Helping colleague write business plan and need to determine Property management fees

Question pertains to commercial property owners or managers who handle the budget. 

Helping a colleague with a business plan and trying to gauge how much PM fees are. So my questions are:

1. How much would you pay a PM (a range is good) 
2. If  the fee is a percentage of rents what is that percentage and is this contingent on occupancy? What would you pay to manage a vacant building? 
3. What do you expect from your PM Company? 
Anything else I’m missing about PM Company and fees ?
[{"id": "h1uon9f", "text": "Depends on the property type and size of property. The best thing to do is to call a management company in the location and asset type you are targeting and give them the low down on what you are trying to do. They should give you a range.", "replies": [], "depth": 1}, {"id": "h1uqcg7", "text": "Management fees are typically around 2-5% of actual gross rents, depending on market and property type, because the primary goal of a PM is to have a fully occupied property. PMs do exactly what the job description is: they manage the property. Manage the tenants, deal with expenses, hire contractors for repairs/renovations. This is based on the assumption of a standard CRE property.", "replies": [{"id": "h1uyx67", "text": "2-5% and maybe some sort of incentive fee. But that depends on the property, etc. If you have a property with lots of units that may turn you may want some kind of invective to keep them focused on keeping them leased. If it's one property with a stable tenant, there's no need bc that rent will be steady for years.", "replies": [{"id": "h1vpszy", "text": "Self storage is typically 6% in my experience.", "replies": [{"id": "h1vpzqj", "text": "Does the management handle the rentals of the units as well? Idk much about those structures actually. Or do they look after the building and collect rent from the company operating the space?", "replies": [{"id": "h1vrlz9", "text": "Yes. The higher fee is due to the more time intensive nature of the product and also depends on the number of storage units within the facility. \n\nAnd to SFLady's qualifying the 2-5% range to typical CRE, you could say this is definitely not office, retail, industrial or MF - or even hotel - but it's certainly not manufactured housing either. Though I do agree with her comment.", "replies": [{"id": "h2111sa", "text": "Not sure where you get that from, I\u2019ve seen PM fees as low as 2% on industrial, ~3% is typical for MF and Office, hotel is usually 2.75-3.5 w/incentive, seniors is 4-5, and MHC is 4-5...", "replies": [{"id": "h2151in", "text": "Not sure where I get what from? You literally didn't say anything that negated what I said.", "replies": [{"id": "h21d0es", "text": "Sorry maybe I\u2019m confused, I read your comment as saying that 2-5% fees were atypical?", "replies": [{"id": "h21f1x5", "text": "Got it. I agreed that they were typical. No worries.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "h1z4mku", "text": "Self storage is a unique bird. Most self storage facilities have an on-site property manager (lives above the the office in some cases), so PM expenses will always be higher than an office property, for example.", "replies": [{"id": "h1z6s1e", "text": "Agreed. Oftentimes the same holds true for MF complexes as well though the fees are much smaller. Realizing that expense is generally in addition to the mgmt fee. Not sure how that works on the Self-Storage P&amp;L's.", "replies": [{"id": "h1zmgkc", "text": "Totally! In California, for example, any apartment building with 16 or more units must have an on-site a PM. This often translates into a 5%+ PM fee. Thanks so much for adding color to this convo!", "replies": [{"id": "h1zobef", "text": "Crazy. And absolutely appreciate the back and forth with you too!", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "h1wqwk4", "text": "As part of the incentive we structure our PM fee is paid off gross receipts or rent actually collected. This incentivizes the PM to track down late rent.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "h1uv6o4", "text": "3-4%", "replies": [], "depth": 1}, {"id": "h1uxxlx", "text": "i'd upvote /u/zagfan10 twice if I could, these are all over depending what the characteristics of the property are.\n\n1.  anywhere from 1-10 percent, also you may have markup on maint (0-20% seems most common that) or they may use first party maint which they profit from.  Depending on property type again, you may have leasing fees to pay.  This would be more common in multifamily, in retail/office the pm and leasing can be different companies.  There may also be accounting fees etc.\n\n2.  Managing an empty property depends on the characteristics of the property and what needs done.  