$120 vacancy fee charged by property manager - anyone seen this?

Question

I own rental properties in CA, TX and FL, and the property manager in TX (north Houston area) told me that they will now be charging a $120 vacancy fee to cover their work during a vacancy.  They say it's customary.  This seems like it's adding insult to injury, given there's no income coming in during a vacancy, and that's about what they get monthly as their fee when a tenant is in place.  Further, they get the first month rent as "commission" when they re-rent the place (SFR).  Has anyone seen this?  It is NOT customary in my experience in CA or FL markets where I invest.  Keep in mind it took them 4+ months to re-rent the 4/3 home; it was vacant June-mid October.  There's an abundance of new construction and many homes up for rent.

Wes S. · Answer

@Janet Souza Short answer is that is not normal. I've worked with property managers in Washington, Florida, California, and Maryland. Typically I've seen 9-11% of the monthly rent, and usually half of the first month's rent (in Orlando, one company has a sliding scale to incentivize them to keep long-term tenants, unlike most "first month's rent" contracts).

If anything, that $120 monthly fee (and full month's rent for new tenants) just incentivizes them to keep one-year tenants -- no maintenance requests, no late rent, all they have to do is post their ads and still get to collect the full month's rent when they find someone. I'd strongly consider finding a new property manager.

Jay Hinrichs · Answer

that's more in line with asset management fee's like banks pay for vacant houses. .one thing I might add that's a little off topic.. but you should call your insurance agent.. and ask them if your house is vacant more than X days are U still covered you may find out a house that is vacant more than 60 days.. the insurance company will not insure.. you have to purchase a special rider for vacant homes..

I have had clients of mine over the years get wiped out.. when their house was vacant 4 or 5 months it had a catastrophic fire only to learn their insurance expired day 61 of vacancy.

and they are good at it.. the insurance companies. they will ask you .. OH when did the last tenant leave you not sure why they ask and you say JUne.. its oct. you have a claim.. house vacant 60 days.. claim denied.

turn over and vacancy kill the rental business as you no doubt learned on this one. it will take you years to earn back what you just lost in that vacancy.. if the market gets flooded with rentals.. it came be a very tough place to make it work long term.   Or if it took 4 months your way over priced on your rent and would have been financially better to lower the rent and get someone in within 30 days..

you lose 3 or 4k in rent because your 100 bucks to high it takes you 30 to 40 months to just make it back and you will have a vacancy before you make it back and turn over etc.  better plan on appreciation bailing you out in those scenarios.

Jerry Ta · Answer

@Janet Souza, definitely not normal and some companies I know used to charge a smaller amount have actually gone away with it.  We have never charged one here in Houston, being an investor myself, I know what cash flows look like in Houston, so we try to cater to that.  Ultimately, our client's success is our success.

Andrew Ashby · Answer

@Janet Souza....seems like it's time to find a new property manager. That one must not be hurting for business or they'd be a little hungrier to retain clients.

Janet S. · Answer

Thank you for the insight about the asset management fee and tip about the insurance - you're so right.  I completely forgot about that.  And with the hurricane having gone through the area, I could have been really been in trouble since it was vacant.  Luckily no damage.  Further, I had the prop mgrs lower the rent a couple of times and even offered an incentive of $500 off the 1st month rent, as there were lots of similar houses in the area for rent at the same price.  I got it rented after the hurricane, but the amount I lost financially will take years to recoup.

Ray Harrell · Answer

Above all, check your contract. If it's not in there, then they can't charge you!

Jay Hinrichs · Answer

now U know.. talk about some sad investors when they come to find out their insurance lapsed at 60 days... I bet maybe 10 to 20% of landlords even know this.. I know I did not until a client was explaining how he got wiped out when his vacant house burned down.. 100k lost still on the hook for 70k loan .. can't walk ruin his credit and in Texas they can and do get deficiency judgments when you walk from a mortgage regardless of the reason.. its something that can destroy an investor or put them in bankruptcy.   Most people don't know that about Texas lending laws as well.. then you add in foundation rain hail.. its a tough market.. for OOS folks in my mind..

Tom Cooper · Answer

@Janet Souza, I suggest you find a new property manager.  @Jerry Ta is a good place to start but there are a number of others in Houston that will do you a fine job without that fee.

Christine Kankowski · Answer

Nope that is not normal. I woudl also shop around . If they are getting a leasing fee, this is all part of it, in my opinion.

Sam Shueh · Answer

Suggest you shop around. Many property managers take a flat %. No rent out no charge.

$120 vacancy fee charged by property manager - anyone seen this?

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