Is 5% property management fee too high? How much responsibility?

Question

I am in escrow to buy a 10,000 sq foot commercial building in Southern California with 13 tenants.  I plan on using the existing property manager who says he will charge a 5% management fee. Do you think this is too high?

Also should the property mananger take care of everything including electricity, property insurance, etc or should I take some of that responsibility myself?  Being a business owner, I am always concerned about embezzlement, is that something I need to be concerned about with a property manager?

Should I give them free reign to do any maintanence without notifying me and just send me a monthly statment?

Joel Owens · Answer

No 5% is actually very good for a building of that size.

This sounds like an office building as the spaces would be very small for 13 tenants and retail.

Sometimes you hit 4% but that is for very large centers and multiple portfolios way larger than the space you are talking.

How do you allow rent to be paid?? Personal check, business check, cash, money order??

I would only allow a money order deposited in an account you control. I would pay those other bills yourself directly. Any repairs have to be approved by you in advance.

Have you vetted the PM to see any credentials or recommendations they have?? PM's can definitely take money and I have heard of it happening before.