in paragraph 3) I will try to explain to you a drop as far as I understand you are unclear about.

on your question why I don't give my properties to property management companies, if I don't like them. Well it  seems like when you see  a property manager buys real estate, you probably ask them why they don't let the investors buy the properties is it because he doesn't "like" their judgements on how to calculate a deal................

Regarding your question if I have "control issues". Well if managing properties takes to have "control issues" then I guess the answer is yes......

Regarding your question  if I don't wanna scale..... I genuinely can't reply... because I had the same question on Warren buffet how does he drive his car and still expect to scale, lol.

on your questions. If the cash flow can't support without. This 10%, I wanna teach you a little secret, but please don't tell anybody.... when you cash flow 10% and you gain an adittional 10% of managing your property it equals to a looming "20%"...

In paragraph 3 you wrote, taking in a friend as a business partner is a bad decision, I actually wanted to take only enemies  as partners, but I asked my "advisors" and they nixed it...

 If you have any additional questions please feel free to ask, I will be more than happy to help.

I really hope my responses were helpful for you

    Good luck

Originally posted by @Sami Gren :
Originally posted by @Steve Hall:

@Sami Gren 

1) PM fees vary. As you said anything between 5% and 12% is common. It is for you and your partner to work out the rate. It sounds like you just want us to pick a rate for you so you can tell your friend what someone else says the going rate is. Ok then, tell them Steve said it's 10%. (I like 10% because I can do the math in head easily.)

2) Why are you managing SEVERAL apartment buildings? How many units are we talking here? Do you just not like property management companies? Do you have control issues? Do you not want to scale up? Or perhaps your cash flow can't support the extra 10% expense?

3) You brought in your friend because you think that's what "good friends" do? Bad business decisionBad friendship decision. Did you ask any of your advisors when you made that decision?

I am very unclear on what you were writing in paragraph 2 and 3, but it sounds that you are quite fresh to real estate, and you are influenced by READING without actual experience, so as a person that likes to help my colleagues (as you  mentioned in paragraph 3) I will try to explain to you a drop as far as I understand you are unclear about.

on your question why I don't give my properties to property management companies, if I don't like them. Well it  seems like when you see  a property manager buys real estate, you probably ask them why they don't let the investors buy the properties is it because he doesn't "like" their judgements on how to calculate a deal................

Regarding your question if I have "control issues". Well if managing properties takes to have "control issues" then I guess the answer is yes......

Regarding your question  if I don't wanna scale..... I genuinely can't reply... because I had the same question on Warren buffet how does he drive his car and still expect to scale, lol.

on your questions. If the cash flow can't support without. This 10%, I wanna teach you a little secret, but please don't tell anybody.... when you cash flow 10% and you gain an adittional 10% of managing your property it equals to a looming "20%"...

In paragraph 3 you wrote, taking in a friend as a business partner is a bad decision, I actually wanted to take only enemies  as partners, but I asked my "advisors" and they nixed it...

 If you have any additional questions please feel free to ask, I will be more than happy to help.

I really hope my responses were helpful for you

    Good luck

Maybe I’m missing something but how do you plan on maintaining 10% cash flow once you’ve added in  your PM fee? 

Originally posted by @Andre Debs :
Originally posted by @Sami Gren:
Originally posted by @Steve Hall:

@Sami Gren 

1) PM fees vary. As you said anything between 5% and 12% is common. It is for you and your partner to work out the rate. It sounds like you just want us to pick a rate for you so you can tell your friend what someone else says the going rate is. Ok then, tell them Steve said it's 10%. (I like 10% because I can do the math in head easily.)

2) Why are you managing SEVERAL apartment buildings? How many units are we talking here? Do you just not like property management companies? Do you have control issues? Do you not want to scale up? Or perhaps your cash flow can't support the extra 10% expense?

3) You brought in your friend because you think that's what "good friends" do? Bad business decisionBad friendship decision. Did you ask any of your advisors when you made that decision?

I am very unclear on what you were writing in paragraph 2 and 3, but it sounds that you are quite fresh to real estate, and you are influenced by READING without actual experience, so as a person that likes to help my colleagues (as you  mentioned in paragraph 3) I will try to explain to you a drop as far as I understand you are unclear about.

on your question why I don't give my properties to property management companies, if I don't like them. Well it  seems like when you see  a property manager buys real estate, you probably ask them why they don't let the investors buy the properties is it because he doesn't "like" their judgements on how to calculate a deal................

Regarding your question if I have "control issues". Well if managing properties takes to have "control issues" then I guess the answer is yes......

Regarding your question  if I don't wanna scale..... I genuinely can't reply... because I had the same question on Warren buffet how does he drive his car and still expect to scale, lol.

on your questions. If the cash flow can't support without. This 10%, I wanna teach you a little secret, but please don't tell anybody.... when you cash flow 10% and you gain an adittional 10% of managing your property it equals to a looming "20%"...

In paragraph 3 you wrote, taking in a friend as a business partner is a bad decision, I actually wanted to take only enemies  as partners, but I asked my "advisors" and they nixed it...

 If you have any additional questions please feel free to ask, I will be more than happy to help.

