Still 7-12% Mgmt Fee for $600 Rent?

Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes

If a rental property has $600-700 in rent coming in, is it standard for property management companies/people to take 10% of that ($60-70) or is it common for them to have like a $100 minimum? Just getting a feel for standard practice here to determine CFs.

2 Reply

250 views

Most Popular Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

depends on the company .. but if I owned it I would have a 100 dollar minimum

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

7 Reply

See this reply in the discussion

72 Replies

Jump to latestLatest

Sort by

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
depends on the company .. but if I owned it I would have a 100 dollar minimum
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
7 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
7y
600 to 700 a month rent is typically a lower income to marginal type area. Management is more intensive so they tend to charge 12%.
Conversely if someone is managing a nice property with 4,000 a month rent they might charge 7%.
One you are getting almost no headaches and 3,360 for fees. The other you might be looking at 800 bucks and a massive headache and tenant that might not always pay on time and a demanding landlord.
Podcast Guest on Show #47
NNN Invest53 Reviews
Website View Page
5 Reply
Aaron Moayed
OP
Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes
7y
@Joel Owens - So 12%/high end, but not a $100 minimum?
1 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
7y
100 minimum depends on cost of living for an area. In CA 100 would be nothing but in MS that dollar could stretch further so what managers will work for varies.
Podcast Guest on Show #47
NNN Invest53 Reviews
Website View Page
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Aaron Moayed:

@Joel Owens - So 12%/high end, but not a $100 minimum?
you get what yo pay for.. also you buy 600 dollar rentals in the deep south and you are in for a wild ride
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
7 Reply
Aaron Moayed
OP
Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes
7y
Gotcha. I’ll do some due diligence via calling. Thx
2 Reply
Aaron Moayed
OP
Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes
7y
@Jay Hinrichs - Not always...
The property in question is renting for $775, but is capable of $875+. It’s in Ohio near Cleveland, so no not the Deep South.
2 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
Originally posted by @Aaron Moayed:

@Jay Hinrichs - Not always...
The property in question is renting for $775, but is capable of $875+. It’s in Ohio near Cleveland, so no not the Deep South.
Some of the firms out here in Cleveland have minimum's of $100 but the majority of the big ones do 10% on that price range. There are some who do even cheaper & don't charge full months rent as a leasing fee & things of that nature.........Lol good luck with those guys though. Those are properties that end up with 3ft high grass & the rental posted on the MLS for 6 months.
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
Originally posted by @Aaron Moayed:
@James Wise - Thanks for the info. Did you get an alert based on the word Cleveland?
Yup keyword alerts are a great feature. Another feature of BP is a strict no advertising in the forums policy.
1 Reply
Tom Shallcross
Rental Property Investor · Chicago · Member since 2018 · 613 posts · 1k+ votes
7y
@Aaron Kinney - my PM does the $100/minimum, otherwise it's 8% or 10% depending on the area. The reasoning, as mentioned earlier in the thread, is there's typically more hours and intensity on the lower monthly rents. I only have one building in my portfolio where I'm at that minimum and it's close to being above the min so it's not a gap.
They have a reputation to uphold and need to ensure they put the right amount of time and effort to it, which is fair. As long as they're doing their part I'm good with it. Again, it's on only one of my units so my outlook might be different if I specialized in an area of lower rents and had many units like this.
0 Reply
Aaron Moayed
OP
Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes
7y
@Tom Shallcross - How's that property performing comparing to the rest of your portfolio (as it relates to ROI)?
0 Reply
Tom Shallcross
Rental Property Investor · Chicago · Member since 2018 · 613 posts · 1k+ votes
7y
It's fine. My only unit <1k is $875/m so it's not like a huge drop off. Tenant was also inherited so I will be putting in some work and bumping the rent once she's out. I'm fine not pushing her out now as she's been good, I'm cashflowing, and I can focus my efforts on scaling.
0 Reply
Federico Gutierrez
Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
7y
It all depends on the company and the market you're in. If all the PM companies are charging the similar 10% or $100 then that's market value.
0 Reply
Syed H.
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
7y
Originally posted by @Joel Owens:

600 to 700 a month rent is typically a lower income to marginal type area. Management is more intensive so they tend to charge 12%.
Conversely if someone is managing a nice property with 4,000 a month rent they might charge 7%.
One you are getting almost no headaches and 3,360 for fees. The other you might be looking at 800 bucks and a massive headache and tenant that might not always pay on time and a demanding landlord.
wow I'm happy I'm not in your market lol.

