Why seven percent, and not eight, and not five.
Two landlords have asked, in the first month, why we don't charge eight percent. One landlord has asked why we don't charge five. Both questions are reasonable. This is the version where I lay out the unit economics for a five-to-fifty-door portfolio, show the work, and explain why seven percent — not eight, not five — is the number where the operating company we want to run is the operating company we can afford to run.
The unit of analysis is one landlord with one portfolio, fifteen doors, average rent $2,650 a month per door, GTA mix. Gross collected rent: about $476,000 a year. Seven percent of that is $33,300 in PM revenue. Hold that number; we'll come back to it.
The cost side, line by line.
The work on fifteen doors, done well, is about fourteen hours a week across the team — call answering, trade dispatch, bookkeeping, statement preparation, renewal follow-through, occasional notice work. At a fully-loaded operator cost (salary, benefits, software, office, the proportional share of the bench's relationship-maintenance time) of $95 an hour, that's $69,500 a year per fifteen-door portfolio. That number alone is more than twice the revenue at seven percent.
The reason the business works anyway is that the operator handles more than one portfolio. The cap on how many portfolios one operator can handle, without losing the operating detail, is the number that determines whether the whole model is viable. Our working number is three full portfolios of fifteen doors each per operator, with capacity to flex up to four. At three portfolios per operator, revenue per operator is around $100,000 and direct cost is around $69,500 — leaving a margin of $30,500 per operator before any of the shared cost of the apparatus (the office, the platform, the legal calendar, the senior oversight, the bookkeeping discipline that doesn't scale linearly with portfolio count).
Seven percent at three portfolios per operator clears that overhead with enough left over to do the work properly, build the bench, and not under-staff the work in the months when work spikes. It is not a high-margin business. It is a business that compounds, because the operator-portfolio relationships compound, because the bench compounds, and because the data compounds. None of that compounding shows up on the first year's P&L.
Why not eight percent.
Eight percent is the placement-fee model with a different name on the line. The math works the same way: you take a percentage of monthly rent in the front line, and you make up the gap by charging for the turnover. The PMs charging eight percent monthly are also, almost always, the PMs charging a full month's placement fee on turnover. The total taken from the landlord is the same; the incentive shape is worse. The eight-percent monthly with a placement fee means that the more rent we collect, the more we want the tenant to leave. The seven-percent monthly with no placement fee means that the more rent we collect, the more we want the tenant to stay. Same total economics; opposite operating incentive. Opposite operating outcome over five years.
We considered eight percent without a placement fee, to give ourselves margin. We rejected it for a separate reason: at eight percent on a fifteen-door portfolio at $2,650 average rent, the line item on the statement is $293 a month per door. That's the number a landlord notices. Seven percent puts it at $185 a month per door. The difference is small in absolute terms but large in psychology — and a landlord who notices the line item every month is a landlord who reads the rest of the statement, calls us with questions, and stays an engaged operator on their own portfolio. The seven-percent number is the number that gets read past, not stared at. That is a feature.
Why not five percent.
Five percent is a SaaS that hasn't admitted it yet. The math: at five percent on the same fifteen-door portfolio, revenue is $23,800 a year. With a $69,500 direct cost per operator handling three portfolios, the gross margin is negative. The PM that charges five percent makes up the gap one of two ways: by charging the tenant (placement fees, application fees, screening fees, lease prep fees — all of which the landlord effectively reimburses through reduced renewal rates and higher turnover), or by replacing the human parts of the work with software.
The first version is the placement-fee model in disguise. The second version is the SaaS-pretending-to-be-a-PM that the founding note already complained about. Both are versions where the operating detail — the call, the dispatch, the notice — gets replaced by a notification that doesn't quite do the thing it replaces.
We have looked at five-percent PMs in the market and read their landlord-facing communications carefully. The pattern is consistent: the lower the headline percentage, the more line items appear elsewhere — on the tenant's invoice, on the landlord's year-end reconciliation, on the renewal proposal. The total cost to the landlord, averaged over a five-year hold, is higher at five-percent-plus-fees than at seven-percent-all-in. The PM industry knows this and prices accordingly; the landlord industry hasn't fully caught up. Our pricing is the version that's the same on month one and month sixty.
What the seven percent buys.
A rent payment that moves on the first, or a call before the third with the reason and the next step. A trade who answers on the second ring because we pay him on the day he invoices. A renewal pursued ninety days before the lease ends. A notice filed by a human who has filed one before. A monthly statement with the unit, the period, the income, the expenses, and a one-line note. Everything below the seven-percent line is the apparatus around the work; everything above the line is the work itself.
A landlord who reads down to here is a landlord who'd benefit from a call. The first call is fifteen minutes, with no deck. Book one here, or write to hello@jaraygroup.com.