Property Managers BS fees

23 Replies

They have monthly statements that have questionable fees here and there for “ maintenance and repair” but it does not specify what the rapair was and it’s handwritten on a paper receipt for 35-50 dollars. They have their own contractors that work for them but their rates are unreasonable. So I shopped around for someone much cheaper and they are now saying they want to terminate the contract that we have. This town where I have 4 buildings one six unit, and three duplexes is about 2.5 hrs away from me. I think I can handle it myself to manage.

@Jennifer Hudgins , sorry to hear about the frustrations.  Maintenance expenses is the most common frustration for landlords.   I would read the agreement and make sure they are following their own terms.

What does your Service Agreement state in regards to maintenance spending?  PM's typically have a $250-500 threshold that allows them to spend without your permission.  This allows them to keep the property maintained without bothering you.

Problem is: little maintenance items add up!  There are classic stories of $99 light bulbs because PM's had a $99 minimum trip charge.

Your Service Agreement should clarify:

  • Minimum threshold spendings
  • Minimum trip charges
  • Hourly rates, plus OT rates
  • Markups on vendors

Take a look at the management agreement and make sure that you understand what you agreed to. If the cost of maintenance is too high with your property manager for simple repairs, you can ask them to be responsible for the maintenance. The requests would be forwarded on to you, and you could determine how and at what cost to have work completed.

This allows you the ability to manage costs on maintenance but reap the other benefits that come from property management including: rent collection and disbursement, tenant communication, eviction protect, inspections, etc.

If the cost of management is too high for this to make sense, I would recommend looking into other property managers!

Thanks that’s very helpful. I’ve also noted some dishonesty in that they are saying the Tennants are finding living conditions substandard and “ uninhabitable “. I’m a nurse by trade and have compassion for all people so this really bothered me. I began interviewing my Tennants and doing some investigation. The opposite was true. They are pushing for more Maintenance and repair on purpose so they can keep more of the rent money. They have a fancy website but handwritten receipts that are not specific at all. The agreement says they can spend $500 without contacting me. But I saw in the statement a plumbing bill for 750 which I was not aware of. The latest thing is that I have a leaking roof with some interior water damage and they want us to go with their construction company and spend $15,000. That’s half of what I paid for the house. I think I’m gonna go there and talk with some local people and find someone that is not a broker. It’s about 2.5 hrs away 

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Originally posted by @Jennifer Hudgins :

There was also a 750 dollar plumber bill that was not authorized by me. 

 A $750 plumbing issue is likely an emergency situation. I don't know any legitimate Property Management company that doesn't have the authority to handle emergencies without your approval. It's not realistic for a Management company to wait for an owner to kick the tires on what they want to do or see if they can save $50 here  or there while the tenants got some major issue that makes the home uninhabitable. There are bigger things at play for a Property Manager than an owner trying to drag something out in an effort to save $50.

@Jennifer Hudgins a lot of different opinions on here but as an owner of a property management company I would say a few things:

1) It sounds like your agreement does spell out the managers spending threshold.  However, it should also indicate if they have permission to handle emergency related services and then inform you in a reasonable amount of time (I would say that waiting to inform you on the financial statement isn't a reasonable amount of time).  For example, if I have a pipe burst, in order to protect your asset I need to fix that now, not play phone tag and wait for approval. However, I would be responsible for sending you a text/email/voicemail, depending on your preferred method, with a detailed explanation as to what happened.

2)It is imperative that as an owner/investor you specify in your agreements that if the repair (non-emergency) is over X amount of $$$,  the PM is required to submit proposals that are identical in scope and that only you, as the investor, can choose the contractor.  

I wouldn't agree to pay a manager a minimum trip charge, or any of these bogus fees.  I have a full-time maintenance person that is my employee.  As my client, you are responsible for an already agreed upon hourly rate for normal business hours work and then after hours work. However, just because that rate is already agreed upon there is ALWAYS an official work order that has the residents info, a description of their issue, a description of what my tech did, the parts used and a time they arrived and a time they finished.  This way there is complete transparency between the manager and client.

In my opinion there should only be three types of fees paid to a manager they are management fee, maintenance repair fee and then if your manager is a full service there can be a construction fee if they are overseeing a large renovation or project.  Making trips are part of normal operations as is leasing and filling the unit so there shouldn't be extra fees for that.

As investors, I recommend you be very picky in who you are choosing to operate your asset.  In most cases your property manager is either going to make the investment a success or they are going to be a major reason why your owner goals aren't met.  It is important that you partner with someone who is going to keep you apprised of all the details as if you were onsite yourself.

I would recommend self managing once you have some dependable people in the building trades in that local market.  I know a few people in my area that do this quite successfully.  The owner is the "call center" for all the tenant concerns, and then they have the discretion on whom or if they call someone to deploy to the property for service.  The tradespeople bill you directly and you can make your own decision whether or not you are overcharged.  Unfortunately, no one will be a better steward over your assets and cash flow than you.  The key to this model is having those "boots on the ground" that you know and trust are reliable that you can call for each of the building trades.

Good luck!

The best property management companies that I have found never use "their contractors".  There is too much room for incentives to pad the bill.  Both on the contractors end because they know they will continue to get business, and from the management teams end because you won't know what the bill was supposed to be so they can upcharge again.

