Does a 1.5% asset management fee on gross revenue actually cover what I spend running the asset

Question

$4,200 a month on a 22-unit I operate myself in Columbus. The fee at 1.5% of gross comes to about $1,890. I've been going through what that gap actually means if I syndicate this thing and take on LP capital, because I'm not going to run it for free and I'm not going to pad the promote to compensate for a fee structure I designed wrong. The $2,300 difference is real labor: two maintenance calls this week, one tenant issue that took four hours to sort, a vendor invoice I had to dispute. I don't see how a percentage of gross revenue prices that correctly when vacancy drops and the fee drops with it but the work doesn't. Curious whether anyone here has moved to a flat monthly fee instead, and what number you landed on per unit before LPs pushed back.

adeola_bankole · Answer

Vacancy spikes are exactly when the workload doubles, Columbus C-class especially.

sasha_lindqvist · Answer

The 1.5% figure is already optimistic for a lot of markets. On a 22-unit in Indianapolis right now I'm seeing sponsors charge closer to 2 to 2.5% of gross just to break even on actual touch time, and that's with a PM handling day-to-day. Flat fee structures I've seen in smaller syndicates tend to land around $175 to $225 per unit per month, so roughly $3,850 to $4,950 on your deal, which actually brackets what you're spending rather than leaving that $2,300 gap. The LP pushback tends to come when the flat fee escalates automatically with CPI, that's the clause that kills term sheets faster than the number itself.

teresa_iglesias · Answer

What's your actual hours per month logged, not estimated?

elliot_nakamura · Answer

What's your current property manager cost if you weren't self-managing?

Does a 1.5% asset management fee on gross revenue actually cover what I spend running the asset

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