In the markets I operate, $600-700 rent is around 7-9%. In the $4000 neighborhoods, 3-5% depending on how many units.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Aaron Moayed:

@Jay Hinrichs - Not always...
The property in question is renting for $775, but is capable of $875+. It’s in Ohio near Cleveland, so no not the Deep South.
so the question is are you over paying by 15 to 25 a month ?? that seems like a pretty small number to be worried about and again I think you get what U pay for.. if there is one thing not to go cheap on and that is PM
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
1 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Aaron Moayed. My PM charges 7 percent on all rents (some as low at 400 or lower). They make up for it in scale (manage 2000 units) and Low overhead (3-5 employees).
They’re service isn’t perfect and you sometimes have to be more hands on, but I find they’re price outweighs the sometimes less then ideal service.
I’ve had PMs where I pay a lot more and the service still wasn’t that great compared to what I get now with the 7 percent PM. For example, another PM I used, I cannot get anyone on the phone, ever. The cheaper PM, someone picks up every time I call..
4 Reply
Aaron Moayed
OP
Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes
7y
@Jay Hinrichs - More like $30-45, but maybe.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Aaron Moayed:

@Jay Hinrichs - More like $30-45, but maybe.
Ok gotcha your focus on the pennies I focus on the dollars .. :) good luck with your rentals..
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
3 Reply
Aaron Moayed
OP
Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes
7y
@Jay Hinrichs - Also, my post wasn’t about saving pennies... it was about estimating them to understand my potential cash flow. Thank you for your always generalized/sweeping statements. Always helpful 😂
2 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
7y
Property management is a low income job. Really low on the scale of choices out there. Someone really has to love that stuff.
In my world of commercial retail.
Lowest return to highest return typically:
1. Property management
2. Leasing for tenant rep or landlord rep
3. Buying or selling comission transactions ( I do that)
4. Syndicating deals as a sponsor ( I do that )
Example 4 million property at 7 cap for 280,000 NOI. All in with cam say 350,000. Management charges 4% so 14,000 annually if all goes perfect.
Tenant rep broker say Starbucks does 10 years at 800,000 value in a center at 3% is 24,000.
Buyers broker on buy side for transacting gets 2.5% for 100,000 in comission.
Sponsor gets 3% for 120,000 fee, plus admin fee, plus split of cash flow, plus equity percent upside, plus disposition fee, etc.
If you get someone good to manage a property for a great fee percentage treat them like gold because they are very hard to find. I have a colleague who manages about 15 million sq ft of retail. It is about break even for them and not a huge money maker. They make some coin off of the leasing but not huge income. The biggest payoff for them is when an owner sells they know upfront so can buy to add to their portfolio ( about 9 million sq ft) and already have been managing the property so know how to underwrite and what to offer for purchase.
For planning purposes you might want to use the higher management number just in case you can't always find the cheaper gem of a property manager. Plan for the worst but hope for the best. Another one is investors doing self managing when initially buying and not including in the numbers. Then when they get tired of that or go to sell the other buyer includes a management fee and expectations for cash flow or exit sale price do not match. Same thing with patching a property and not properly maintaining while owning to suck out extra cash flow. The seller then tries to sell with a bunch of deferred capex. They want to have the cake and eat it too. Doesn't work that way. Buyer comes in with lower price.
Podcast Guest on Show #47
NNN Invest53 Reviews
Website View Page
4 Reply
Mike Fontaine
Property Manager · Leominster, MA · Member since 2017 · 53 posts · 16 votes
7y
@Aaron Moayed - totally depends on the company and for some, the scope of work which they actually have to get into. I've seen in my area that a lot of companies base their percentages off how many units you have. -10 10% / 12% 11-30 8%, 30 -50 7% and so on. Usually if they have to find the tenants first they will charge an upfront fee. Atleast that's how I've seen successful companies in MA run
0 Reply
Tom Ott
Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
7y
Originally posted by @Aaron Moayed:

If a rental property has $600-700 in rent coming in, is it standard for property management companies/people to take 10% of that ($60-70) or is it common for them to have like a $100 minimum? Just getting a feel for standard practice here to determine CFs.
The minimum is normally 10% or $100, at least around Cleveland. I wouldn't work with anyone is undercutting the competition. They will make up for the lower fees somewhere else.
0 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
Just be sure to factor in about 16% PM cost year 1 for a vacant. If the tenant-placement fee is 1 month's rent (1/12 = 8%) you can count on everything else not costing only 2%. LOL
Then hope you don't have any service calls. The Maytag man will be called for every little thing. Plus overrides, of course, for scheduling the work. Estimate PM fees generously.
3 Reply
Aaron Moayed
OP
Real Estate Broker · Sacramento, CA · Member since 2019 · 198 posts · 46 votes
7y
@Steve Vaughan - Hmm yeah, I did an excel IF function to keep prices at $100 a month minimum (otherwise 9%), did 1/2 month’s rent for leasing fee, $350 setup fee, and 1/2 rent for lease renewal. Repairs/vacancy/capex were their own section, but totaled 18%. I feel like my numbers are pretty aggressive.
0 Reply
Steve RozenbergPro Member
Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Aaron Moayed
I would first say that it depends on the business model of the PM company you are using. I do know from owning these first hand as well as managing these types of properties that they tend to take more staffing hours from a management perspective. We did a study here in our Houston market and found that it was almost double the management staffing hours for properties that rented below $1000 then above on average. If you look at it from a business perspective and if my company charges 10% of the mgt fee and your property rents for $600 we make $60 per month with more involvement needed from my staff. If I manage a home that rents for $2000 per month that is a $140 difference and less staff time. I can grow and still charge less over time because I can have my staff managing more homes with less work which enables my staff to do more proactive things for the owners and tenants and not be swamped with challenges and issues that go with lower income rentals. Its not a bad thing but I personally found it hard to manage on a larger scale
3 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.