Profit Share with my Property Manager?? Good or Bad?

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I have not had this issue, but I wonder what the road block/obstacles are in the management company getting it up to standard. If they aren't performing, I'd just let them know what your expectation is and ask why they are having a hard time. Maybe you can help with that specifically.Maybe find a new one?Is profit sharing arrangement going to improve your personal cash flow? I know that's ultimately the plan, but what if they still don't perform? It seems like a lot of cajoling to get what you should already be getting.Just a question... are you expectations correct for the area?

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Thank you all for the feedback, definitely some things to think about before I make a switch on PM/structure!@Steven Kleppin Typically 10% for residential, and maybe a couple percent less for commercial/multiple units. I think their 5% was very low, but they wanted to expand more into the city I was in, plus they wanted to get the rest of my other properties as well as my parents'. @Tyler Libby Even for being a decent sized city, i couldn't find many commercial property managers in that area, and this was the largest one with hundreds of units and a full team. The cash flow I think will improve & stay consistent if there is a threshold since they have an incentive to make more profit. My expectations are realistic I think, I am making assumptions based off of the previous owner's (of 35 years) figures and occupancy. He did make make a visit daily and had a business in there, so definitely spent a lot more time and took great care of it himself. @Deanna McCormick I was getting billed a bit much for snow removal, but the other costs (locks, lawn mow, trash-out, etc.) were all reasonably priced. I now request quotes with details on the repair and pictures for everything, so I do review them and have the option to go elsewhere on certain repairs if I want. Those are some good things I honestly never considered, I will definitely do some calls/site visits on them to see how their process is working! I do deal directly with the owner, but due to her wanting to engage all her owners, she is bogged down and can be late in addressing issues. @Andrew Johnson These are all definitely solid points, I think I'm on the same page as far as having a feeling in the back of my mind on the PM's motives, whether or not anything wrong is going on. This would be my biggest concern in this structure, to having them make a decision on whether or not to make a required Capex improvement. Of course if I could find a great PM, or even one that just does the basics, I would even pay double or triple to forget about all the hassle.

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Ujwal Velagapudi I've never done it, so I want to be up front about it. I've also never asked for it. Why? I want to make my own maintenance and cap-ex decisions for my property. I don't want a PM deciding to defer HVAC maintenance or not patch a hole in the roof for 3 months because their kids need braces and that profit sharing would help. Side note, I do not (in any way) believe that my PM would do that even if we had a profit-sharing deal. However, it would be stuck in MY head and make ME second guess things. In my mind that's not healthy for a landlord-PM relationship. You don't want to doubt motives, question timing for routine maintenance, etc. Now others may be more evolved and mature. If you are, awesome, these are good scenarios to think through.

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You could try.. but they already have you tied up.Nobody is going to manage your property as well as yourself. So far have you figured out any numbers on costs of the maintenance up charges,, do they make sense.. are you overpaying on that part of the deal.. maybe just source them for leasing and hire a separate company for the maintenance What's the hold up on lease ups,, are they not advertising enough or returning calls, or are busy with other clients so your leads end up being leased at one of their other property.. cross/selling... but not to your advantage... Next vacancy I'd do a shop on them,, see how long it takes to get listed online,, have someone place call that wants to see it ASAP and see how long they have to wait for return call , appointment set up and showing,, and if that person asks do you have any other properties what are they told.. its one thing if they ask,, it's another if it's offered at the first sign of well I'm not quite sure.. How hard of a sell is this PM are they having the newbies show your place??? How is it being represented at showing.. do they do a follow up call.. I worked in the rental industry for many years.. our employers hired shoppers and leasing agents were rated on everything from initial phone call. Fair Housing compliance was checked during the entire appointment, showing, guest cards, how many times they were asked if they were going to submit a application (sales closing techniques).. Is the person you were impressed enough to handle your account, working your account or are you passed on to whom ever ??

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I'm not opposed to profit sharing, but this seems pretty darn generous (obviously depends on where that X lies in your profit margin). If you're worried about them squeezing the place dry... you probably need a new company, not pay them more.What's the average property manager structure look like in your area? My first PM was only taking 8% where the standard where I was living was 10%. I learned that he had to incentivize prospective clients with the lower rate, and could afford to do so, because he worked alone and didn't have a team in place. He was clearly overwhelmed and my property and bank account suffered. He has since been replaced and I'm gladly paying the market 10% for PM with a professional team in place.

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@Ujwal Velagapudi What did you end up deciding? Did you end up profit sharing (75/25?) thinking about doing something similar? sounds like a good a idea to create a more incentive based vested interest opportunity for them