Property Management - Repair Mark-ups?

[Steve Cook]

Hi BP!

Happy new year!  I own three investment properties in Indianapolis that are professionally managed.  I was on the phone with my property manager the other day and he said something that caught my attention.  He stated "My properties perform better than yours do because I'm not paying any mark-ups on my repairs."  This immediately struck me as odd as I wasn't aware of any form of compensation to the PM for any maintenance related activities, just 8% of gross rent and 1-month of rent to lease the property, per our contract.

Naturally I wanted to understand the nature of this arrangement, specifically how much mark-up is being charged, so I referenced a specific sewer repair bill from 2015 that was $2,600 and asked him if he could provide the vendor invoice so I could understand how much the vendor charged and how much revenue the PM recognized.  He came back and said that discussing price discounts that he's established with vendors wasn't appropriate.  This was a huge red flag for me. 

So now my questions are,

1. Is this normal?  Do PM's typically take $ of the top of repairs after they have negotiated lower rates? There is nothing in our contractual agreement that acknowledges this type of arrangement. 

2. If this is normal, is there a typical industry standard mark-up?  5%, 10%?

Overall, this feels wrong to me.  Fundamentally I'm paying a property manager to protect my investment, not pocket money on the side from construction arrangements with vendors.  Even if he has negotiated lower rates with vendors, I would expect him to pass that savings onto the investor and not pocket the difference.  

Would love to solicit the community's thoughts. 

Happy investing!

Steve