How do management agreements typically specify the management fee compensation?

Management agreements typically specify the management fee compensation through negotiated terms between the owner and the manager. This flexibility allows both parties to come to a mutually agreeable financial arrangement that reflects the specific needs and conditions of the property being managed. Each management agreement can vary widely depending on factors such as the property type, location, the specific services required, and the expertise of the property management company.

Negotiating these terms gives the property owner the ability to capture any unique factors of the property, such as its management complexity or market conditions, which can affect the potential profitability and required management efforts. This means that the ultimate fee can be tailored to match the expectations and business model of both the owner and the manager.