What is the ideal annual property management and vacancy rate?

[Ndy Onyido]

BP Nation,

I am considering picking up an investment property from a turnkey company. Turnkey, because I am an out of town investor. However, the terms include 10% management and vacancy rate, which I find absurd. Does this depend on the location or do we have a standard rate for all?.

If an assumption of a vacancy rate is not met ( for instance in a year you have 100% occupancy?, who gets the budgeted amount for vacancy?

what else should I look out for in the contract agreement?

Thanks all

[Bill Jacobsen]

The ideal vacancy rate is 0% and the ideal management cost is 0% of rent.

I budget 5% vacancy unless I have other information that indicates I should budget more.  I pay 10% of actual rent + 1 month's rent to fill a vacancy.  It comes out to about 13.8% for property management.

If you are looking at a 4 plex or larger you should be able to get a little lower for management.

For vacation rentals I usually have 40-50% vacancy and 30-45% property management.

Hope that helps.

Bill