Apartment Payroll and On-Site Staffing: How to Underwrite It
On this page
Payroll is the line in an apartment budget that sellers most often make look small. An owner who runs the building with family, or a manager who also works the leasing desk, can hide real labor cost. A new owner with a professional manager then pays for every role. This post shows how to underwrite payroll from the ground up. It sits with our underwriting guides. It is general information, not legal, tax or investment advice.
Raising for an apartment deal? Start free
Step 1: List the roles
A typical building may have some mix of the following. Smaller buildings share roles, and very small ones may use no full time staff at all.
| Role | What the work is |
|---|---|
| Community manager | Runs the property, leasing, collections, reporting |
| Leasing agent | Tours, applications, renewals |
| Maintenance supervisor | Repairs, turns, vendor work |
| Maintenance technician | Work orders, unit turns |
| Groundskeeper or porter | Common areas, trash, curb appeal |
Step 2: Price each role and add the load
For each role, estimate the wage in your market. Then add the costs that come with it: employer payroll taxes, workers' compensation insurance, health or other benefits, bonuses and training. Many underwriters multiply base wages by a load factor, but ask your property manager for the real number rather than a rule of thumb.
Do not forget:
- On-call and overtime. Emergency work does not stop at five o'clock. See the federal overtime rules at the Department of Labor.
- Unit credits. A free or discounted apartment for the manager is a cost even if it never appears as payroll. See loss to lease.
- Contract labor. Some work is contracted instead of staffed. Count it once, in the right line.
Step 3: Compare with the seller's numbers
Check the T12 for gaps. See reading the rent roll and T12.
- A very low payroll line can mean the owner does the work or pays family informally.
- A payroll line with no maintenance staff may be hiding vendor costs somewhere else.
- If the seller self manages, there may be no management fee either. Underwrite both. See property management fee.
Step 4: Test the total
Divide total payroll by units and compare it with other buildings your manager runs of similar size and class. If your figure is far from the manager's numbers, find out why before you rely on it. Test the result against the whole expense picture in operating expense ratio and the first year operating budget.
Step 5: Grow it
Wages and benefits do not stay put. Grow payroll with your own expense growth assumption, not with rent growth. See expense growth assumptions and reducing operating expenses.
A hypothetical example
This is an illustration with made up numbers, not a benchmark. A 60 unit building shows $20,000 of payroll in the seller's T12 because the owner and a relative do most of the work. A professional manager's plan calls for a community manager, a maintenance technician and part time help, which comes to $210,000 a year with taxes and benefits. Underwriting the seller's number instead of the plan would overstate net operating income by $190,000, and at a 6% cap rate that is over $3 million of value that does not exist.
How DoorRaise fits in
DoorRaise does not manage buildings. A sponsor sets the underwriting, and DoorRaise handles the raise, the deal company, the investor paperwork and escrow. Sponsors pay a flat $1,500 setup fee and a flat $5,000 yearly administration fee, not tied to the amount raised.
Frequently asked questions
Is payroll part of the management fee?
No. The management fee pays the company to run the property. Payroll for on-site staff is usually a separate expense the owner reimburses.
How do I know if payroll is understated?
Compare the T12 with your manager's staffing plan and with similar buildings they run. Large gaps need an explanation.
Should payroll grow with rents?
No. Grow it with wage and benefit costs, which are separate from rent growth.
Sources
- U.S. Department of Labor: Wage and Hour Division, FLSA
- IRS Publication 527, Residential Rental Property
This article is general information as of November 2026, not legal, tax or investment advice. Every investment can lose money. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.