Is it normal that PM gets 13% of all repairs and rehab?

[Ariel Tobi]

It sounds weird that the PM's business is against the landlord's interest. They need you to spend money and you try to save... It's sleeping with the enemy part 2. Is this rights?

[Russell Brazil]

Would you rather pay a highrt monthly PM rate and have no added on fees? Going to be typically either or.

[Bill B.]

Has to be market dependent. In MN and NV I pay less than market with my PM. They give me a quote from a retail vendor that shows a discount for how much business the PM does with them. They ha no problem with me arranging someone else to do the repair.  When I’ve called around the “un-discounted price” has been within 5% of market. The discounted price is usually about 5-10% under market prices. Plus it’s fixed same day. 

If you don’t love your Pm call a couple other local pms or talk to local investors about who they use. Tell the people you interview the address or just the area and the property details (so they don't look up current rental info.) Ask them how much rent they would charge and all charges you would face. 

I pay $300 for a new tenant, $150 for a renewal and 8% of rent collected. Period, end of story. Oh, and they keep 1/2 of late fees. End of story. :-). 

Ps. Does their contract require you use their vendors? Do they add on the charge if you call in your own repair guy? (If so, I’d bail.)

[Patrick O'Sullivan]

I've seen property managers charge a % or flat fee to do project management or coordinating multiple vendors for say a make ready repair turn. I haven't seen many charge a % or fee if it is just coordinating with a single vendor. Most property managers consider project management not included in their property management services.

[Ariel Tobi]

Quote from @Bill B.:

Has to be market dependent. In MN and NV I pay less than market with my PM. They give me a quote from a retail vendor that shows a discount for how much business the PM does with them. They ha no problem with me arranging someone else to do the repair.  When I’ve called around the “un-discounted price” has been within 5% of market. The discounted price is usually about 5-10% under market prices. Plus it’s fixed same day. 

If you don’t love your Pm call a couple other local pms or talk to local investors about who they use. Tell the people you interview the address or just the area and the property details (so they don't look up current rental info.) Ask them how much rent they would charge and all charges you would face. 

I pay $300 for a new tenant, $150 for a renewal and 8% of rent collected. Period, end of story. Oh, and they keep 1/2 of late fees. End of story. :-). 

Ps. Does their contract require you use their vendors? Do they add on the charge if you call in your own repair guy? (If so, I’d bail.)

[Ariel Tobi]

Thanks for your answer.

They charge me 7% from gross income plus 13% of any repair or rehab wether I bring the vendor or they do it.

how do you think?

[Bill B.]

Interview other local PM’s. See if it’s a standard charge for your market or your Pm is taking advantage of you. Are you using a true PM or a realtor that does it on the side?  Try interviewing 2 or 3 (even by email) PM’s that have 500 or 1,000 or 2,000 properties. 

Ps. The 7% of rent instead of my standard 8% might almost cover the bs repairs add on? If you’re spending less than 7.5% of rent of repairs you’re actually ahead of 8% and no repair add on. (13% of 7.5% is less than 1% your saving.) I spend much less than that in repairs but YMMV.  lLook at your records for last year and do the math. 

Pps. To me it still “feels” wrong, especially if you’re hiring and scheduling the repair yourself.   I’d be interviewing other local PM’s. You’ll either find a better deal or find out it’s “normal” for your market. 

[Bob Stevens]

Quote from @Ariel Tobi:

It sounds weird that the PM's business is against the landlord's interest. They need you to spend money and you try to save... It's sleeping with the enemy part 2. Is this rights?

 A bit high, but hey you can try and deal with all the headaches, see if it's worth it. I live In Palm beach, and do all my biz out of state, freedom is priceless

All the best

[Jeremy H.]

Sounds really odd to me 

I pay first months rent plus 8% (swapped from 10% to 8% when I went to 10 units) to my PM

Repairs are usually done by either their maintenance, which I've been really happy with so far. They may hire a contractor (they use the same guy and he's done a great job so far) or a specialized trade for anything more advanced - electrical, plumbing etc. 

As far as rehabs - I sometimes use their contractor/maintenance for stuff near the end of the job that they can do much faster for me. But I also know they are not a construction company. If you're wanting them to do a full rehab - that's really out of the PMs scope, so I would expect to pay additional here (since they are essentially managing an out of scope project for you)

But as far as an additional upcharge for them doing some basic rehab/repairs? That's gonna be a no for me. If that's the case then I'll get my own vendor. If I'm getting my own vendor, then (in my opinion) I'm doing part of their job...which is a problem. 

I want to know about the problem and hear what they plan to do to fix. I will spec materials/colors/repair method when I feel it needs to be done a certain way or I want something different/special.  

