Construction Oversight Fee for Property Manager

[Kim Hopkins]

Hi Everyone,

We are engaging with a new property manager for a 100k SF multi-tenant building we own. In addition to their % management fee, they want to charge a construction management fee as a % of the project cost for any tenant or capital improvements. They're proposing 4% up to $250k in project cost, and 3% above that. 

So for example, if it costs us $100,000 to paint the  building, that would be a $4,000 fee to our property manager. If it costs us $1M to  put new roofs on the building, that's a $30,000 fee to the property manager.

In my opinion, $30,000 for supervising putting on new roofs seems pretty steep. We have fees like this in our other agreements but none of our other properties have improvements that could cost this much. 

Any experience on what is reasonable to counter with here if anything? 

Thanks,
Kim

[Tracy Streich]

Kim it really depends on what your time is worth. If you have the time to do then just do it. Even if the management contract says 4% that does not mean you can not coordinate the project yourself. Our contract has a 10% markup on items outside typical PM duties. Regular service call and turn over no 10% fee. Have us coordinate a new roof or work with insurance in storm damage,roofs. Meeting contractor because you want 3-5 bids then you pay the markup. $1M rood sounds really expensive and the type of job many roofers would like. If your PM makes a bunch of calls gets you a better price are you giving them part of the savings? Again if it is outside the normal scope of PM and you ask them to get involved they have to get paid. Otherwise save the money and coordinate yourself. Time vs Money. The equation is different for every investor