Management Agreement
Definition
A management agreement is the capital-light coliving model where the operator runs someone else's building for a fee, typically a base fee plus an incentive tied to performance. The operator sells a playbook and track record rather than taking property risk.
The formula
Operator fee = (Base % × Gross room revenue) + (Incentive % × NOI above hurdle)
- Base %
- the fixed management fee, charged on collected room revenue rather than billed revenue
- Gross room revenue
- rent collected before operating costs, usually excluding deposits and one-off fees
- Incentive %
- the operator's share of performance above an agreed threshold, often 15-25% where it exists
- Hurdle
- the NOI the owner keeps in full before any incentive share applies
Worked example
Our worked example, not a market rate: a 20-bed building, £900 a bed, stabilised at 92% occupancy. Base fee 10% of collected revenue, incentive 20% above a £110,000 NOI hurdle.
- 01Collected room revenue = 20 beds × £900 × 92% × 12 = £198,720.
- 02Base fee = 10% × £198,720 = £19,872.
- 03NOI after all operating costs and the base fee = £126,000 (assumed).
- 04Above the hurdle = £126,000 − £110,000 = £16,000. Incentive = 20% × £16,000 = £3,200.
Total operator compensation £23,072 — 11.6% of collected revenue. The incentive is only a seventh of it, which is the honest picture: in most coliving management agreements the base fee is the business and the incentive is the alignment gesture.
A management agreement is the model where the owner keeps the building, keeps the tenancy risk and keeps the upside, and buys operating capability instead of renting it out. It is the opposite trade to a master lease: there, the operator takes the risk and the spread; here, the owner takes both and pays a fee. Neither is superior — the question is who is better placed to carry an empty month.
The three live structures are a percentage of revenue, a fixed per-bed monthly fee, and a hybrid with a performance share. Percentage of revenue is the most common and the most aligned on rate, because the operator earns more by pricing better. Per-bed is easier to budget and favours the owner in a strong market, because the fee does not rise with rents. A hybrid exists to fix the one thing percentage-of-revenue does not reward, which is cost discipline — the operator earning a share of NOI has a reason to care about the utilities bill.
The clauses that decide the deal are rarely the fee. They are: the term and what triggers termination without cause; whether the operator can be removed for missing an occupancy floor; who owns the resident data and the booking channels at the end; whether the operator may charge affiliated suppliers; and what happens to pre-opening costs if the building never opens. We read those five before we read the number.
The common mistake
Charging on billed revenue instead of collected revenue
A fee calculated on what was invoiced pays the operator the same whether or not the money arrives, which removes exactly the incentive the owner is paying for. Collected revenue is the correct base, and the agreement should say what counts as collected and how long an arrear stays uncollected before it is written off. Owners who miss this clause discover it during the first bad quarter, when arrears and fees rise together.
Frequently asked
What is a typical coliving management fee?+
We will not publish a single percentage as though it were a market rate, because the range we see genuinely spans single digits to the high teens depending on scope. What moves it is what the fee includes: an agreement covering marketing, bookings, resident management, maintenance coordination and reporting sits far above one that covers bookings alone. Compare scope before comparing numbers.
Is a management agreement better than a master lease for the owner?+
It is better if you believe in the building and want the upside; worse if you want a guaranteed rent and no operational exposure. A management agreement leaves every empty bed on the owner's account. The honest way to choose is to model both at your break-even occupancy and see which one you can survive at 70%.
Can an operator run a building without owning or leasing it?+
Yes — that is precisely what a management agreement is for, and it is the lowest-capital way into operating. The operator brings brand, systems and staff; the owner brings the asset and the risk. It scales faster than lease arbitrage because each new building needs working capital rather than deposits and fit-out.
Coliving management
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Underwrite a coliving deal
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