Property Management

Property management is the hands-on running of a rental, from advertising vacancies and vetting applicants to taking rent, fixing problems and staying inside landlord-tenant rules. It is done by the owner or by a hired manager for a fee. A gross rent multiplier ignores the cost either way.

Professional managers typically charge a percentage of collected rent, plus leasing fees when a unit turns over. That fee comes out of rent before net operating income. Two identical properties at the same GRM, one self-managed and one professionally managed, have different returns.

Using a management fee in the analysis even when you plan to self-manage keeps comparisons fair and puts a price on your own time. It also matters when comparing sellers' numbers. An owner-managed property's expense history may leave management out entirely, which makes its net income look better than a buyer who hires a manager will see.

Further reading: Property Management on Wikipedia.