Operations · Property management

The eight per cent is not the cost of property management.

A worked example of where an operating year actually leaks, and why the management fee is almost never the number to argue about.

September 2026 · 6 min read

A worked example, not a client file. The figures are illustrative and chosen because they are ordinary.

Owners negotiate the management fee harder than anything else in the operating budget. It is visible, it is a percentage, and it feels like the one line you control.

Take a small building: eight units, $1,800 a month each, $172,800 gross potential. Management at 8% is $13,824. Argue it down to 6% and you have saved $3,456.

Now look at what else happened that year.

Where the year actually went

The fee saving set against what the same operating year actually leaked. Every bar but the first is money the fee negotiation never touched.
  • Vacancy and turnover. Two units turned. Three weeks empty each, plus paint, clean and a lock change. Call it $4,600 in lost rent and $2,400 in make-ready.
  • Delinquency. One tenant went two months down before anyone moved. $3,600, most of which never comes back.
  • Deferred maintenance. A roof repair postponed twice became a roof repair plus a ceiling. The difference is not the roof, it is the ceiling.
  • Under-market rent. Three units never got the renewal increase because nobody ran the comps in time. At $75 a month each, that is $2,700 this year and it compounds into the next.

You saved $3,456 on the fee. Turnover alone cost twice that, and the rent you did not raise costs it again every year.

$3,456Saved by arguing the fee down two points
$13,300Leaked elsewhere in the same year
3.8×The second number over the first

What the fee is actually buying

The manager who charges 8% and holds turnover to one unit, catches the delinquency in week two and brings you the renewal comps unprompted is not more expensive than the one at 6%. They are several thousand dollars cheaper, and the gap widens every year you hold.

This is also why operations belong in the underwriting. A rental model with a management fee line and no turnover assumption, no delinquency allowance and no annual rent review is not modelling the building. It is modelling a spreadsheet.

What we would actually check

  • Turnover rate and average days vacant, in writing, for the manager's existing portfolio.
  • How delinquency is escalated, and on what day.
  • Whether anyone is contractually responsible for reviewing rents at renewal.
  • The maintenance reserve, and whether last year's deferred items are in this year's budget.
  • What the manager does not do, which is usually where the surprise lives.

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