Closing fee is one month's rent, renewal is $350, and there's a $150 admin fee on every new lease on top of all of it. Ran the actual dollar number against gross collected for 2024 on a deal a sponsor showed me and it landed at 9.1 percent. The base fee is almost a rounding error by the time you add everything up.
Your math is right. The 6 percent is calculated on gross collected rent, but it only covers the ongoing management work. Every other line item, leasing fee, renewal fee, admin fee, sits outside that calculation. When you add them all back in and divide by what the property actually collected, the true cost of management is higher than the headline number. 9.1 percent on a 34-unit is plausible depending on turnover rate.
The number that moves this most is vacancy and turnover. If the building runs 15 percent annual turnover, you are paying a one-month leasing fee on roughly five units a year. At, say, $1,200 average rent, that is $6,000 in leasing fees alone, before renewals and admin. Low turnover shrinks the gap between the base fee and the all-in number. High turnover widens it fast.
The thing worth asking before you compare management bids: what does the sponsor's historical turnover look like, and what is the occupancy trend? A manager who charges 7 percent base but holds turnover at 8 percent annually can cost less in practice than one charging 5 percent with 20 percent turnover. The all-in math is the only number that matters for underwriting.
One thing to confirm with whoever is doing the deal's financial modeling: whether pro forma expenses used the base fee or the all-in fee. I would not assume either way without checking. A licensed CPA or real estate attorney can also help you read the management agreement if the fee structure has terms you are not sure about.
The Rena strategy guide for multifamily property management covers how management fees interact with net operating income, which is the figure institutional owners watch. Worth a look in the Guide tab.
What was the turnover rate the sponsor quoted you for 2024?
9.1 on gross collected is actually pretty tame for a full-service shop. I've seen 34-unit proformas where the sponsor modeled 6 flat and then buried a $200 "lease-up coordination fee" per unit that didn't show up until the management agreement appendix.
What's the vacancy assumption they used when they modeled that 9.1?
