Fees for third-party commercial property management services are structured in multiple ways:
- Percentage of Gross Rental Income: Management fees for rental or investment properties are most often computed this way. For example, if the total annual rental income of a property is $1 million, the management fee is $40,000 per year if the fee is four percent.
- Cost-Plus Structure: Management fees for headquarter buildings or larger condominium properties are often computed this way. If a property manager is on-site and is only responsible for that property, then 100% of her salary is paid by the client (i.e., the “cost” component). Additionally, the property management company receives an additional amount for administration, overhead, and profit (i.e., the “plus” component).
- Fixed Fee Structure: A fixed monthly fee is appropriate for a condominium property that is too small to warrant a full-time, on-site property manager. That condominium property most likely requires a portfolio property manager who manages multiple properties and spends only part of the time working for that property.
- Hourly Rate: An hourly rate structure is typically used for facility maintenance and consulting services as negotiated. They can be included as part of the management agreement or a stand alone agreement.
- Percentage of Project: Fees for project and construction management are often computed at a percentage rate of the total project as negotiated.
Understanding fee structures is one important factor when considering a third-party commercial property management company. Knowing what services are included with the management fee is equally important. At Trimark, we tailor our agreements to match each client’s needs. We always welcome the opportunity to discuss our services in more detail.