[Matthew Morrow]

Flat fee or small percentage on top of all materials / fee is typical here. They cant be expected to run to the shop, grab materials, install at cost. Real estate is our business, Management and coordination is theirs. So depending on your market this may or may not be standard. 

[Theresa Harris]

My PM's policy is similar to Bill's (except for late fees, and I pay for advertizing on top of the placement fee). I've never got late fees and have always got my rent from the PM around the 15th-20th of the month, so I assume tenants are paying on time.  When they break the lease, I get that money.

[Theresa Harris]

Quote from @Ariel Tobi:

Thanks for your answer.

They charge me 7% from gross income plus 13% of any repair or rehab wether I bring the vendor or they do it.

how do you think?

 If they charge you when you bring in the repair person, that seems wrong.  Most places require repairs at turnover, none should require it every month.  I figure part of the 8% or whatever it is, is to take calls from tenants and deal with repairs.  Having to collect the rent (which is done electronically), deposit it and transfer it each month, shouldn't take more than 30 min in total (being very generous).

[Adam Bartomeo]

The more I read these posts the more I realize how valuable a good PM is... First, to say that the PM is against the owner's interest means that either you do not understand the value of the PM OR the PM is not adding value. Here is what we charge in the case of maintenance:

1. $0 for normal or routine maintenance

2. 10% of the rehab ONLY if it is over $2,500. This is waived in 1 of 3 ways: 1. Our team performs the repair (we are usually lower than other vendors) 2. The owner buys or sells the property with us when the time comes (verbal agreement only), 3. The owner handles the rehab themselves.

So, we rarely charge any fees as our owners typically choose one of the 3 options and they are all a win/win for both of us. 

If your PM's interest is not inline with yours then you either need to find a new PM or reevaluate your interests. Someone is trying to get over on the other.

[Michael Smythe]

Would like to know who on this thread works for free?

Wait, what? ---Crickets chirping...

So, why would you expect a PMC to work for free to arrange maintenance, repairs and renovations?

You think the 8-10% monthly management fee covers:

1) Managing a staff of handymen? 
---Coordinating their schedules to prioritize & handle on the fly, hundreds of Work Orders each month? 
2) Making a bunch of calls/emails/texts to get the multiple bids for owners wanting to save $5?
3) Chasing contractors to actually stick to timelines/deadlines and get work done to keep tenants happy?
4) Dealing with juggling schedules because the electrician job for someone else ran over and now your whole schedule for the drywallers, painters, cleaners, is blown?
5) A blown schedule may require you to try to find replacement downline contractors because they have other jobs schedule they can't miss. Oh, and you have to find a replacement willing to meet the previously owner-approved bid or be called a thief by that owner!
6) Trying to deal with owners who find Craigslist contractors they want you to use because they have the cheapest prices, but you know they don't have insurance, won't get the job done on time and won't warranty anything - no matter what they say.
7) Dealing with all the stress caused by multiple owner & tenant calls because no job can ever be done fast enough for a tenant or cheap enough for an owner!

A well-run PM will charge a minimum markup of 10-20% for maintenance - which is MUCH LESS than a General Contractor!

If you're not willing to pay that, do us all a favor and DIY manage.

[Michael Smythe]

Quote from @Ariel Tobi:

Thanks for your answer.

They charge me 7% from gross income plus 13% of any repair or rehab wether I bring the vendor or they do it.

how do you think?

 If you bring the vendor and then are NOT happy with the quality of the work, timing or change order pricing - who are you going to hold accountable?

Your PMC!

Also, if they know what they are doing, they will still verify licensing and insurance for the vendor YOU found! So, time is money unless you do it properly and share the info with them.

So, why would they want to take on all that liability for free?

[Ariel Tobi]

Thanks to everybody for the recommendations. They will very useful for a renegotiation or look for a new one.

If somebody is PM and work around miami, please let me know.

Thanks

[Wolfgang Croskey]

I don't think the issue is 13% normal but rather what are you getting for 13%. If the value is there, the value is there. 

[Bud Gaffney]

@Ariel Tobi heck no. Negotiate that down to 2-5%!

[Theresa Harris]

Quote from @Michael Smythe:

Would like to know who on this thread works for free?

Wait, what? ---Crickets chirping...

So, why would you expect a PMC to work for free to arrange maintenance, repairs and renovations?

You think the 8-10% monthly management fee covers:

I'm asking this respectfully.  I know 8-10% converted to $ will vary depending on how much the rent is and the type of property (or rather the condition of the property, but I'd like to think most PMs would not manage a home that is a disaster).  What do you think the 8-10% monthly fee should cover?  Renos (not repairs) are clearly above and beyond and not regular PM duties.

[Ariel Tobi]

if a PM has a % on repairs or rehabs, higher or lower or even doesn’t have (but its vendor recognize a 10% under the table) their interest will go thru bringing and finding repairs to do.

