Easy Ways Homeowners Can Protect Against Unethical Property Managers

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In talking with homeowners, I am oftentimes shocked at what their property managers are charging them. When you are owning a vacation home, it is just like owning a business — you need to make sure your expenses are in line with your income. Even if you have had the same property manager for years, you need to look at your bill each and every month and check all the charges on the statement. Here are some of the most common charges that property managers are unethically charging homeowners.

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3 Common Expenses Property Managers Unethically Charge Homeowners

Credit Card Fees

This has actually become a really popular expense that property managers are passing along to their homeowners. If your property manager is charging you this fee, you need to demand that they stop charging it today. The property managers are already making a commission or a fee on every booking they are putting into your house.

For example if a guest is paying $100 a night to stay in your house, the property manager is taking anywhere from 20% to 35% commission for that booking. Credit card processing fees should be considered a business expense by the property manager and should not be passed on to the homeowner.

Related: The Big List of Roles Property Management Companies Need to Fill Expertly

Monthly Recurring Fees

I’ve seen these monthly fees be as high as $25 to $50 a month. I called a property manager here in Orlando, and they told me their recurring fees take care of batteries for the remote control, light bulbs, trash bags, dishwashing soap, room deodorizers, etc. For this they were charging $35 a month. Wow! I never knew batteries and light bulbs were so expensive.

Free Use of Your Vacation Home for a Week or 2 Weeks a Year

I really like this one. A property manager in North Carolina was charging this and explaining to their homeowners that they need to use the vacation home 1 or 2 weeks a year so they can have their marketing partners stay in their vacation home. They said the goal was to promote all the vacation homes in the area. Sure, it sounds good, but the property managers are still making 20% to 35% on the bookings from those marketing partners so shouldn’t they share in the cost of putting up those guests?

When you are evaluating your property manager or if you think your vacation home property manager is taking advantage of you, then you should put in some processes to make sure the company is acting ethically. Here are a few processes you might consider.

3 Ways to Protect Yourself Against Unethical Property Managers

Pay Your Own Bills

This is huge; you need to tell the property management company that you are going to pay your monthly utility bills. Your utility bills shows you when someone has been staying in your home and when someone hasn’t. Your monthly utility bill should correlate with your booking calendar.

Most property management companies will want to pay the utility bills for you, as they say they don’t want the power or water to be cut off while a guest is staying in the house. Here in Orlando, we do not pay any of our owners’ utility bills, and I can think of only a handful of times in 12 years that we have had the power or water cut off due to non-payment.

Don’t Pay Money into Escrow

Most property managers, especially the ones in Orlando, ask the owners to pay $1,500 to $2,000 in escrow. This money is to cover expenses if the expenses are higher than the revenue for the month. If you are paying your own utility bills, there should be very few months — if ever — where the expenses are not higher than the revenue. The biggest problem I see with the escrow payment is that the owners hardly ever get back their full escrow money if they decide to leave this particular management company.

Owner Must Approve All Expenses Over $100

If there is something that needs to be fixed in your vacation home, you should have it in writing that the management company will not do any repairs until they have your approval. There are only two ways to make money in vacation home property management, and that is through bookings or repairs to the unit. On every repair, you should make sure you have some type of warranty on the work (in writing), you need to make sure you are getting the work done as cost efficiently as possible, and need to make sure the work really needs to be performed.

Related: Protect Your Investment: How to Tell a Good Property Manager From a Bad One

My father used to always tell me, “Check on what you expect to get respect.” If you own a vacation home, you need to make sure you are checking up on and questioning any expense that is being charged by your management company. Most vacation home property managers are ethical and do business the right way, but there are a few bad apples out there. It doesn’t take but a few minutes each month to make sure all the numbers are working out correctly.

How do you ensure that your property managers are honest with expenses?

Leave your comments below!

About Author

Trey Duling

Trey Duling has been managing and marketing vacation homes in the Orlando and Disney World area since 2001. His passion is helping investors make their vacation homes more profitable. Please visit his website at http://www.orlandovacation.com/home-rentals/.

