Hello BP forum! We are paying $500 a month for a property manager but it's been two months or more and the house is still not ready for rental. When a house/ property is vacant what is the normal negotiation for most property managers? If they are on a percentage based agreement do they still collect a percentage of $0?Or is a flat fee charged to help get the house ready for tenants? We were desperate to get the house cleaned and ready for tenants and hired our PM with hopes that this would be resolved much quicker. To their credit they have had good communication with us and have hired the last exterminator that got the job done. So far we've spent $1850 on two different exterminators combined but at least the house can begin to get worked on. I am used to working at a faster pace and hiring contractors to get things done. Every time we have a phone meeting , something that was supposed to be done last week is still not done. Like replacing the doors/ locks, etc. and its getting frustrating. Whenever I articulate my frustrations to my wife it causes friction within our relationship I want to get this house rented asap but I wanted to get a barometer to see if perhaps my expectations are a bit unrealistic , especially with consideration that no one could get in the house due to the fleas until recently. This is our first time working with a property manager so any tips would be greatly appreciated on how to proceed moving forward.. thank you! Chris

What is the typical fee charged by property manager while rental is vacant?

Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes

2y

I have never paid a property manager anything when a house is vacant.

On the other hand, it appears you are using them as a GC. If the property was in really rough shape when you handed it to them, I could see why they might want to have some income to manage all that work.

The downside is you now have a situation where they make more money the longer it takes to get your house rented. They are incentivized to go slowly.

1 Reply

Andrew FreedBusiness Member

Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

2y

@Christian Gibbs - I agree with the sentiment. Normally there is some sort of onboarding or start up costs however usually PMs charge based on how much revenue they received hence if no revenue is produced due to the property being vacant, no funds are collected. This is the preferred strategy since it incentivizes your PM company to fill it as quickly as possible so they actually start receiving revenue from your property. I would definitely question a charge like this.

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Michael SmytheBusiness Member

Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes

2y

@Christian Gibbs let's look at this logically.

PMCs either charge a percentage of collect rents or a flat fee.

If they charge a percentage of collected rent, they typically are incentivized to get a property ready to rent quickly and find a good tenant.
-- But, what happens if the owner wants to drag out repairs with requests for multiple bids, takes weeks to review and approve those bids and then take even more time to send funding?

In that case, it's probably fair for a PMC to charge some type of monthly fee!

Regarding PMCs that charge flat fees, many charge those "low" fees whether a property is vacant or occupied, tenant paying or not.
-- This doesn't really align the PMC's interests with the owners:(

Regarding why it's taking so long for your PMC to get your property RentReady - how are they making MORE money by taking longer? Hopefully, you've approved a bid they submitted, so the cost is fixed - unless they can document the need for acceptable change orders.

If they are charging hourly, then, yes, they may be able to charge you more the longer it takes.

Keep in mind, your PMC is unlikely to have an exterminator and other licensed contractors on staff. So, they are contracting out for these. They should then share the actual invoices with you and charge a reasonable markup for their time coordinating.

Check your PMC contract about all this.

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Adam BartomeoBusiness Member

Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes

2y

Normally, this fee is added when it is a flat fee service, or the owner is difficult to work with on pricing.

Working with contractors is a difficult task filled with frustrations and missing timelines. We moved a lot of the work inhouse to have full control of the timelines. If one is not accustomed to working with contractors, then your expectations are probably unrealistic. I grew up in the industry and still have a hard time with holding contractors accountable.

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Kevin Epp

Property Manager · Tacoma, WA · Member since 2024 · 60 posts · 39 votes

2y

1. Vacant unit fees. If you're on a %/mo fee structure from them it doesn't sound like financial incentives are aligned if they still get paid while it's vacant. If you pay them a flat fee per month (like Adam said) then that could explain it.

2. Contractors. I'm sure it's frustrating for you, that's tough. A lot of PM firms keep contracting work in-house and do not allow outside help from owner's because of timelines, relationships, and of course potential liability. Some do. My recommendation would be to ask them if they're okay with you finding folks/quotes for the uncompleted work and getting them on the schedule (if it doesn't explicitly say it in the agreement).

1 Reply

Christian Gibbs

OP

Member since 2022 · 32 posts · 14 votes

2y

Quote from @Adam Bartomeo:

Normally, this fee is added when it is a flat fee service, or the owner is difficult to work with on pricing.

Working with contractors is a difficult task filled with frustrations and missing timelines. We moved a lot of the work inhouse to have full control of the timelines. If one is not accustomed to working with contractors, then your expectations are probably unrealistic. I grew up in the industry and still have a hard time with holding contractors accountable.

thx Adam -

We agreed from the start that we would pay the $500 a month as they sounded great in an interview , go to town council meetings on our behalf , and do some in house work like put up blinds and minor repairs that is included in that fee. Also she is working with us with city ordinances to see if down the road we can change it from a LTR to a STR.

last two- three years my wife and I have been property managing it from across the country using handymen as our boots on the ground and I remodeled the house with contractors inbetween tenants . Getting the phone call that a pipe has broke or well pump is broken is definitely not the parts of landing that we love !

