Negotiating with the property manager?

Question

We found a few rentals nearby to eachother in an area we have been looking at for a while. We were thinking of seeing if the property management would reduce their fees since the rentals are near to eachother.

I was wondering how others talk to their property management about reducing their management fees.

Thank you

I was wondering how others talk to their property management about reducing their management fees.

Thank you

Ricardo R. · Answer

@Mark H. Porter you can certainly try to get a 'deal' on property management but, realize that unlike bartering for a car, property management is a service based industry - meaning that long after your 'deal' has been struck your PM will determine what quality of service you will get for the deal you locked down.

Look you're trying to nickel and dime a business that makes profits on nickles and dimes... instead of trying to get a 'deal' on pricing (which you will always loose in the long run... you just don't know it yet) you're better off in trying to get a deal in the types and quality of service provided by your PM. If you're fretting over the difference between 8% and 10% on a rent of $800... a difference of $16! I've got news for you... you're not keeping your eye on the ball. You're getting ready to turn over one of your most valuable assets over to the person you're trying to nickle and dime and which will ultimately help you define it either as an asset or a liability.... go ahead... bargain all you want but likely you'll be posting on BP with all the other disgruntled owners on how the PM failed you... regardless of what you read or hear it's a universal truth 'you'll rarely get quality service at rock bottom pricing', heck I've got a 19 yo. cousin that will manage your rental for 2%... want to take him up on that?... Instead of asking 'How low can you go on fees?" the more appropriate dialogue would be:  "Okay well I won't fight you on it but, tell me what quality and capabilities can I expect?"

James Wise · Answer

Disagree with this advice. In practice the people who call us and tell us all about their grand plans are total flakes. We don't care about what you plan on doing. We care about what you actually do.

Kase Knochenhauer · Answer

@Kevin OBrien - I would give them a call and tell them a bit of your story and where you want to go in real estate. If they see someone who is motivated, ready to grow quickly, easy to work, etc; they'll be much more willing to move their fees around.You might ask, "We are in this for the long haul and want partners who will help our growth, if we decide to work with you, how can you move your fees around to enable the growth we want to achieve in the next x years?"

Phillip Vera · Answer

In all areas of real estate, this is NOT the area you want to "skimp."  @Ricardo R.mentioned that proximity does not equal savings on the PM's part and he is exactly right.  Volume matters more and @Kevin OBrien any PM will see a value.  As already mentioned, it also matters what you do.  We do not discount on the opportunity, but we will lower as you acquire more properties.

Truly understand what you are paying for.  I'm happy to provide a list of questions.  Pricing may be industry and market standard, but the quality of communication, customer service, additional fees, all play into that management fee.  Most people only care about the "management fee" and it's arguably the least of the things to consider when considering a property manager.

Ricardo R. · Answer

@Kevin Leahy it's always worth asking. We might reduce our fees by half a point or maybe a point but not much more than that simply because just because your properties are close to each other it doesn't lessen the work load much as there are still multiple tenants to deal with, with different timelines i.e. a tenant move-in inspection for property "A" will likely not coincide with a tenant move-in at property "B" and "C", etc. etc. - the fixed costs to manage each are the same for the PM. Like I said we may consider a reduction but more often then not it just translates to more work for less pay, which is not something we're interested in - we are interested however in ensuring your properties run smoothly so that you are happy and continue to use our services but not at the cost of placing our services on sale.

Mark H. Porter · Answer

Never, ever be afraid of asking for a deal no matter what the circumstances.  I’ve asked for and received better deals from pool caretakers, pest folks, property managers, cable companies, contractors, etc...  it’s your money and under your control until you give it to someone else.

Ricardo R. · Answer

@Mark H. Porter no one is questioning how long you have been doing this and I sincerely appreciate your input but make no mistake about it... just because someone says they've been doing something for 23 years doesn't always translate into usable experience... I'm sorry but you don't get a pass on that. Who has more experience the landlord that has managed one rental for 20+ years or the one that has 100+ rentals over 10 years and does it every single day? - Volume and type of experience comes to mind.On your next kitchen remodel do  you want to hire the contractor that's done 3 kitchens in the last 20 years or the one that does them every day? (and hopefully quality comes to mind at some point).... so again, and I'm not saying you're not experienced but your logic in assuming that solely the # of years doing something automatically translates into validity... not quite sure about that one...  Heck Blockbuster had 22 years of experience before they went bankrupt... is that the type of experience you want to count on? they were after all in business for 22 years.

Why is $16 worth more to your PM than it is to you, you ask? - Ok well, for no other reason other than you're asking your PM to take a 20% pay-cut right from the onset before you have even evaluated the services provided. With that logic, should your PM provide you with 20% less service? or be 20% less motivated to list your property? or not worry about evictions 20% of time? - of course not but, it just highlights why your PM values it more and why you're not buying sandwiches here, it's a long-term service. You're cutting their margins by 20% right out of the gate... and will then wonder why they are not so motivated to move with urgency on your units.

I hear you on the late night turnovers... heck we've been there... don't forget most PM company owners started off as investors and self-managers... but what... so are you saying your level of expectation is that your PM have someone painting your units at 3 am as well? ... It's a service and they have a system and it's not for everyone... but honestly if your property does not cash-flow enough to pay for a PM or the time you put into it if you're self-managing... then newsflash... it's probably not as great of an investment as most would lead you to believe.  And you are correct when you mention that "no one will care about [your] money more than [you]"... again no one is arguing that... but with your logic that applies to anything, might as well cut your own lawn and might as well do your own kitchen remodel and might as well represent yourself in court... it's the classic 'stepping over dollars to pick up pennies' scenario - one must find value in services, pay for them and move on to bigger and better things... ON your business instead of IN your business.

Again I thank you for your feedback but anyways... the solution for wanting management fees to be lower is to either 1) question and find out what services and quality you're getting that will justify them or 2) try to find another PM that already has the price point set at what you're looking for. Bartering with a PM to take a 20% price cut before you even have one property under management is asking for trouble and will usually lead to you ultimately being unhappy, if they even take on the account at all.

Lucas R Froelich · Answer

@Kevin OBrien

In my experience with negotiation, you should not approach the issue simply by asking the property manager to lower their fees.

They are running a business as much as you are. Do your research, find comparable services in your area, and walk into the room prepared to strike a deal favorable to both of you. If you can illustrate that it is in their interest to lower their fees for you, you will be much more successful.

Your properties in close proximity to one another is only one factor. Are other PM’s in the area priced lower? Can you show that your portfolio is expanding and a deal today might lead to additional business down the road? Can you provide referrals for potential customers?

Create a package deal that benefits them, as much as it benefits you. Two parties working towards a shared interest are much more likely to strike a deal than two parties fighting each other. Also, don’t be afraid to walk away. Think about your alternatives, and have a back up plan before you sit at the table.

Good Luck!

Ricardo R. · Answer

@Mark H. Porter I'm sorry you feel that way but, it's not a question of what YOU have done or basing a decision on emotion and generalities, it's about setting up members for success with credible information. We certainly hope there are readers, we have a pretty good reputation with our owners and investors and always encourage them to read our posts, which is why we go as far as posting a link on our management webpage directly to our posts. We manage properly, cash-flow properties and free up our customers, so no worries there - there's no such thing as having too much information even if you don't agree with it or it's not inline with what you think, thank you for your input.

Mark H. Porter · Answer

Gawd, your arrogance is astounding and your assumptions are baseless.  Did you ask how many doors or revenue I managed or did you just assume.  Now I hope everyone sees what type of PM you are.

Negotiating with the property manager?

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