If PM will be in charge of the finance and keep the budget aligned, it wouldn’t be the one who handles/hire/have interets in any expenditures. Their repair recommendations should be objective with any economic interest.

Is the goal of the PM to reach the best NOI or it is just attend the tenants and problems of the property? These are opposite jobs/interests. Can't go together.

What do you think? Am I wrong?

[Michael Smythe]

@Theresa Harris good question!

In a "perfect world", a PMC would be like an attorney and be able to track how much time they spent on an owner's property and bill accordingly.
---Pretty sure owners would be SHOCKED at how much time is actually spent on their properties!

That's not reality, so everything has to be averaged out in some fashion.

The challenge is owners like to think in terms of the minimal time it takes to do things ASSuming everything goes well. They also RARELY fully separate their personal time and time they spend self-managing their rentals. So, they're clueless as to how much time is actually required to PROPERLY manage a rental.

On the other hand, when something goes wrong and takes a LOT of time to address, owners expect the PMC to cover it for NO ADDitional cost:(

So, PMCs (at least the ones that want to stay in business and make money) are forced to try to average everything out.

BTW, what do YOU think the 8-10% covers? Here's a PARTIAL list:
Office rent
Computers, printers & software
Internet & phone bill
Office furniture
Office supplies: paper, postage, ink, etc.
Office liability insurance
Auto expenses: monthly payment, insurance, gas, maintenance, registration/plate fees
Broker license fees: annual, monthly board & MLS fees, continuing education fees, E&O insurance
Equipment: lockboxes, signs, etc.
Payroll & payroll taxes
Business income tax preparation and payments
Labor: answering phones, calling past due tenants, scheduling tours, taking marketing pics, processing those pics, writing ads, researching rent amounts, posting ads, explaining to owners how rent determined & showing where ad posted, opening & processing mail, posting payments, bank deposits, scanning documents & posting to owner & tenant portals, explaining accounting to owners so they understand their monthly statements, taking pics/videos of repairs, finding reputable handymen and contractors, confirming they're properly licensed & insured and tracking annually, verifying repairs done properly, processing invoices for utility bills, repairs, taxes, city inspections, scheduling periodic property evaluations/inspections with tenants that don't want strangers in their homes, explaining to owners why taking so long, and more & more & more...

[Theresa Harris]

Quote from @Michael Smythe:

@Theresa Harris good question!

In a "perfect world", a PMC would be like an attorney and be able to track how much time they spent on an owner's property and bill accordingly.
---Pretty sure owners would be SHOCKED at how much time is actually spent on their properties!

That's not reality, so everything has to be averaged out in some fashion.

The challenge is owners like to think in terms of the minimal time it takes to do things ASSuming everything goes well. They also RARELY fully separate their personal time and time they spend self-managing their rentals. So, they're clueless as to how much time is actually required to PROPERLY manage a rental.

Thank you. I know there is a lot more behind the scenes so to speak (like everything).  For me with my PM as long as it is transparent what my fee does cover and what is extra, I'm fine with it (and my PM is very transparent-they list it on their website which is one reason I went with them).  I also know from some AGM for strata meetings (my PM also does strata management for condo buildings), that some people require a lot more hand holding and ask a million questions which takes a lot of time.

[Jay Hinrichs]

Quote from @Bill B.:

Has to be market dependent. In MN and NV I pay less than market with my PM. They give me a quote from a retail vendor that shows a discount for how much business the PM does with them. They ha no problem with me arranging someone else to do the repair.  When I’ve called around the “un-discounted price” has been within 5% of market. The discounted price is usually about 5-10% under market prices. Plus it’s fixed same day. 

If you don’t love your Pm call a couple other local pms or talk to local investors about who they use. Tell the people you interview the address or just the area and the property details (so they don't look up current rental info.) Ask them how much rent they would charge and all charges you would face. 

I pay $300 for a new tenant, $150 for a renewal and 8% of rent collected. Period, end of story. Oh, and they keep 1/2 of late fees. End of story. :-). 

Ps. Does their contract require you use their vendors? Do they add on the charge if you call in your own repair guy? (If so, I’d bail.)

PM fee's are heavily dependent on the class of property.. 

[Calvin Thomas]

We manage hundreds of our own doors, no third party.  So, we are a PM for our own properties. I think some of the posters here are a bit out of whack on what they think a PM does and what they should charge.  @Bud Gaffney, what would you do for 2% - 5%?  If the rent was $1000.00 a month, what would you do if you were earning $20.00 - $50.00 per month on the rental?

