Orangevale, CA · Member since 2015 · 2 posts · 0 votes
My tenant recently moved out of my rental in Birmingham, AL and looking past the fact that I didn't know about the vacancy until after it had happened, I recently received a note from my property management company asking if I would like to put a cage on the HVAC for $440 to prevent any theft, as well as an itemized quote for $4k to make the place rent-ready. Some of them made sense to me such as interior paint at $990. Others though, like a lightbulb change for $55, a padlock for $55, and putting up blinds for $440 seemed a little high.
Making ~3200/year on this property in cashflow, it's quickly starting to look like a bad investment if it costs $4k/year to turn over a tenant.
Does anyone have experience with this? This is my first tenant turn-over, and I'd like to ensure that I'm not being taken advantage of due to my lack of experience.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
6y
Your PM is price-gouging you - $55 for a light bulb replacement? Ridiculous. Find a new property management company and take a look at their list of standard charges prior to signing with them so you don't get any surprises.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
6y
Your PM is price-gouging you - $55 for a light bulb replacement? Ridiculous. Find a new property management company and take a look at their list of standard charges prior to signing with them so you don't get any surprises.
Property Manager / Licensed Realtor · Toledo/Columbus, OH · Member since 2019 · 244 posts · 262 votes
6y
Hey @Ryan Huffman It sounds like price gauging for sure! I am an investor and also a property manager and I have never charged an owner $55 for a light bulb. Sounds like you should have a second opinion to be honest. Does your contract specify that you HAVE to use their team? That can also be a game changer as well for you.
Tenants moving out without giving a notice is not uncommon. You didn't mention whether or not they broke their lease or just left at the end of it. Either way, hopefully their security deposit was retained to help cover expenses.
I agree with @Karl B. and @Mike Mocek that you are getting price gouged, specifically on the light bulb replacement. $4k doesn't just sound like a lot to get the property rent ready - it is a lot. The tenants that moved out must have seriously damaged the place. If the repair costs are the result of the tenant's actions, you could take them to small claims court to recover your damages. Depending on the severity of the damage, your home owner's Landlord insurance policy may cover the repair expenses, less any deductibles. If you don't have the proper insurance, call your insurance rep and get the proper coverage for protection moving forward.
I would also check the quoted list and confirm whether or not each quoted item is necessary; for example, I don't paint the interior every time a tenant moves out. Not all property management companies understand some things aren't preventative maintenance and can be held over, and/or they don't know how to make skilled, educated decisions on the financial, economic, impact on your property. They just make a repair list with figures and no guidance as to the necessity of the repairs.
You mentioned this is your first tenant-turn over experience, which leaves me to assume it's also your first experience with your property management company. Not all property management companies are the same. I find property management companies whose staff also have financial backgrounds make better decisions and suggestions to real estate portfolios.
Orangevale, CA · Member since 2015 · 2 posts · 0 votes
6y
Thank you everyone for the feedback! It is extremely helpful. @Mike Mocek I'll look at the agreement. I don't think it says anything about having to use their team, but I'll verify. @Amy Scarborough I'll DM you shortly. I'd love your feedback. @Account Closed Thank you for the added commentary. I appreciate it. The client didn't break the lease, they just turned in their keys once it expired.
Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes
6y
@Ryan Huffman That's a tough situation! Definitely need to fire that PM ASAP. How did you find that PM originally? Were they a recommendation from a friend? I'm curious so we can all learn more about vetting property management thoroughly. I had to fire one this year too. Best of luck and thanks for sharing with everyone.
You and your Property Manager should have the understanding, that you the owner can arrange for all and any of the repairs as needed. On my two rentals I have a yearly Home Warranty policy; however, I expect to be notified via the Property Manager if something needs to be fixed. I make the choice on the costs.
Investor · Tampa, FL · Member since 2017 · 589 posts · 251 votes
6y
Tenant turnover can be very costly. Be sure to do proper screenings to weed out a lot of the bad apples and keep turnovers at a minimum. I believe you should have been communicated to a little better than you were. As other's have mentioned perhaps the charges were a little high but the main issue is not having a tenant stay long term and take care of the property. Now this will happen from time to time as you can't control every issue. Stay positive and get an other tenant and property management company to look after this property. Single family properties don't allow for a lot of mistakes as the cash flow is very minimal. Control the mistakes and you can still be profitable.
Wichita , KS · Member since 2017 · 35 posts · 25 votes
6y
It kind of looks like they’re working off a standardized list, so they’re basically double- or triple-billing you for trips.
$55 for a special trip out to the property to change a lightbulb may or may not be reasonable, depending on your point of view and situation. $55 for a special trip out to the property to install a padlock may or may not be reasonable, depending on your point of view and situation. $440 for a special trip out to the property to install blinds may or may not be reasonable, depending on your point of view and situation.
But they can complete multiple tasks in a single trip. Changing lights and installing a padlock should only add a small marginal cost (say parts + 0.5 hr labor total) to the painting and/or blind installation jobs, not the $55 per task they’re quoting you (unless they bill ~$220/hr for handyman services, which seems awfully high).
