Hey guys,
Currently RFP’ing third‑party management for a Class B/C, sub‑50 unit 1920s asset in the Northeast. We typically use our sister company for PM, but they focus on Class A, so this is our first time running a true competitive process and benchmarking them against the market.
We’ve owned the property for almost two years, and the current PM is running a 67% expense ratio — about $10.5k/unit in opex on ~$1,300 rents, which leaves a thin yield. Our target is closer to $9k/unit and a 55–60% expense ratio.
I’ve spoken with several PMs who all claim they can save money, but none will include a budget in their proposals. I get that they don’t want to commit blindly, but I’m trying to use an RFP framework to understand their operating model and the real P&L impact.
So far I’m seeing two camps:
- The “Scrappy” Local — ~8% fee, more included in base, but still charging leasing fees. Likely to self‑perform cleaning, lawn, turns, painting, etc.
- The “Institutional” Pro — ~5% fee, but everything is a pass‑through: staffing, software, and a long list of third‑party contracts.
The Ask: How do you weigh the scrappy local vs. the institutional manager on smaller assets? What opex ratios are you seeing for similar size/vintage? How do you force transparency around their operating model so you’re not staring at a bloated opex line six months in? Any clauses or “gotchas” you build into the management agreement to keep them aligned with pro forma?
Appreciate any insight.
To tackle your situation effectively, here’s a breakdown based on the most helpful WSO content:
1. Weighing Scrappy Local vs. Institutional Pro
Institutional Pro: While their fees may appear lower, the pass-through costs can quickly inflate your opex. They bring better technology, reporting, and potentially stronger leasing capabilities, but their model may not align well with a sub-50 unit Class B/C asset.
Key Consideration: For a smaller, older asset like yours, the scrappy local might be better suited if they can demonstrate strong cost control and operational efficiency. However, ensure they have the capacity to handle tenant relations and compliance effectively.
2. Opex Ratios for Similar Size/Vintage
3. Forcing Transparency Around Operating Models
4. Clauses and “Gotchas” in the Management Agreement
5. Additional Tips
By combining these strategies, you can better evaluate potential PMs, drive transparency, and align their incentives with your pro forma goals.
Sources: Tides Equities?, Multifamily Developers and Acquirers: What do you look for in property management firms?, Student Housing Model, Park Hill Group Real Estate (PJT), Institutional Self Storage
bump
10.5k of opex per unit on a 50 unit older northeast asset doesn’t sound outrageous. Taxes and insurance probably a lot of that. If you have an elevator, security, or anything else like that it’ll also add up. If landlord pays some utilities that can also add up
How do you think you can save money on the expenses? That kind of asset management is more owner driven than pm driven imo
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