I always speak to other owners and some select the cheapest PM or realtor they can find. Yes, you will always find someone to fill and "manage" your property on the low level. When something breaks at 2 am, do you expect them to be on call for $20-50 bucks a month? If there is a fire, heating issue, tenant argument, police issue, inspection, etc... Would you be on call for $20 - 50 bucks a month for a property you don't own?

If you drive a vehicle, how much of that $20-50 bucks a month covers gas, insurance, tolls, etc.?  How about covering errors and omissions, general liability, staff, phones, etc.?

You can say it's part of the business expenses, and you would be right. However, the owners must be realistic and know you get what you pay for. You pay 2%-5%, expect to get 2%-5%.  Yes, there would be a world of difference between 2%-5% vs 8%-10%.

[Ariel Tobi]

Quote from @Calvin Thomas:

We manage hundreds of our own doors, no third party.  So, we are a PM for our own properties. I think some of the posters here are a bit out of whack on what they think a PM does and what they should charge.  @Bud Gaffney, what would you do for 2% - 5%?  If the rent was $1000.00 a month, what would you do if you were earning $20.00 - $50.00 per month on the rental?

I always speak to other owners and some select the cheapest PM or realtor they can find. Yes, you will always find someone to fill and "manage" your property on the low level. When something breaks at 2 am, do you expect them to be on call for $20-50 bucks a month? If there is a fire, heating issue, tenant argument, police issue, inspection, etc... Would you be on call for $20 - 50 bucks a month for a property you don't own?

If you drive a vehicle, how much of that $20-50 bucks a month covers gas, insurance, tolls, etc.?  How about covering errors and omissions, general liability, staff, phones, etc.?

You can say it's part of the business expenses, and you would be right. However, the owners must be realistic and know you get what you pay for. You pay 2%-5%, expect to get 2%-5%.  Yes, there would be a world of difference between 2%-5% vs 8%-10%.

There’s no question that who ever is in charge of repairs must be very well paid.
my PM calls me 3 times per week with problem to repair. When I have some time to check them, I realized that we can avoid some of them or there are cheaper ways than suggested by the PM… So, if they will not care of my budget and they are focus to make the 13% as much as money they can create, I would need to separate the jobs. PM to attend the property letting me know when they believe we have to repair something and on the other hand hire a service company NOT RELATED TO THE PM, to solve the problems. In this way I believe I cut the economic interest of the PM to continue create/find creative problems in order to rise their repair %.

[Calvin Thomas]

Quote from @Ariel Tobi:

Quote from @Calvin Thomas:

We manage hundreds of our own doors, no third party.  So, we are a PM for our own properties. I think some of the posters here are a bit out of whack on what they think a PM does and what they should charge.  @Bud Gaffney, what would you do for 2% - 5%?  If the rent was $1000.00 a month, what would you do if you were earning $20.00 - $50.00 per month on the rental?

I always speak to other owners and some select the cheapest PM or realtor they can find. Yes, you will always find someone to fill and "manage" your property on the low level. When something breaks at 2 am, do you expect them to be on call for $20-50 bucks a month? If there is a fire, heating issue, tenant argument, police issue, inspection, etc... Would you be on call for $20 - 50 bucks a month for a property you don't own?

If you drive a vehicle, how much of that $20-50 bucks a month covers gas, insurance, tolls, etc.?  How about covering errors and omissions, general liability, staff, phones, etc.?

You can say it's part of the business expenses, and you would be right. However, the owners must be realistic and know you get what you pay for. You pay 2%-5%, expect to get 2%-5%.  Yes, there would be a world of difference between 2%-5% vs 8%-10%.

There’s no question that who ever is in charge of repairs must be very well paid.
my PM calls me 3 times per week with problem to repair. When I have some time to check them, I realized that we can avoid some of them or there are cheaper ways than suggested by the PM… So, if they will not care of my budget and they are focus to make the 13% as much as money they can create, I would need to separate the jobs. PM to attend the property letting me know when they believe we have to repair something and on the other hand hire a service company NOT RELATED TO THE PM, to solve the problems. In this way I believe I cut the economic interest of the PM to continue create/find creative problems in order to rise their repair %.

 You should look for a PMC who has an in-house staff to repair things. I.E. plumber, handyman, electrician, etc.  Anything more they can quote out to send you the quotes for review and consideration.

There are too many real estate agents who also moonlight as PMCs. Pricing would be much cheaper for Bobby, the realtor, who can also offer property management services, than Property Management Inc., which has multiple offices and staff that can handle 24/7 management of all site properties. Some states have additional licensing requirements for PMCs, and others don't.  

I've always stated that if they do their own repairs for their clients and if they have their own insurance.  If they say no to either, then they really aren't PMCs; they are real estate agents moonlighting as PMCs on the side. Since, at least in NY/NJ/CT, you need a real estate license, not an additional PM license.