Property Management Pre-authorized Repair Limit

16 Replies

I own some properties (mostly duplexes) in Cleveland, OH and have been looking for a new property manager. In looking for a manger I see that there is a wide range of maximum repair value that the management can authorize without my authorization. One manager had $100 as the limit, one had a $500 limit. The property manager with the $500 limit was very rude when I pushed back, saying I just needed to trust them or we shouldn't work together. In my opinion trust is earned, and $500 for one service call adds up quickly.

I was wondering if anyone has any feedback on what they have authorized for their property manager, without the manager needing to get your authorization for the repair. My hunch is $250-300 seems reasonable, but would like feedback.

Also, any recommendations on a Cleveland property manager?

Thank you!

I’ve encountered $250 everywhere I’ve been. The bad news almost every repair is $175-$250 because the technician knows the job will be instantly approved by the PM. The good news is sometimes it might have been a $300 job but they don’t want to come back after waiting for the PM to get approval and simply discount it to $250.

In the end. If you don’t trust your PM switch PMs. If you do, the pre-approval limit could really be any amount, Since you trust them. If hey call and say the water heater burst at a rental and it’s $985. Are you going to say hold up I’m going to get another plumber to come out and give me a quote?

Find a PM that doesn’t make money on repairs. They just want to make their 8% “easy” money. The rest is just noise. 

@Bill Brandt thanks for the feedback. The $250 is what I thought is reasonable, I figure that's still a couple hours for a plumber or an electrician, and even more for a handyman. The "just trust me" attitude the person had made me want to trust them less, trust is earned.

$200+ is pretty normal. Call around and see what a basic service call costs for a variety of common issues: clogged toilet or sewer line, furnace or water heater pilot won't stay lit, garbage disposal is leaking, refrigerator isn't staying cold, etc. You'll find these will run between $100 - $200. If you PM called and asked your permission, you would say yes to all of these. Why waste the time? If your PM is worth their salt, they won't send contractors out for unnecessary repairs and they'll use trusted vendors that don't jack up their invoice just to maximize the $200 limit.

By the way, you said the last PM "was very rude" when you pushed back, but maybe they were just being honest and you didn't like the answer. I've refused to work with certain owners because they are micro-managers, penny-pinchers, dishonest, or asking me to do things that are not honest/legal/moral. Maybe they were just trying to explain that your expectations will not fit with the way they operate their business. I think that's a good sign even though they're probably not a good fit for you.

300-600 if what I have seen.  Never seen anything below 300.  This is also area dependent.  

In my opinion, if the managers minimum  is to high to you then I agree with the manger, you should not work with them.  I don't agree with the trust us part as that comes over time, not on a phone call.  But they have systems and processes in place for all of their homes that target their minimum.  

They may agree to lower it for you for a period but I would not be shocked if they have a hard time doing something on your homes that is out of sync with everyone else homes they manage.

@Scott M. When I brought up the trust is earned, as I feel burned by the last manager, the guys says "if your wife cheated on you, would you never get married again?" I definitely sympathize with the fact that they may have systems, I've thought a lack of systems has been an issue from my current management, but saying stuff like that makes me very skeptical that when an issue arises there is going to be someone who is receptive to fixing it on the other end.

Not arguing your point @David Rosen .  My suggestion to you is to find a manager that has a limit that works for you.  Trying to get a manager to work outside of the systems and processes they have in place for every client but you may (may not) cause issues, even if they agree to it.  A handyman doesn't get the word and does work over the allowed amount etc.  Our systems have the limit printed on each WO but that doesn't take care of human error.  So if a handy man works for a co and sees X limit on 100% of the WO's for years and then yours rolls through with a differnet number, there is potential for an issue.

Best to just find a manager that works within your comfort zone.  