I really hope my responses were helpful for you

    Good luck

Maybe I’m missing something but how do you plan on maintaining 10% cash flow once you’ve added in  your PM fee? 

I don't understand either, was just trying to answer his question on my best ability...... 

@Sami Gren No need to get hostile with @Steve Hall , he was just offering a different perspective, albeit in a somewhat brusque tone, haha. Being able to justify why we do things allows us to consider whether it is the best way forward. We're all just trying to make money here in the best way possible for us personally.

As for your PM fee question, I charge 10% of gross rents to do full service management, which means that leasing is inclusive of that 10%. Typically if people/companies are charging less, like 8%, then leasing is a separate fee equal to one month's rent. I don't like that structure, as it incentivizes the PM to turn over tenants more frequently, and turnover leads to leasing, vacancy & repair costs.

Originally posted by @Gregory Hiban :

@Sami Gren No need to get hostile with @Steve Hall , he was just offering a different perspective, albeit in a somewhat brusque tone, haha. Being able to justify why we do things allows us to consider whether it is the best way forward. We're all just trying to make money here in the best way possible for us personally.

As for your PM fee question, I charge 10% of gross rents to do full service management, which means that leasing is inclusive of that 10%. Typically if people/companies are charging less, like 8%, then leasing is a separate fee equal to one month's rent. I don't like that structure, as it incentivizes the PM to turn over tenants more frequently, and turnover leads to leasing, vacancy & repair costs.costs .

First of all thanks for your advice , I like your way of thinking.

secondly, I wasn'ttrying to be hostile at all to @Steve Hall, I'm so situ if it came through wrong, I was just trying to explain to him in a humorous way, a problem that occurs by a lot of people without much experience,  they read and read, but the don't realize that it takes actual Experience, to understand what you're reading...

@Sami Gren 10% plus 10% is indeed 20%; however, this is multiplication, not addition. You don't double your return by managing your properties yourself. If your properties are 10% caps, then by managing them yourself, you effectively make them 11.1% caps.

As for investing with friends vs non-friends. If a deal goes South and your investor is a friend, you may have just lost that friend. If a deal goes South with a non-friend investor, that's business, it happens sometimes. There's a large gap between friends & enemies.

I wouldn't write off the experience of others on this site, as many of the questions you've asked in your posts are quite basic things that many experienced investors would have no need to ask others about.

Gregory, As per your 10%, I addressed my joke in an earlier post as a response to someone that asked the same thing.

as per asking simple things. I want to teach you something and I'm sure once you will exercise it you will be thankful for this piece of advice, no matter how experienced you are, you should always ask other people for ideas, experienced as well as young energetic young inexperienced peopLe trying to push their way through the industry. YOU CAN AND WILL ONLY BECOME SMARTER.

in any case it seems like you were taking things personal  (explains why you couldn't understand how I could manage  properties, but I by nature am a guy that can take....) but I really really did not have any intention of doing thsa, it's just my humorous way of bringing out a point, my deepest apologies 

however if you would like to hear any kind of advice, I am all here to help other people, experienced as well as inexperienced

     Good luck

@Sami Gren I think the point of @Steve Hall 's original question on why you're self managing multiple apartment buildings/ asking if you don't want to scale up was basically to say that there are higher dollar per hour activities you can be doing than dealing with property management. If you factored in the numbers for property management into every deal you go for (which you must not be because you're asking what the avg rate is) then you could simply manage a manager rather than manage an entire building and all that goes into it. Once you find a PM that fits the bill and does a good job, you can spend your wasted time finding more deals and scaling.

To get back to the point and come away from the pointless sarcastic banter, just assume 10% average for PM. If you're 50/50 partners and you're doing all the work, why would you split evenly. Hypothetically you put the same capital down on the property, but going forward you do everything and he/she just collects a paycheck? If you HIRED a PM, then sure, the 5%/5% split between partners would make sense but since YOU are paying the full 10% in the form of labor (executing the job duties of a PM), that should come out of their end.

I guess that last part is my personal opinion on what's fair but you may have a different view. Partners usually bring either the hustle or the capital. You're bringing both and barely benefitting from it. If you really want to help your friend you should show them your whole process, including the PM so that they can then go and perform on their own. How's that saying go again?... "Give a man a fish, he eats for a day. Teach a man to fish, he eats for a lifetime."

Whatever you decide, spell everything out in a partnership agreement and be ready for a bumpy road because friends or not, when money is involved things can get stressful. Good Luck.

Originally posted by @Mike Bean :

@Sami Gren I think the point of @Steve Hall 's original question on why you're self managing multiple apartment buildings/ asking if you don't want to scale up was basically to say that there are higher dollar per hour activities you can be doing than dealing with property management. If you factored in the numbers for property management into every deal you go for (which you must not be because you're asking what the avg rate is) then you could simply manage a manager rather than manage an entire building and all that goes into it. Once you find a PM that fits the bill and does a good job, you can spend your wasted time finding more deals and scaling.