Since you have already been in contact with your tenants, I would call the tenant for whom the $750 bill was attributed to and see what kind of plumbing issue they had.  If the issue was something trivial like a leaky sink, or worse yet there was NO issue, then file immediately in small claims court and find a new management team.  Also if you are unhappy, write reviews online.  It only takes 30 seconds and it lets other investors in the area know who to stay away from.

I guess I have been fortunate as I have not had any issues with my property management company like you are describing on here.  

My property manager will email me a heads up for routine repairs that they don't even need authorization for out of courtesy.  

If it's an emergency, they will text/call me simultaneously to calling in the appropriate repair person.  

All fees/expenses are clearly itemized on my monthly report.   

Granted, over 95% of our properties are A/B SFH, so that probably helps out quite a bit as well.

one issue is if you bought 30k properties they are probably fairly old and will constantly need up keep could be a symptom of the asset its self.
I have had good luck with my A class rentals.. I just hired a regular real estate broker who advertised and placed the tenants then my secretary managed them.. Key to this was have a very good and reliable handyman even though these homes were brand new construction when i bought them stuff comes up.. tenants are tenants.. and if your dealing with 80 to 120 year old homes out in your area.. that you buy for the price of a used car.. then they can indeed be money pitts.. a new roof if its bad can easily be 7 to 10k. on a 30k house you cant look at it like hey thats 1/3 of what I paid for it.. the reason those props are so cheap is for the issues that one faces with them.. and lack of demand.

Two things I'd like to point out. 

1. People who own their own properties, spend much more time than they realize. Because they're not getting paid for their time, they don't track it carefully. But someone who is getting paid for their time, will track it more carefully, so it may seem at times like you're overpaying.  

2. Your property manager should be trustworthy, honest, ethical and have integrity. If they are, they'll do the right thing for you and your property. If they're not, then you have propblems. The stealing and skimming could be the least of the problems.

I own and manage my own properties, but also manage properties for others. I manage other people's properties for a fixed monthly fee. It's not a lot, but it's compensation for my time and effort and once I have an agreement with an owner, I stick to it. I would NEVER take anything that I don't already have an agreement to take from the owner. If and when I feel like I'm doing more than I'm being compensated for, then I will either quit or ask for a raise. But that's me, I understand not everyone has integrity.

@Jennifer Hudgins . I have 5 units in a town 5 hours away and I manage them myself. I have a system of maintenance and repair folks that I can call on for most every need. I advertise on Zillow at no cost, know the past I used Craig’s List but have not liked the possible tenants. I have someone local that will show a property if needed. I can do my own screening and phone calls. It’s work but it is worth it. It’s hard to find properties that cash flow enough to offset PM fees.

Originally posted by @Jennifer Hudgins :

Thanks that’s very helpful!

Been there.  Been ripped off.  If your contract with them says you have to also pay a fee for firing them before your contract is up, and you want to fire them, what worked for me was to threaten to sue them and I gave them the choice - call it good and we agree in writing to end the contract without any additional fees - or - I take them to court and let a judge decide if they have committed fraud.  They agreed to terminate the agreement and call it good.

The problem with the industry is the way the pay fee is structured.  PMs can't make a decent wage if they only charge 8 - 10%, so they make it up in fees and sweetheart deals with kick-backs, etc.  The industry really needs to restructure this so that fair contracts are created that incentivize the PMs according to an owner's profits.

I couldn’t agree more. I fired them last month but I ended up paying the 250 for the early termination. I just wanted to be done. The only silver lining to all the charges is that the handwritten receipts can be a tax write off. I was going through the mountain of them this week and discovered charges for 115 dollars to mow a tiny yard! Well it’s in the lease that they are responsible for the yard. It’s robbery!! I now have a handyman, not a broker making deposits for me and doing emergency plumbing and such. Anything else he calls me with a quote. We will see how this goes. I’m crossing my fingers for February.

@Jennifer Hudgins

I self manage my 20 units.  One of my buildings is 65 miles away.  I had a property manager and fired them within 6 months.  They were terrible with communication, documentation and responsiveness.

I went to the local hardware store and asked for references.  Found a contractor for repairs and he had many contacts for other sources that have come up.  Check some local hardware stores for references even the big box stores like Home Depot, Menards and Lowe’s can be a good source as well.

Good Luck.

It is very common but if they are good and fees are just a bit more expensive, it is usually worth it.  A good property manager is hard to come by.  It's a thankless job for the cost of a cellphone bill.

Originally posted by @Jennifer Hudgins :

There was also a 750 dollar plumber bill that was not authorized by me. 

You're answering your own question.

Property Managers are typically required by state law to clearly disclose all fees. This means there should be no surprises, unless you simply fail to read the agreement before signing.

Maintenance should have a limit. Property Managers aren't authorized to replace the siding or install a new furnace whenever they want. There is usually a hard limit and any maintenance over that amount must first be approved by the Landlord. Mine is $250 but I've seen some as high as $500.

When the PM has their own maintenance service, that can be a good thing because it reduces wait time. HOWEVER, it also carries a high risk of abuse. A PM with a maintenance crew should have a professional maintenance crew which means invoices will be professional, detailed, and clear. A hand-written note is another sign that this PM is an amateur with an amateur employee.

Based on what you've shared, you need to cut ties. Start looking for a new PM.

Remember: cheaper doesn't mean you'll make more money.

You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help. If you send me a copy of their PM agreement, I'll be happy to read through it for you.

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