Chatsworth, CA · Member since 2016 · 190 posts · 224 votes
My property manager charges 10% markup fee for all service calls. So a $250 plumbing call turns into a $275 call. Does that sound crazy or normal? I already pay them a management fee, you'd think that would be included in that but maybe I'm wrong? I pay 7% management fee or $55 a door whichever is higher so my lower income/rental properties are actually at around 10-11% management fee. I would love to know your thoughts.
Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
5y
It helps the property manager safeguard themself against an owner who did a bad brrr to save money then think they should have the property manager basically be a gc for the 20% of work done wrong. A pm should not be spending days a month at your place for only 55 per month. So 10% is a fair rate as it can act as a gc fee as well.
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
5y
I think you're fortunate that it's disclosed to you as a 10% markup. I've seen bills for caulking a tub come in at over $350 by the time the property manager was done with it. My recommendation would be to check your contract. What does that management fee cover? Are you expecting the PM to do everything for $55 per unit/annually- secure tenants, screening, collect rents, inspections, repairs/improvements? You get what you pay for and I wouldn't be willing to accept what I think $55 a year would get me at one of my properties.
Bottom line: fine tune your expectations and then negotiate a fee based solely on those important items.
Chatsworth, CA · Member since 2016 · 190 posts · 224 votes
5y
@Patricia Steiner that's $55/month. They also keep first month's rent for securing a new tenant so that should more than cover getting new tenants into a unit especially since they charge a rental application fee. The $55/month should cover collecting rent. I don't mind at all paying them the $55/month minimum and 7% above that is very fair. I just want to know what others have experienced.
Property Manager · Janesville, WI · Member since 2017 · 707 posts · 297 votes
5y
This is a very common thing in the property management industry. Not all companies charge this fee, however, it should be something you discuss with your manager prior to signing the agreement. As you work through this contract, it could be a negotiating point prior to your next re-up on your contract.
Chatsworth, CA · Member since 2016 · 190 posts · 224 votes
5y
The property manager has been pretty good and did disclose the fee ahead of time. I guess I didn't think about the fact they'd be charging the fee for everything like lawn mowing, paying utility bills on vacant units, and basically anything they do that is not collecting rent.
Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
5y
It helps the property manager safeguard themself against an owner who did a bad brrr to save money then think they should have the property manager basically be a gc for the 20% of work done wrong. A pm should not be spending days a month at your place for only 55 per month. So 10% is a fair rate as it can act as a gc fee as well.
Property Manager · Lindenhurst, IL · Member since 2016 · 854 posts · 506 votes
5y
I personally don't charge, but the question you want to ask yourself is, "what is the alternative?" You can find another property management company that doesn't charge a 10% markup, do a good job as the current one or better, and will end up cheaper after considering the management fee. Or you can self manage. If they are not the option, and you still cashflow enough for you with the current one, then stick with them for now.
I don't think that is right. What are you paying them their management fee for? Arranging service calls is part of that job and that monthly fee or do they expect you to pay the 7% just to collect the rent every month? You could just as easily make the call yourself and have a repair person show up. I get if it is a high maintenance tenant or a house with a lot of problems, but the former is their problem as they placed the tenant.
And while charging one month's rent to find a new tenant (I hope they don't charger that for a renewal) seems high, I know others who do that. I can see if the rent is low. Mine charges a set amount (which is not even close to one month's rent, but my rent is not low). There is often a vacancy as well that accompanies the turnover.
Chatsworth, CA · Member since 2016 · 190 posts · 224 votes
5y
Thanks everyone, I've been happy enough with them. There's been quite a few small mistakes on their end that are frustrating but overall nothing huge so I'm not looking at moving to someone else, just trying to see what is considered standard charges.