We really like our new property management but we didn’t anticipate the house being empty for so long because the fleas were having a hard time being exterminated .

However we will be bringing in $2100 rent on this house and I feel that once a tenant in place I would like to negotiate to a lower fee as it seems the “ GM” part of the job will be over for the most part.

It’s a month to month contract so I am trying to find a solution to see if they take a lower monthly fee .

Thank you for your response!

Christian

1 Reply

Christian Gibbs

OP

Member since 2022 · 32 posts · 14 votes

2y

Quote from @Greg Scott:

I have never paid a property manager anything when a house is vacant.

On the other hand, it appears you are using them as a GC. If the property was in really rough shape when you handed it to them, I could see why they might want to have some income to manage all that work.

The downside is you now have a situation where they make more money the longer it takes to get your house rented. They are incentivized to go slowly.

thanks Greg for your reply. I love these forums to get a barometer of what the parameters of property management is . You are correct in that we are using them as our “boots on the ground” , GM of sorts.

We were desperate at the time to get the house ready for rent so agreed to the flat fee as she went into it the agreement knowing the house had a flea infestation.

thanks again

christian

0 Reply

Christian Gibbs

OP

Member since 2022 · 32 posts · 14 votes

2y

Quote from @Michael Smythe:

@Christian Gibbs let's look at this logically.

PMCs either charge a percentage of collect rents or a flat fee.

If they charge a percentage of collected rent, they typically are incentivized to get a property ready to rent quickly and find a good tenant.
-- But, what happens if the owner wants to drag out repairs with requests for multiple bids, takes weeks to review and approve those bids and then take even more time to send funding?

In that case, it's probably fair for a PMC to charge some type of monthly fee!

Regarding PMCs that charge flat fees, many charge those "low" fees whether a property is vacant or occupied, tenant paying or not.
-- This doesn't really align the PMC's interests with the owners:(

Regarding why it's taking so long for your PMC to get your property RentReady - how are they making MORE money by taking longer? Hopefully, you've approved a bid they submitted, so the cost is fixed - unless they can document the need for acceptable change orders.

If they are charging hourly, then, yes, they may be able to charge you more the longer it takes.

Keep in mind, your PMC is unlikely to have an exterminator and other licensed contractors on staff. So, they are contracting out for these. They should then share the actual invoices with you and charge a reasonable markup for their time coordinating.

Check your PMC contract about all this.

I hear ya!

One of the reasons I asked the question is that it seems strange to me that a property management wouldn’t take anything upfront if they inherited a house that wasn’t ready for rent .

Our property management also does the cleaning ( deep clean over 4 days was $1000 but they had to deal with some nasty pet hair , fleas etc)

and that included some cover up paint etc .

One lesson learned here is every contract with owner : property management varied greatly it seems from what is needed .

But moving forward - I feel that $500 a month on a $2100 a month property is too high once it’s rented - unless endless problems persist of course ..

thanks for your insight!

Christian

0 Reply

Nicole W.

Rental Property Investor · L.A. Ca · Member since 2020 · 121 posts · 43 votes

2y

I have never paid that much for a property mgr. I have 3 as my properties are out of state. One has a few of mine and I negotiated 8% of the rents and no lease up fees. One other manages one and agreed to 8% as well of just the rents and when a new tenant comes in, I pay a new lease up fee (but not for just renewals yrly). She was doing property mgmt on the side as a realtor and I just talked to her about it and she agreed. With the other, I pay 10% of the rents as it is only 1 property and a company. No release up fees. It was the most economical for the best reviews I could find. So when any are vacant, I pay nothing on any of them. I wouldn't go with that as there is no incentive to fill your unit. No matter the price at all. If I need any of them to do anything extra for me, I just work out a payment for that one thing and pay them by action. You can review your contract and see when it ends then renegotiate or find someone new. There are tons of them out there and good ones at that. You just have to interview around.

0 Reply

Laura Stayton

Property Manager · DE · Member since 2023 · 248 posts · 133 votes

2y

Quote from @Christian Gibbs:

Quote from @Adam Bartomeo:

Normally, this fee is added when it is a flat fee service, or the owner is difficult to work with on pricing.

Working with contractors is a difficult task filled with frustrations and missing timelines. We moved a lot of the work inhouse to have full control of the timelines. If one is not accustomed to working with contractors, then your expectations are probably unrealistic. I grew up in the industry and still have a hard time with holding contractors accountable.

thx Adam -

We agreed from the start that we would pay the $500 a month as they sounded great in an interview , go to town council meetings on our behalf , and do some in house work like put up blinds and minor repairs that is included in that fee. Also she is working with us with city ordinances to see if down the road we can change it from a LTR to a STR.

last two- three years my wife and I have been property managing it from across the country using handymen as our boots on the ground and I remodeled the house with contractors inbetween tenants . Getting the phone call that a pipe has broke or well pump is broken is definitely not the parts of landing that we love !