To get back to the point and come away from the pointless sarcastic banter, just assume 10% average for PM. If you're 50/50 partners and you're doing all the work, why would you split evenly. Hypothetically you put the same capital down on the property, but going forward you do everything and he/she just collects a paycheck? If you HIRED a PM, then sure, the 5%/5% split between partners would make sense but since YOU are paying the full 10% in the form of labor (executing the job duties of a PM), that should come out of their end.

I guess that last part is my personal opinion on what's fair but you may have a different view. Partners usually bring either the hustle or the capital. You're bringing both and barely benefitting from it. If you really want to help your friend you should show them your whole process, including the PM so that they can then go and perform on their own. How's that saying go again?... "Give a man a fish, he eats for a day. Teach a man to fish, he eats for a lifetime."

Whatever you decide, spell everything out in a partnership agreement and be ready for a bumpy road because friends or not, when money is involved things can get stressful. Good Luck.

On your question about self managing, i might not understand exactly your point, because for me in fact, and I believe anyone that has the few minutes a day to write on bigger pockets, the 24 hours of the day, is not so yet so busy that I shouldn't have  the extra time to manage my own properties,  now why should I hire a pm and pay them let's say even $50,000 a year if I can keep it in my pocket?

secondly, why is managing my own properties different than the property management companies? Like I said no one here is so busy to be able to close on a deal twice a week....

Also, I think you should try to manage your own property, you will see not only do you gain the PM fee, there. Are so much things that would not be as good when the owners themselves wouldn't manage it.

An other point if your buildings are so time consuming that you are busy with it all the time, then I agree, you should hire a pm........ my main busy time is the first month after purchasing the buildings, to get it running, but once you've set it up right, it should be very easy and non time consuming 

to wrap it up... it seems to me like I mentioned,  that people read a lot and then get caught up in their dream bubble,  and they put themselves on the same line with Grant Cardone or other huge re players, and they think they don't have time to manage....... work hard so you'll earn money to buy more deals

and even when you'll have 1,000 units and will be very busy, it is still cheaper and better  (for the ones that can handle it) to pay your own worker to manage it, rather than just giving it over to a different third party company. .

Regarding your point about my friend paying the whole management fee, I am an honest  person, and that's why I succeeded till now,  and I don't know, maybe I'm missing something,  but the way I look at it is as follows, if we would pay 10% for a pm company, let's say it's $10,000 a year, I would pay $5,000 and my partner $5,000, so now if I manage the property I see no reason why my partner should pay my half.... I'm viewing myself like a third party company.

and why I'm not teaching my friend how to manage, I think the answer is in the question you asked me, I AM THE PROPERTY MANAGEMENT COMPANY THAT MY FRIEND CHOSE....

again if you have any additional questions, I would be happy to assist

Updated about 2 years ago

I also feel I need to add a thing that I see a lot here on bp. people tend to bring out their successes on the amount if deals they did or the amount if units etc. I just wanna say the goal here is to Make money,

@Sami Gren I never said I couldn't understand how you could self-manage, I manage my 20 properties personally, it takes about 5 hours per week, which equals $35K per year of management savings, no problem. 

I also never said not to ask questions, I said that you shouldn't be condescending to others saying they have little/no experience when you obviously have glaring gaps in your own knowledge base.

Originally posted by @Gregory Hiban :

@Sami Gren I never said I couldn't understand how you could self-manage, I manage my 20 properties personally, it takes about 5 hours per week, which equals $35K per year of management savings, no problem. 

I also never said not to ask questions, I said that you shouldn't be condescending to others saying they have little/no experience when you obviously have glaring gaps in your own knowledge base.

 Sorry for me not being so clear, all I said was regarding to what you were trying to explain what that guy (sorry, forgot his name) was saying, so I was just saying that his RESPONSE was out of lack of experience, 

I was not trying to sell my 11 years of experience  in managing  buildings ranging  from 8 to 123 units from the best to the toughest neighborhoods, nor was I trying to sell my several years experience going solely on my own. And not even my biggest success in making all my properties earn from the nicest cap rates in the whole area (downside is constantly having to deal with my friends/realtors trying to get me to sell my properties due to their amazing maintenance and huge cap rates, lol), and that was only, BUT ONLY  through always putting my head down and asking advice from people, even with much less experience than me, like I mentioned earlier, the best way to success is to learn from EVERY PERSON as if they are the smartest, you can always learn something new.

so again, I was not talking about MY experience,  all I was saying was, that if you want to give advice then go ahead with whatever you think, but if you just wanna sound professional by poking fun, then that ok, I love that too, but 'know your stuff before you do that"

@Sami Gren Well, you're the one who came on here asking for people's help, then attacked the people kind enough to offer their advice / opinions. Little did we know that you are the most successful real estate investor of all time & we were all wasting our breath, good luck to you.

Originally posted by @Gregory Hiban :

@Sami Gren Well, you're the one who came on here asking for people's help, then attacked the people kind enough to offer their advice / opinions. Little did we know that you are the most successful real estate investor of all time & we were all wasting our breath, good luck to you.

 I would kindly suggest, and it's highly advisable for you  to take classes to go over basic ethical conduct, being nj license 1642932 and PA license rs332943