Property Manager · Lindenhurst, IL · Member since 2016 · 854 posts · 506 votes
5y
@Theresa Harris It costs money even when rent is corrected automatically and PM is doing "nothing." Most of the PM, if not all, need to spend time and money to maintain their real estate broker license. You are paying for their experience also. Not always, but in theory, PM uses the vendors that do a good job, insured properly, and charges fairly, if not cheap. Not to mention PM needs to be on stand by, in case there's a call. No one does that for free. Finally, should we go to a buffet and pay one price or go to a restaurant and pay for each item we order? Well, the answer is it depends. Some may prefer cheaper management fees but willing to pay x% markup for repairs. Some just want to pay one (higher) management fee and just want to pay the actual repair cost without any markup. You may end up paying the same amount anyway. There's no right or wrong, IMO. Personally, I don't charge any markups.
@Allen Tracy I’m just wondering if anyone on this thread finds it beneficial to buy home warranties for their rentals? I know with my primary residence I pay like $37 a month and when I need to call them it’s like $65 to repair the system! I was thinking maybe that’ll help since property management charges can be rather steep when it comes to maintenance. Along wit their up markup and or hourly fees.
Chatsworth, CA · Member since 2016 · 190 posts · 224 votes
5y
@Ursula Leake I've had terrible experiences with home warranties with my personal property. I've also seen other posts in this forum saying the home warranties aren't worth it. The same advice came from my real estate agent.
@Theresa Harris It costs money even when rent is corrected automatically and PM is doing "nothing." Most of the PM, if not all, need to spend time and money to maintain their real estate broker license. You are paying for their experience also. Not always, but in theory, PM uses the vendors that do a good job, insured properly, and charges fairly, if not cheap. Not to mention PM needs to be on stand by, in case there's a call. No one does that for free. Finally, should we go to a buffet and pay one price or go to a restaurant and pay for each item we order? Well, the answer is it depends. Some may prefer cheaper management fees but willing to pay x% markup for repairs. Some just want to pay one (higher) management fee and just want to pay the actual repair cost without any markup. You may end up paying the same amount anyway. There's no right or wrong, IMO. Personally, I don't charge any markups.
These are all excellent points. I don't believe there is a right or wrong answer for this
My experience, if I am sending my maintenance technician to inspect/work that is included in our PM agreement and no markups apply. However, when I reach out to contractors or vendors for work/products needed on one of the properties we manage we've vetted this company. We've taken the time to build relationships with them to ensure quality work is being given for our client's homes. So yes, a markup will apply towards anything beyond the simple maintenance requests.
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
5y
This is how every PM makes money. The 7-10% of rent you pay is just the beginning. The fees/upcharges on maintenance, leasing; etc, is how they stay in business. & Honestly, you couldn't pay me just $55/month/unit to manage someone's property. Just not worth it.
That being said, if you only have a few units, self-managing these days is simple. Hardest part is finding 2-3 good handymen in the area and building a system that works for you.
Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
5y
Im pretty sure the way some property managers operate is they charge more for management fees like 10% vs another thats costs 8%. In property management if you market to homeowners that are accidental landlords and not investors you deal with a lot less maintenance. I could understand why many firms that target these clients comp there maintenance fee. They know it will be minimal. The 7 or 8% guy gives all the clients the chance that they will not need to manage a ton of work. When they do they are compensated appropriately. People who think someone with a good level of experience managing contractors and cutting maintenance costs through that while also inspecting is free and will work for only the management fee need to reaccess whether real estate is the right business for them. No one is going to take on a high level of responsibility for you at less than minimum wage. This is really true on jobs with a high level of maintenance. No one is getting gauged based on a 10% fee. If the fee that the 10% is added to is high thats a different story. I would say the fees you are talking about work out to being 1% in c grade or better at very most. Leasing and management still are the core costs incurred to the pm. It really is to insure the pm doesnt become a gc without proper compensation. If they do the work without asking unless an emergency than thats a different story.