When I've done that in the past I just charge a flat fee (750/month I think is what I charged last time that came up, for a small (think it was 5k/sf or so?) office property.  Thats basically contracting and paying landscaping/utils/etc and walking through it twice a month to make sure nothing bad is happening.\n\n3. this is all negotiable, it varies drastically on property type, size, and class.  It depends too if staff is expensed against the property (normal for larger places, rare for small places)", "replies": [{"id": "h1v3oy2", "text": "Thanks for the feedback. For the maintenance fees your fee is the 15-20% on top of the cost of repair correct?", "replies": [{"id": "h1v5dvh", "text": "I actually don't charge a maint markup but yes that kind of range is common.  That would be for 3rd party contractors, if you are large enough to have staff for the specific property it wouldn't typically be marked up at all, if the maint is employees of the man company and billed against the property hourly that is also not typically marked up.  \n\nKeep in mind these are just generalities, people do all kinds of weird shit that won't conform with what I just said.\n\nIf you can share more info on the property in this thread I think you'd get a lot better answers.  PM on a 500k SF office high rise and a 9 unit apartment complex are going to be night and day different from each other.\n\nI've seen norm maint and capex marked up differently too before (or even in some cases ownership taking resp for capex themselves and pm not even being involved in it)", "replies": [{"id": "h1v6ljw", "text": "Thanks and at the moment I don\u2019t have more information as I am helping with proposing pm fees at this stage. However when a property with specifications does come through may I please DM you the specifics? We will be sending out letters to PM owners soon", "replies": [{"id": "h1vllny", "text": "just post here, I wouldn't necessarily even be able to answer that for all properties and this is all market specific too.", "replies": [{"id": "h1vlpa6", "text": "Understood", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "h1uyjce", "text": "You have property management fees which are some % of gross revenues depending on the property class/market, but you\u2019ll also have property manager salaries that are separate. The salary portion will depend on market and level. Both are typically recoverable operating expenses. \n\n(Class a and b office perspective)", "replies": [{"id": "h1v3gal", "text": "So let\u2019s say the property isn\u2019t fully leased and in a recovering market what\u2019s the best way to approach fees? Maybe start off with a lower flat fee monthly and when the building gets fully leased transition the PM Fees to reflect a percentage of gross rents? I guess I\u2019m trying to help my partner figure out how to structure diff scenarios", "replies": [{"id": "h1v4o8x", "text": "If the building isn\u2019t fully leased, then the annual gross rents are already lower leading to a lower management fee due. The separate salary will be your fixed cost. \n\nEven if the building is 100% vacant, you\u2019ll need someone in some capacity to run maintenance and upkeep.", "replies": [{"id": "h1vk4s1", "text": "Exactly. This is precisely why i wanted to get feedback on fee structure. The numbers have to make sense for both parties. Thanks for your reply.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "h1viz5c", "text": "Get bids or quotes. The conversations will be useful in growing your network and expanding your general knowledge base because these are rates change based on region and asset size.", "replies": [{"id": "h1vjf1j", "text": "Truth. Just wanted direction and feedback from Reddit.", "replies": [{"id": "h1vk1sh", "text": "For a small asset in Los Angeles 6% of NOI is a top line number that passive investors pay. If you are using PM fees as a way to take cash out (investors or syndicates who own enough properties to justify hiring a full time PM), I\u2019ve seen up to 8%", "replies": [{"id": "h1vlul9", "text": "Wow I\u2019ve never seen that high. In the south I see 4% but that\u2019s interesting to know. Thanks", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "h26tbbd", "text": "1. The average hourly pay for a PM in the United States is $37.54 an hour.  It is better to monitor the local positions.\n2. A property manager costs approximately 7-10% of my total rental income.\n3. Identifying activities, developing project schedules, estimating required resources, as well as activity timelines. This is what I expect from my PM company.\n\nAlso, I can recommend checking the site of the **OGSCapital** company. They create business plans and have a great website with much useful information, including an informative blog and helpful samples.", "replies": [{"id": "h27v0dj", "text": "Wow awesome info thanks!", "replies": [], "depth": 2}], "depth": 1}]