Real estate & rental
Property Management Pricing Calculator
Prices management services, where the fee structure has to match where the work actually is.
Result
Overhead and margin are taken as shares of the selling price, which is why the cost is divided rather than multiplied. Adding 15% to cost does not produce a 15% margin. Gross profit is what is left after the cost of doing the job. Overhead comes out of that: the building, the office wages, the vans, insurance, software and advertising. A healthy gross margin still loses money if overhead is larger.
Get a Free Business AuditHow the calculation works
Cost to service a unit divided by one minus overhead and margin together, so the fee carries both, compared against the percentage of rent that fee represents. The percentage model is conventional and it does not match the cost structure, since the work per unit is similar whether the rent is low or high.
What moves the number
- Cost to service a unit, which is largely independent of rent.
- Turnover frequency, which drives most of the labour.
- Maintenance coordination volume.
- Overhead per unit under management.
Where this one goes wrong
A percentage of rent charges less for a low-rent unit that takes the same work, which is why portfolios of inexpensive units are frequently unprofitable at a percentage fee that works elsewhere. Either set a minimum monthly fee per unit or price the segments differently. Turnover is the other mismatch, since a unit turning over annually consumes several times the labour of a stable one and a flat percentage charges the same for both.
Before you quote
- Set a minimum monthly fee per unit, not only a percentage.
- Price or charge separately for turnover-heavy portfolios.
- Calculate the cost to service a unit before setting the percentage.
Questions
About this calculator
Why do low-rent units lose money under a percentage fee?
Because the work per unit is largely independent of the rent. A percentage charges less for a unit that takes the same effort, which is why inexpensive portfolios are frequently unprofitable at a fee that works well elsewhere.
How should a manager handle high-turnover properties?
Price them separately or charge properly for leasing, since a unit turning over annually consumes several times the labour of a stable one. A flat percentage treats both identically and the heavy ones subsidise nothing.
Is a minimum fee reasonable?
It matches the cost structure better than a pure percentage, because it reflects that servicing a unit has a floor cost regardless of rent. Most managers who have measured their cost per unit end up with one, and owners generally accept it when explained.
The formula
price = direct cost / (1 - overhead% - margin%)
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How to use this calculator
- Labour cost ($). Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($). Enter your own figure; the page starts at $850.
- Other direct costs ($). Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%). Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%). Enter your own figure; the page starts at 15%.
The result updates as you type, so you can try a figure, see what it does to price to quote, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Labour cost | $0 |
| Materials cost | $850 |
| Other direct costs | $0 |
| Overhead rate | 22% |
| Target net margin | 15% |
What comes out
| Result | Value |
|---|---|
| Price to quote main result | $1,349 |
| Direct cost | $850 |
| Overhead recovered | $296.83 |
| Net profit | $202.38 |
| Gross margin | 37.0% |
| Markup on direct cost | 58.7% |
Quote $1,349 to cover $850 of direct cost, recover $296.83 of overhead and leave $202.38 of net profit. That is a 58.7% markup on cost.
What each figure means
- Labour cost ($)
- Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($)
- A money amount, starting at $850.
- Other direct costs ($)
- Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%)
- Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%)
- A percentage, between 0 and 80, starting at 15%.
What the results tell you
| Result | What it is |
|---|---|
| Price to quote | The headline result. A money figure. |
| Direct cost | A money figure. |
| Overhead recovered | A money figure. |
| Net profit | A money figure. |
| Gross margin | A percentage. |
| Markup on direct cost | A percentage. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.