Chatsworth, CA · Member since 2016 · 190 posts · 224 votes
5y
Hey @Syed H. if I only had a couple of properties located near me I could self manage but I have a few out of state multi families along with a demanding full time job, a family, and plans to purchase more properties. I wish I could self manage locally, I know it would be a lot of work but I could give a lot more personal care and attention to my properties. That's the trade off with out of state investing though.
Keep in mind, the cost of spent ammunition alone to attend/ deal with your $500/ month rental may be higher than $55 to them. If you’re not managing yourself, it takes a certain type of person to want to collect and deal with the demographic that pays $500 monthly to stay off the streets. That said, the nickel and dime type mentality is prominent in the pm game. It’s garbage. Get clear on exactly what you pay for and what you pay extra for. It’s on paper or it wasn’t agreed to.
Rental Property Investor · Delray Beach, FL · Member since 2017 · 102 posts · 44 votes
5y
In most cases, you will pay significantly more for repairs in one form or another when you are using a PM , unless you coordinate repairs with your own handyman.
Investor · San Francisco, CA · Member since 2017 · 303 posts · 327 votes
5y
@Allen Tracy Personal experience: I had a Class A, less than 15 years old SFR in a market with lots of PM choices. The original PM did not charge a fee for managing contractors, but I fired that PM for other reasons. I next gave a chance to a newish PM in that market, who charged 10% from the rent (like the first one) and also 10% on top of repairs. When I asked about the reason for that fee before signing the contract, the young broker told me that he would be able to get lower-cost labor for me than what I could get on my own, and that the end result would be a lower end bill for me. Sounded fair; I gave him a chance.
Unfortunately, it was a year of small and larger calls, including a change of a kitchen appliance. As a result, I was able to compare some “handyman” calls to the original PM’s prices: I was paying a higher price under the new PM - and the commission on top of that. Jokingly at first, I began to refer to the PM’s repair emails as “death by a thousand cuts.” I also pointed out that his costs were not lower than the previous PM’s (who did not charge a commission.) The final straw was a pre-approval of an AC call that I had a chance to compare on my own - which he was ok with me doing, of course: I found someone cheaper (and still highly rated.) We had to part ways.
The third PM was not only charging a lower monthly PM fee, but also did not have the “let’s fix every small thing the tenant asks for” INCENTIVE, because they were larger and had their own maintenance staff. And when the tenant - again - called to fix the laundry closet door that had been fixed under the previous PM (and was working when the tenant first moved in,) instead of rushing to fix this minor issue with no prior notice to me, the third PM simply told the tenant that they would combine the issue with another future call. And that is exactly what I do for such issues where I self-manage. And I still have happy tenants. It is also important to have a PM who knows when to tell a tenant to wait.
To be clear: I do not think that the second PM was lying to me. He was also a nice guy. But he did not deliver on the lower-end-bill promise - and “trained”!the tenant that I would take care of any small issue.
When you have options - if you have options - I would recommend that you make sure that you don’t incentivize repairs, especially when a lower quote may be obtained from someone who is not a preferred provider not only because (allegedly) they may be reliable, but are also not too much more expensive than the next reliable contractor to make you question the bill. Little by little, small premiums start adding up to a loss.
I have PMs today in various markets who do not charge this commission, and are happy to get more than one quote for me when they - themselves - see that the first pro quote they got may be unreasonable. Perhaps this comes with experience on their end. I simply call it “great customer service.” I always remember to thank the PM for the additional work for my benefit. There are months with no issues when they still charge the rent commission on multiple of my properties each. And they deserve it.
I learned/confirmed that I like having aligned interests. Unfortunately for the second PM, he provided no financial benefit to me beyond perhaps being more personable. And I also wanted to help him out in his early days. But, looking at the numbers, I remembered that this is business, and I had this forum if I needed to get personable with someone..
Perhaps your PM provides value in some other way to justify the fee to you. My example is just another thought exercise, one of many here. You must do the literal and figurative math for yourself. And you should feel free to negotiate.
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