We really like our new property management but we didn’t anticipate the house being empty for so long because the fleas were having a hard time being exterminated .

However we will be bringing in $2100 rent on this house and I feel that once a tenant in place I would like to negotiate to a lower fee as it seems the “ GM” part of the job will be over for the most part.

It’s a month to month contract so I am trying to find a solution to see if they take a lower monthly fee .

Thank you for your response!

Christian

It sounds like they are doing work for you in going to meetings, arranging contractors, and working with city ordinances. Flea infestations can take awhile to treat and NO contractor is going to do repairs until that's done. It must have been really bad.

I agree if it's a normal prep and quick turnaround then no fees should be charged but if they're attending meetings and dealing with ordinances and such that is outside the scope of normal management duties and prep and they should be compensated.

0 Reply

Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

2y

@Christian Gibbs a lot depends on what the attendence at town council is about, are they specifically representing you and your property to town boards? That is worth something, what is happening besides killing fleas? Right now if they are doing work for you that is what you agreed to and you can try to negotiate if they aren't getting things done. However $500/ month if that is after the house is rented is a high percentage for a long term rental. Check with other PMs in your area to get a relevant percentage. Also it matters if there is also a lease up fee the PM will collect, look at your agreement.

1 Reply

Matthew Kwan

Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes

2y

You have to negotiate with them. I ususally dont pay any management fees if the units are vacant. They only get incentivized once it's occupied

0 Reply

Christian Gibbs

OP

Member since 2022 · 32 posts · 14 votes

2y

thanks Colleen -

So after I posted this I expressed to my PM that most people are doing 10-12% for property management . She heard me out and then explained the fee of $500 a month stops once place is rented .

that was a big relief . I don’t know why we didn’t get that vital piece of info in our initial meeting.

So my wife and I are extremely relieved .

She says she will stay on as a courtesy and if things come up it will just be an “ hourly “ rate for emergency type situations or basic boots on the ground necessities.

We really like her enthusiasm and positivity and she is great at communicating and seems sincerely empathetic to our situation. We reigned in the budget for some painting and minor handyman work .. and she obliged to our budgetary restraints .
House is being shown as we speak. Fingers crossed . October not the easiest month to rent in a rural upstate NY area .

best

Christian

0 Reply

Jake KnightPro Member

Property Manager · Indianapolis · Member since 2017 · 303 posts · 146 votes

2y

Some companies have these fees, as a PM, it's a bad look to charge vacancy fees. You really want your PM to be incentivized to find renters as opposed to getting paid either way.

1 Reply

Christian Gibbs

OP

Member since 2022 · 32 posts · 14 votes

2y

thank you Laura -

I do feel good about the compensation as they have been our only boots on the ground as we just can’t use “ friends” anymore ..

I also found out that the $500 monthly fee is lifted once the place is rented and she goes to a much lower rate / hourly when things arise .

I just thought it was a unique price structure and have never heard of things executed as such before .
Thanks again for your reply-

Christian

1 Reply

Mike H.

Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes

2y

I'd fire the PM immediately. What are they charging $500 a month for if it isn't rented? The only way that makes sense is if they charge a flat monthly fee but nothing for finding a renter. If they're charging $500 a month AND they charge a set amount (sometimes its a months' rent or half a months rent when they get a new tenant), then they're ripping you off and you should fire them immediately without question.

Most reputable pm's won't charge when the property is vacant. What are they doing if there's nobody in the property? They're clearly not having to take any renter calls or deal with any issues. Its an outright scam that they pulled on you and you should fire them immediately.

0 Reply

Nicole W.

Rental Property Investor · L.A. Ca · Member since 2020 · 121 posts · 43 votes

2y

I agree with Mike H. There is absolutely no incentive to rent it. More so to keep it unrented.

1 Reply

Sarah Rosko

Property Manager · Indianapolis, IN · Member since 2024 · 45 posts · 24 votes

1y

I work for a property management company in Indianapolis, and in our practice, we only charge a monthly management fee when rent is being collected. If the unit is vacant, we don’t charge a monthly fee.

For situations like yours, where the house needed extermination and other prep work, we would typically only bill for the costs directly related to the work or services provided, not a standard monthly management fee.

Your expectations aren’t unreasonable—getting the house rented ASAP is a valid priority!

0 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

1y

I have zero fees on my units when they are vacant. I pay a % of rent and a tenant placement fee

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What is the typical fee charged by property manager while rental is vacant?

What is the typical fee charged by property manager while rental is vacant?

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