So here is what it boils down to; Did you buy the property to invest your money or to buy a job?
The fact of the matter is that if you are buying a property you MUST include a management fee as part of the operational cost during your decision-making process.
You will either pay it to a management company or pay it to yourself. Either way including that fee best ensures you are making a decision based on the reality of the business and are compensated according to the effort you are willing to put into it.
If you're a long-term investor who is adding to an already existing investment portfolio you already understand management doesn't cost anything more than normal operating costs. No matter what investment you own there is someone managing it. The example I like to use is a stockbroker; who having access to your money is charged with applying the money to stocks they believe will meet or beat your financial expectations. The operations of how the money is used is completely dependent on the management team of the various companies your money has been loaned to. They build, market, and sell the widget or service. Your money is working and hopefully, it is churning out cash and value at the other end of the process. Odds are you will not be successful in finding an investment for your money and not have to pay a management team to deal with the operations of their industry. Real estate is actually one of the few exceptions, at least in theory. More on that in a bit.
Getting into real estate investments is very similar to the stock market. The cash is outlaid for the acquisition of ownership, in this case, real property (house, apt building, strip mall, etc). Along with that acquisition comes the management of the property; that is to say the day-to-day activities, building efficient processes, competing, marketing, leasing, and being able to report financials to yourself, investors, and Uncle Sam.
There is a difference, which I'd eluded to above, with real estate investment; or at least perceived to be a difference. This is where any other reason another item 1 above gets to be a little awkward.
Real estate has a relatively low entrance barrier. You as an individual are buying both the asset and the operational structure of an entire business. It's alluring because you get to be the CEO of your company and no doubt the Pro-forma you were given by the seller made all the sense in the world.
Here is how you know whether you have the opportunity to even decide whether you have a choice of hiring a management company; Are you an expert? Simple enough, but what do you need to know to do it effectively, to make money at it w/o exposing yourself to major risks?
Wow, I re-read that and it seems like a scare tactic. That was not the intent, and it isn't to say you don't have the skills &/or patience to handle it. This is an industry and this industry has experts all over the place. If you are not an expert and are competing against experts you can bet the learning curve will be steep before you start meeting your financial objectives in many cases. As negative-Nancy as it comes across each of these areas present very real risks; anything from disappointed tenants to $11K per day per occurrence in penalties.
What does a management fee include? Well, that's you're pro-rated portion to pay into the infrastructure of an already existing company. It's the administrative and executive labor & the underlying company structure you will not have to build yourself.