@David Rosen Our limit is $500, even just a basic trip/diagnostic charge can eat up $100 of that. Very much to @Nathan G. point, we have trusted service personnel that we have spent a lot of time curating; we know they won't pad the bill or talk us into unnecessary repairs. We have a vested interest in protecting our clients assets and don't spend money frivolously. We also give our owners a choice between using our provider or one of their own if they don't trust ours. I would suggest that whomever you are targeting, you ask what their process of documentation is with regard to sending you receipts, etc. However, with that said, many service personnel don't track their time down to the minute so I would temper my expectations for that. Often times, you will get a receipt with a basic write up of the completed repair with the total and nothing else. 

@David Rosen

Trust? No such thing.

If $250 is your number, then that's your number. If you get so many repairs just over that, you can change that number when you like. There should be zero issue with a PM requiring authorization to spend your money.

When you are more comfortable with your man, you can move that limit all together if you like.

I am the guy paying the bills. I state my preferences and choose from those who will follow my wishes. Nothing personal. Business!

It should be up to the homeowner and would probably vary by owner, house and area. $500 might be appropriate for one house and be low for another. You decide what you want it to be and then change it if you are constantly getting calls.....

@Julie Hartman I wish all property management was trustworthy to not spend my money frivolously, but skeptical. Current management wanted to bill me $2k to take a tree out that was in a tree lawn and owned by the city. I called the city and in 5min had an appointment scheduled for them to visit for free. Property manager would have made $200 if I just approved the bill, they make nothing when the city comes out. At the end of the day it's easier to spend my money than watch my money, so to me the trust is earned.

Originally posted by @David Rosen :

@Julie Hartman I wish all property management was trustworthy to not spend my money frivolously, but skeptical. Current management wanted to bill me $2k to take a tree out that was in a tree lawn and owned by the city. I called the city and in 5min had an appointment scheduled for them to visit for free. Property manager would have made $200 if I just approved the bill, they make nothing when the city comes out. At the end of the day it's easier to spend my money than watch my money, so to me the trust is earned.

I understand your frustration but not all PM"s profit from repairs, we certainly don't. I would also suggest asking any potential PM what their process is when a repair request is sent in. We always notify the owner no matter how small the repair because we don't want them to be surprised when the monthly statement rolls in. We get them to sign off on sending someone out prior to scheduling a repair, (unless it's an emergency and we cannot reach them). Any potential PM should also be able to distinguish between a necessary repair vs. something cosmetic that the tenant is asking for. You are correct that trust is earned but if you hire someone to do a job, let them do it.  

A couple of logical comments to add:

1) Every relationship requires a bit of trust in the beginning. As soon as you hire ANY PMC you're trusting that they won't steal rents, inflate invoices or just disappear with your rental funds. Why would some trust with maintenance be any different?

2) No one worth anything works for free! That includes maintenance. We'd like to know why landlords keep thinking PMC's should do maintenance for free! How many landlords have sat down and figured out how many hours they expect their PMC to spend on the property monthly and then divide that by the 8% (or whatever) management fee they're paying? Several property managers have laid those numbers out on other BiggePockets posts - and it's NEVER what landlords think it is!

3) How many of you landlords have taken into account that another reason for the authorization threshold is to keep TENANTS happy, not you! How likely is a tenant to renew their lease if they have to wait for their PMC to submit an approval request to the owner, which some owners will approve in hours, but others the PMC has to chase for days, to get a response?

4) All that being said, our threshold is $500, but we have in our management contract that we can't do more than 2 per month without owner approval. We did that because one of our local competitors has a history of spltting up a big project into multiple work orders to keep them all under their approval threshold. A lot of their clients have come to us over the years and like that feature of our contract.

Overall, keep in mind no system or company or person is perfect! What matters is integrity.

Right now we are working with three property management companies in different areas. Come to think of it I don’t remember having a minimum, but they have all contacted me on large ticket items. If 300 extra dollars is going to sink you then you might want to rethink your plan. 

@David Rosen

It depends on how much trust you have in the new PM. You want a PM that has the ability to manage costs effectively.

Always ask for references before testing a new PM.

Perhaps negotiate the ability to cancel the PM agreement with 30 days notice if it isn’t working out.

Also, ask the PM how much their maintenance tech charges per hour. This will help you compare costs as well as give you a sense of how much they charge for general repairs and maintenance.

Good luck!