Master Lease Rent Payment to Owner

[Shelli Schilke]

I'm chatting with a guy who has a 5/2 SF house in the Tampa Bay area and he's renting out 5 rooms on a month-to-month basis. He doesn't want the hassle of doing that anymore, but selling his property will be a challenge.

I suggested doing a master lease listing me as the master tenant and then I would sublease the rooms to his current tenants. I would basically do what this owner is currently doing, which is more or less property management. He asked me for numbers, but I have no idea what would be equitable for something like this. To me, it's like Airbnb arbitrage, but for mid-term rentals.

He's getting $4K/month total rent. If that's what I would be getting from my sublessors (i.e.current tenants), how much rent should I pay the owner?

Your feedback would be greatly appreciated.

[Michael Smythe]

@Shelli Schilke average PMC management fees are 8-10% for LTR.

Higher for MTR & STR due to greater time investment tied to turnovers.

Room-by-Room is also higher due to higher management involvement. Probably 15-20%.

[Shelli Schilke]

@Michael Smythe - great info, thank you! 

[Tim Baldwin]

Since you are incurring significant risks, I would charge a fee that is commensurate with the risks. Property management company fees range from 8-15% in Florida for long-term rentals. Your management of this property would be more burdensome, however, because, as you said, it's similar to a vacation rental (but not quite as demanding). Vacation property managers charge over 20% normally. If I were you, I would be charging what vacation PM's charge. Also, be sure to have the landlord and property management resources you will need to manage the property properly, including having an attorney on-call for guidance and counsel, forms, lease agreement, and education.