My PM company charges a flat $55/hr for work and +10% on materials. Covers our overhead and gives them a little on top. Allows them to do light bulbs for like $7 as long as its part of a larger job. Based on what you've shared, I'd start looking for a new PM company immediately. Some expensive turns are unavoidable (they are much more common in "high yield / high cash-flow" areas), but an above-average PM will keep them few and far between.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Ryan Huffman the light bulb price is pretty crazy but blinds seems even more expensive. How many sets of blinds? Blinds are very cheap.
You’re finding out why long distance investing isn’t great. Turnovers kill all your cash flow. Add in the PM lease up fee, probably 2 mortgage payments and this is easily a 6-7k turnover or 2 years of cash flow.
Even if your turnover is 2k, which is about as low as it’ll go, the other costs will make it 4K and you’ll have the same problem.
Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
6y
Turnover costs will always be the highest expense. Sounds like your PM is charging you premiums on every component of the flip. I'd question it and possibly switch to a new PM if they aren't willing to lower it. Going forward, putting an emphasis on tenant retention efforts (easier said then done) is key.
It kind of looks like they’re working off a standardized list, so they’re basically double- or triple-billing you for trips.
$55 for a special trip out to the property to change a lightbulb may or may not be reasonable, depending on your point of view and situation. $55 for a special trip out to the property to install a padlock may or may not be reasonable, depending on your point of view and situation. $440 for a special trip out to the property to install blinds may or may not be reasonable, depending on your point of view and situation.
But they can complete multiple tasks in a single trip. Changing lights and installing a padlock should only add a small marginal cost (say parts + 0.5 hr labor total) to the painting and/or blind installation jobs, not the $55 per task they’re quoting you (unless they bill ~$220/hr for handyman services, which seems awfully high).
Bingo. Looks like the line items are being charged as if they were being performed in a bubble independent of other work at minimum trip-charge rates. Most if not all of that work is single handyman type stuff that should be charged at a flat fee or hourly, and some might not even be necessary.
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
6y
This is a good post. I assume you have a single family rental. My turnover costs are done by my crew. They still end up costing at least $3K. A vacancy also is the time to address any deferred maintenance and capital issues. So I often go over $4K.
My cost to turn over apartments is far less. Mainly because of smaller square footage and shared infrastructure (roof) with the entire building.
My costs for turnover in A / B+ areas is less, as tenants seem to maintain the properties better.
To make money in this business with rental houses, the strategy is to keep tenants for a long time. If I have a tenant that only stays one year, it is a loss. With houses, you have some people that will stay a decade.
@Ryan Huffman I had very similar cost/experience with my property Managment. Decided to have them do this year because of Covid, but definitely not happy with them at all. It shocks me how they do things and how much they charge.
On top of that they encouraged me to allow pets and rented to someone with cat and dog and they told me they keep the pet rent. I insisted that it was unethical and they said they will give me pet rent and just keep 8%. It shocks me how little value they add and how much they cost.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
6y
Meanwhile back home in Orangevale, CA, properties are appreciating ~$17,000/year (median home price $420k, average appreciation over last 20 years 4%). But "cashflow is king", and "appreciation is speculating"...
Meanwhile back home in Orangevale, CA, properties are appreciating ~$17,000/year (median home price $420k, average appreciation over last 20 years 4%). But "cashflow is king", and "appreciation is speculating"...
Agreed. Every week here, we see at least four "is my PM shafting me from across the country?" threads from long-distance investors. Is water wet? Do sparks fly upwards? And the advice they get -- just go through PMs until you find a good one, buy less-profitable A/B-class housing next time, get a handyman you can trust because you can't trust your management company...
$55 to change a light bulb and $55 for a padlock are ridiculous. For blinds, it depends on what they are installing and how many. Unless the place was left in poor condition, it shouldn't cost that much to get rental ready.
Hire your own handyman and I'll bet they could do all of that for a fraction of the price...or drive there yourself and take a weekend off to do as many repairs as possible.
If the tenant left at the end of their lease, your PM should have had another tenant lined up or at least minimized the turnover. You will now have it vacant for two months.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Jim K. The better way is don’t buy long distance single family homes. Unless it’s a screaming deal (and turnkey properties never are), it won’t work out Long term.
Property Manager · Raleigh, NC · Member since 2014 · 728 posts · 596 votes
6y
@Ryan Huffman
This is why i manage my own property. Light bulb, $2.
Blinds $10 per window
I do hire out for paint if it is entire interior. But, does the unit need paint, or just touch up? I rarely have to repaint the interior. Sounds like you need a new pm
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
6y
Welome to the reality of C class rentals. The usual costs are paint, carpet, small repairs and can add up to 3-4K. Itemized lightbulbs are BS. Handymen charge by the hour and can do a punch list like that in a few hours. The total cost of miscellaneous repairs should be a few hundred at most. But without seeing the list, 4K is not always out of line.
I do all the work myself and a turnover is usually about $1K in materials and my wife does most of the cleaning. Most of this is covered by the security deposit. If I were to hire out the work I can see it easily being $4K. Most turnovers need painting, interior door knobs, patching sheetrock, removing junk left behind, changing locks, light bulbs, deep cleaning and yard work. This takes me about 30-40 hours. I do this on nights and weekends and will take me about week. I don't think many people consider this expense when investing.
Also, PMs have no incentive to keep cost down or decided what is really necessary to make the home rent ready. One of my many complaints about PMs.