Is it standard for an appraiser to add in a 5% - 6% management fee when appraising a park? Or more like 3%? Anyone’s input would be appreciated - especially from Mr. Hanson.
Rob:Since the appraisal is usually conducted at the request of a lender, the management fee should certainly be included. I would expect to see 5-6%, which is what we used in our underwriting and deal review. The lender is trying to figure out what price another buyer would pay (the loan is paid off) or what expenses they would incur if they had to take the deal back (loan is foreclosed).Will
Rob:
Management fees are fairly standard for most income producing properties. The lenders have come to expect management fees in our analysis. The management fee may be for on-site management or off-site management, or a combination of both. The basis is paying the owner/manager/operator for his or her time for finding tenants, moving in new homes, hiring contractors or getting bids for park maintenance, meeting with local municipalities, etc.
The amount of the fees can vary greatly depending on the property. There is not set industry standard or set percentage that I am aware of, but I have seen anywhere from 3% to 8% across different property types. For example, a property with many tenants with significant turnover (i.e. large apartment complex) would likely have a higher management feet (% or dollar amount) than a single-tenant small office building.