Multi-Family Operating Margins

It is my understanding , that operating margins for multifamily range from 50% to 70% given variables such as number of units, payroll, tax rate, etc.

I'm looking at a deal where the GPs operating margin is slightly north of the high end of the range listed above. This GP has a fantastic track record so I want to take what they're giving at face value, but this operating margin seems far too aggressive.

Has anyone, either personally or anecdotally achieved margins north of 70%...? Would love to hear people's thoughts on this.

 
JimboUSC:
i've seen closer to 60% , 70 sounds aggressive

This is the best I've seen. I'm skeptical when I get margins this high. The only time I'm seeing assets achieve ~60% margins is when the utilities are all paid by the tenants. If you have an asset with >40 Units and you're below $1,600/door across payroll, R&M (including TO and all service contracts), and SG&A I'm usually calling bs.

 

I've seen it with value add once stabilized, usually involving some sort of combination of operating efficiency as mentioned above (green building/solar panels, tenant direct bill, low management/payroll costs, portfolio level admin/sg&a). Not out of the question but tough. I think 70%-75% is OK as long as they can provide some backup/detail, anything above that would be ludicrous.

"Who am I? I'm the guy that does his job. You must be the other guy."
 

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