When you’re at the mercy of Property Management vendors

Question

Hi,

I currently have a property management company managing my property. I haven’t had to many service requests but the few I have had, property management company will send out their preferred vendors and will quote some outrageous price. Luckily, I am in the area so I usually response quickly stating I have preferred vendors that I have used before and send out one that I find and get prices significantly lower. I have a recent request for AC not cooling and am terrified of what the company’s preferred vendor may quote considering I recently repair AC unit within the past 3-5 years. How do you deal with this? I feel I should just manage the property myself but have a year contract. I feel vendor know they can increase prices for property management companies. Does any fee l the same way?

Nathan Gesner · Answer

Some property managers mark up every invoice with a fee. Check your invoices/charges to see if that's happening. Also read your PM agreement to see if you agreed to them doing that. All fees should be fully disclosed in writing.

I'm in a small market and don't have the option of looking for cheaper vendors, but I do have good relationships and ensure faster response times and quality work. If I were in a bigger market like Austin, I would use vendors that offer me a discount based on the volume of work I send their way. Most larger management companies can negotiate a 10% reduction or something.

Anthony McEvoy · Answer

Hello @Raquel Gonzalez - Does the property manager get a kickback and/or are they using larger companies?  I would ask them about the costs and let them know you have comparable pricing.  I have done the same with my property manager and I just ask for further explanation.  Usually that is enough to make them aware you are watching.

What happens if you break the agreement?  Sometimes the expense to break an agreement is minimal because they are looking to get the setup fee reimbursed.

Julie Hartman · Answer

@Raquel Gonzalez I think it would be a reasonable request to ask your PM how long they have been using thier preferred vendors and the reasons why they chose them. We have spent a lot of time cultivating realtionships with various service vendors because we know they do good work and don't charge outrageous prices. Sometimes vendors are just simply expensive (i.e. plumbers). Repair costs are high right now for various reasons so it pays to know what the ballpark pricing is for different types of repair. It also helps to understand the repair process for your PM. For example, it doesn't matter how small the repair, we always let our owners have first dibs at making the repair themselves to save money or request we use thier preferred vendor. If not, we will use our preferred provider. This builds trust and gives them assurances that we have gone through the proper channels of saving them money while still making the repair in a timely manner.

Eliott Elias · Answer

They will try to make as much money as possible with these service calls. Work a agreement where you use you or YOUR guys to do the work

Joe Scaparra · Answer

Finding a good property manager is a very difficult thing to do.   Most will quote you a 8-10% management fee but it will cost you a lot more than that.  For example when aquiring  a new tenant most PMs charge additional 1/2 to 1 months rent fee.  On renewal of tenants, some PMs charge a fee.  If your tenant pays late, you might not collect the late fee the PM collects.  Maintenance/repair cost: if the PM manages 500 properties and give their repair business to select vendors do you thing they get preferred rates?  If they don't, then I question their management acumen.  The big question does it get passed on to you..........I doubt it very much.  Lastly, the more properties they manage the higher probability the management quality of tenants decrease.  I can't tell you the number of tenants that tell me their past PMs were lazy fixing issues.  I can believe it as some of the duplexes I have bought have been extremely run down and were managed by a retail PM.  If working with a PM you should expect longer vacancy times as they have a lot of properties to fill and you"re just a number.

Now I bring up all these negatives so that if you the owner looking for a PM can ask questions and be more knowledgeable before you enter an agreement.  I can assure you if you were not aware of these negatives,  you would not ask and probably be disappointed in you selection later.  There are some good PMs, but it will be hard to find one better than yourself (even with little to no experience).  You too will do a better job, because you will be more motivated with your own property.  However, if you don't have the time or inclination you will need to find a needle in a haystack.  Good luck.

Drew Sygit · Answer

@Raquel Gonzalez why not discuss with PMC and ask if they will agree to use your preferred vendors?

Raquel Gonzalez · Answer

@Anthony McEvoy thank you! My concern also applies to how quickly things need to be resolved. For example, having to send someone out I use can delay the service time request and prolong things and I worry about this with things like plumbing and HVAC unit

When you’re at the mercy of Property Management vendors

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