Standard per-door management pricing breaks down fast on a co-living portfolio

Consider a property manager whose standard structure is 9 percent of collected rent plus a leasing fee of 60 percent of one month per new lease, built around single family and small multifamily where a house turns once every 20 months. Now put that same structure against a 21-room by-room co-living portfolio across four houses, average tenancy running about 8 months, so roughly 30 new leases a year. The leasing fee alone comes to 60 percent of an $875 room rate, or $525, times 30 leases, or $15,750 a year. The percentage side runs 9 percent of roughly $220,000 collected, about $19,800. Total revenue of $35,550 sounds reasonable until the labor gets counted: showings for 30 rooms at roughly 4 showings each, screening 30 applicants properly, 30 move-ins and 30 move-outs with room-level deposit accounting, common area coordination across four houses, and being the point of contact for six-person households in each one. That labor typically runs 25 to 30 hours a week, close to a full time position at loaded cost of 55,000 to 65,000. The standard rate structure runs underwater by a wide margin on this kind of portfolio. Three pricing paths tend to close that gap: a flat per-room per-month fee, commonly seen in the 80 to 120 range; keeping the percentage structure but raising it to 14 or 15 percent with a smaller leasing fee; or a separate turn fee per room that covers the clean and re-list. Since turn frequency is the entire risk in a co-living contract, pricing the turn as its own line item, rather than folding it into the percentage, is usually the more defensible structure because it lets the fee track the actual driver of the cost.

angela_burke CP4CPRO 12

Answer

dmitri_248 CB2CPRO 11

Price the thing that drives your cost, and your cost driver is turns, not collections. A percentage of rent is a fee on an occupancy outcome the operator only partly controls. A per-room flat is a fee on capacity that has to be staffed whether the room is full or not. For a portfolio like this, structure it as a flat per-room-per-month base plus a per-turn fee, and drop the percentage entirely. Base covers the standing work: rent collection, maintenance coordination, the phone. Turn fee covers showings, screening, move-in and move-out inspection, deposit accounting. That way if average tenancy improves from 8 months to 12, revenue falls in a way that matches workload falling, and the owner has a reason to care about tenancy length, which otherwise he doesn't. On numbers like these, say 100 per room per month across 21 rooms is 25,200. Add a turn fee at 350 and 30 turns is 10,500. That's 35,700, roughly where the current contract lands, at a structure that doesn't punish the manager when the owner buys a fifth house full of empty rooms. Whether to own the turn risk or pass it through depends on whether the manager can influence tenancy length. Usually some, through screening standards and renewal outreach. So take a piece of it: turn fee flat regardless of cause, and a written screening standard the manager controls. If the owner wants to override a screening decision, that's a separate clause and it shifts the risk back to him. Also worth putting a rooms-under-management minimum in the agreement, and a termination notice long enough that the manager isn't left with a hiring commitment and no contract.

dmitri_248 CB2CPRO 11

3 replies

nataliehsuServicePRO

Naive question from someone still working out where I fit: does the owner know his 8 month average tenancy is the expensive part? If he's never seen it broken out per room, showing him that number might be the whole sales conversation. He's paying for it either way, in your fee or in his own vacancy.

nataliehsuServicePRO

bmoreno23ActivePRO

As the person here with the least experience, the thing I'd want if I were the owner is a number I can budget. Per room per month I can multiply. A percentage plus a leasing fee that varies with something I can't predict makes my own pro forma useless. @dmitri_248's version is easier to say yes to.

bmoreno23ActivePRO

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