3 Comments

  1. Denise Evans

    Excellent advice, thank you for sharing. I would add only one thought. Many power companies now have electronic metering that sends information, via satellite, daily. There is usually not a fee for this. You can then sign up for daily power usage reports, even if the management company pays the bills. That will sure help you keep track of vacation usage, and also alert you to someone cranking the A/C up to high and opening all the windows in August.

  2. Stephen S.

    I have a problem with this. And I really can’t think of a way to fully solve it. Property managers always want to use their own contractors. Now this could be a matter of simple familiarity – or it could be that the contractors pay the manager back a finder’s fee. I know this last pattern is at least fairly common as I have been asked about doing it myself in my real life job as a mechanical contractor.

    Also; property managers tend not to be technical people I imagine – so who is it that verifies that whatever repairs are done were actually the repairs which were needed? And by this I mostly mean: the least amount of repairs which were reasonably required.

    I have an example:

    Last year a house was rehabbed and I went over the A/C system myself as there is no one better at it. Both coils were pressure washed, the massive overcharge of refrigerant removed, system was leak checked, blower wheel and housing removed and cleaned, and a anti-frosting thermostat was added to the indoor coil to prevent it from ever freezing – it turns off the outdoor unit if the indoor coils get below 35º F. And I also replaced some electrical wear-out items out of a sense of general prudence. The equipment is about 20 years old but was left operating well. It happily kept the house at 72º for me and for all the contractors. I filled in a fully detailed ‘start-up report’ for the property file – so I have a base-line of performance record.

    Then the management company rents the house.

    Two weeks later – No cooling.

    What happened?

    The coil froze.

    Did you see it covered with ice?

    uh . . . no; but when this would happen in our apartment they told us the coil froze. Now we don’t have cooling so it must be the same thing.

    OK; I’ll get someone to look at it.

    Meanwhile the tenant secretly calls the management company so many times that the management company calls their own HVAC guy.

    The service man goes out and finds (as he carefully notes on the service ticket):

    1. The system is completely frozen – a solid block of ice.
    2. The system is completely out of refrigerant
    3. The outdoor unit is massively leaking refrigerant – it has leaks everywhere. (he shows the tenant the severity of this problem with a beeping/flashing leak detector)
    4. He can temporarily charge it up – but it probably won’t last a week.
    5. The entire system has to be replaced.

    On site for less than one hour – $375. Now granted; his office is 35 miles away – but why did my management company not call someone local (my HVAC friend’s office is literally on the same street as this house)

    My questions:
    1. How can the system be frozen and completely out of refrigerant at the same time? What magical process was used to form the ice?
    2. How can the indoor coil be frozen when it has a known-good anti-frosting thermostat on it?
    3. How can all these leaks have developed in one month’s time?

    So I have a local HVAC friend of mine check it out and then later I go check it myself. There are no refrigerant leaks. The anti-frosting thermostat is tested and found to be in working order. The refrigerant charge was found to be exactly as when I had serviced the unit two months before.

    So what is my conclusion? Is my management company merely technically stupid and doesn’t know any better? Are they deliberately nefarious? Do they call this rip-off-artist HVAC company because they get kickbacks on the service calls and repair charges? Or maybe because he is their friend or relative? Or did they just send whoever could show up the soonest and shut the nagging tenant up? And, short of handling all mechanical issues myself, what can I do about the problem?

    And think about this: I am a refrigeration and general construction genius – what are more ‘laymen’ type landlords supposed to do? How can anyone know that they aren’t being ripped off?

    Any ideas?

    stephen
    ——————-

  3. Brian Walsh

    Stephen, I share your concern. I own Progressive Properties of Greenville LLC. We are licenced property managers in Greenville, S.C. . i am also a Licensed Master Plumber (retired thanks to my rental properties). In addition to being a Plumber I have worked in and around a broad range of construction projects for the past 20 years so I have first hand knowledge of how a house is built from the ground up.

    That being said my wife and I talk about this very topic all the time. How can someone without at least a basic knowledge of construction truly save a property owner money on repairs or at a minimum not let them get overcharged for basic repairs ? I say we definitely have an edge over the competition in this regard. I also think every management company should employ someone with a substantial construction background (not just a good leasing agent). This is one of the big reasons I fired my first Property Manager and started my own Management Company.

    I would suggest interviewing some local Managers that may be more qualified to handle your repairs.

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