Investor · Aiken, SC · Member since 2014 · 398 posts · 120 votes
11y
I would use the $92. You are only paying management when the property is rented. However, be sure to account for a placement fee if your manager charges it.
In my situation I figured that my units turn over every 2 years, so I turn half a year. My manager charges me 8% for management and 1/2 month's rent for placement. So, 1/2 months rent over 24 months per unit.
At $500/mo rent - $250 placement fee/24 months or about $10/month per unit.
Investor · Aiken, SC · Member since 2014 · 398 posts · 120 votes
11y
I would use the $92. You are only paying management when the property is rented. However, be sure to account for a placement fee if your manager charges it.
In my situation I figured that my units turn over every 2 years, so I turn half a year. My manager charges me 8% for management and 1/2 month's rent for placement. So, 1/2 months rent over 24 months per unit.
At $500/mo rent - $250 placement fee/24 months or about $10/month per unit.
Real Estate Investor/Developer · Seattle, WA · Member since 2015 · 96 posts · 75 votes
11y
Petra,
Great question!
If you are calculating management fee then the management company will almost always use the collected amount of rents when they calculate their fee (what you refer to as Operating Income). Typical mgmt fees are 3-5% for multi family properties, and 8-10% for properties with less than 5 units. That may or may not include any lease bonuses if they lease your units (read contract).
When it comes to operating expenses, I would typically use a fixed $$ amount or the percentage of collected rents. (I can use fixed numbers because I have a lot of data that I can reference and compare to.)
The best option is always to talk to other investors in your area, with similar deals (age, units, condition) and get real numbers, or to review the financials from the owner, if they have any. You can also get estimates from vendors on insurance, painting for an apartment etc. before you buy.
Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
11y
This was right on target for me! Great question and one that I was trying to determine myself just today. Deciding to search instead of posting the same question, now I can move on with my analysis. :)