Property Management is ripping me off??

[Ki Lee]

Hey BP, I have a 3 unit property in Logan Square, Chicago. 

I have a PM management company that takes care of it, and in the past 5 years, didn't pay much attention to the numbers. As I started scrutinizing the numbers, I realize that the rent I'm getting is pretty good - 1.2% of PP.  This makes me believe that I should be able to generate a nice cash flow.  But I dont.  I'm pretty much break even or even having a slightly negative cash flow year after year.  Now, I know that the 1% rule isn't perfect, but I'm wondering if the management is ripping me off.  This doesn't make sense.  

A few things about the property - It IS old.  100 years +, and the taxes are rather high in Chicago.  Property tax is rather high - $6000+ for $400K house.  I do pay for water/trash/snow removal/landscaping  and gas/electric for common area.  But even given these facts, not cash-flowing seems very suspicious.  What do you guys think?

It's hard to point our what is exactly racking up all these bills, but the turnover cost is huge.  between commission for signing a new lease and turning over the new unit, it comes out to almost $4,000.  Is this outrageous for a unit that has a rent of $1700?  Can you shed some light?

I need help.  The contract I signed locks me in until next March or I need to pay a fee that equals to 50% of their expected PM fees.  Anybody know a very reputable PM company in the Logan square area?  

Thanks in advance

[Ryan Ingram]

I once had a property management company charge me $45 to deliver a letter to the tenant advising them that the PM would be entering the residence the following week.

That same management company also had an early termination cause in the contract.

Now, this may be local to my area, but I soon after received some wisdom from a few other investors. That was to always be leery of a property management company that has an early termination clause in their contract.

If they’re good at their job, there is no need for that clause. 

I’ve switched to another PM and she has made my life extraordinarily better. It feels so good to get owner statements that are consistently rent collected minus PM fee without any other expenses.

She does not have that clause in her contract. When I asked her about it, she said, “if it isn’t a good fit, why stretch it out? If you don’t like working with me, or I don’t like working with you, why stretch it out longer than necessary?”

Completely agree....

Again, this may be specific to the area which I invest...but I hope it helps.