Is this normal from a property manager?

Question

I have a property that needs some roof work completed. My PM contacted me about it, and said that, with their "25% management fee", the repair cost would be $X,XXX. Is that normal to charge an additional fee on top of my normal, monthly 10% of rent collected? It's not disclosed in the management agreement (nor are the other fees they tack on just for responding to a resident's request...), and I tried fighting them on it but they wont budge. I have another PM in a different stated that has helped me immensely with another property and hasn't charged anything above the monthly amount, so I'm just not sure if I'm extremely lucky in one case and normal in the other, or vice versa.

Nathan Gesner · Answer

I think it would be worth contacting the Ohio real estate commission. The law typically requires the property manager to disclose all fees, and attempting to charge fees outside of that disclosure vould be a violation of the law and ethics.

Nathan Gesner · Answer

Have you read your Property Management agreement? All fees should be disclosed. If it's not disclosed, push back. If it's in the agreement, then you have to accept it or coordinate the repair yourself.

Joe Norman · Answer

If it isn't in the property management agreement then you don't owe it, plain and simple.

As to your question about if it's normal for PMs to markup repair/renovation costs - some do and some don't. I guess that doesn't make it "normal" but it doesn't make it "abnormal" either.

Good luck!

Zeke Liston · Answer

Hi Jacob, a property management upcharge is pretty standard, but 25% seems excessive. If this wasn't disclosed, I would second

@Nathan Gesner and contact the board if the property manager is unwilling to explain or work with you through it.

Jacob Laginess · Answer

Yeah, this was the first one that I hired. I did look at a few other companies, but all the contracts seemed comparable (and these fees were not disclosed in the management agreement) and they were active on the BP forums so I figured they would be good. Ah well, you live and learn, time to move on.

Drew Sygit · Answer

@Jacob Laginess how did you get involved with an unethical PMC that is adding stuff NOT in their management contract?

FIRE THEM!

Choose wiser:

Even if someone give you a referral, don’t make the mistake of assuming that PMC will meet your expectations, just because they met the expectations of the referral source.

We also can’t believe how many owners hire the first PMC they speak with!

Then they complain their expectations aren’t being met!

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – and they often select the first PMC they call!

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Please send us any feedback via email, as we do not use the DM feature here. 
Also, if you like our response, please don’t be shy about giving us a vote😊

Ned J. · Answer

I can understand charging a fee to handle the management of the project..... getting permits, paperwork, coordinating with he tenant and roof company etc...all takes time.... totally get the justification for a fee

25% is pretty high....and if that fee is not in the contract I signed, I'm not paying it.

Jacob Laginess · Answer

The fee is definitely not in the agreement, in any way shape or form. I tried to call them on it and got pushback. Now I have to figure out how to get out of the agreement to get a different company in there based on my current PMs breach of contract. We'll see how that goes...

Russell Brazil · Answer

My PM also charges 8% of outside contractors fees. But those contractors also are charging less than their standars rate to the PM, so.it roughly evens out. But any fee needs to be disclosed in the PM contract. And 25% seems excessive.

Is this normal from a property manager?

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