Managing my manager - how to best approach maintenance requests

[Robert Zajac]

I need some advice on managing my property manager. Particularly when it comes to maintenance requests.

Some context: I own two small multi families in Cleveland and they are managed by a PM company (B2B property management). This company charges 15% on top of any maintenance requests in addition to their normal fees but all I need to do is approve the estimates - they do all the work/communication with the contractors.

Recently my PM sent me a few maintenance requests: a $1400 to fix some plumbing in a bathroom (clogged and leaking - contractor says they need to cut the pipes, reroute and replace some plumbing, recaulk. Etc) and another estimate for $800 for lead paint testing. And basically I’m just realizing I don’t know how to know if these are reasonable prices or not? They seem high. On one hand I don’t want to fall victim to overpriced contracts squeezing a naive owner. On the other hand I don’t want to be cheap and losing money in the long run bc I’m not properly fixing things. Does anyone have any resources or advice on how to know better about this? I’m mainly looking to educate myself for the long term.

I also am planning to meet with my PM on Monday to discuss pain points and better expectations, I would love to hear what sort of expectations you set with property managers? What you ask and expect of them (beyond the basics) and what expectations can I further establish?

[Nathan Gesner]

Quote from @Robert Zajac:

15% markup on maintenance is one of the highest I've heard of. Most property managers don't charge any markup. When a PM does charge a markup, he's usually getting a discount on the service to keep the cost stable. For example, my appliance store gives me a 10% discount, so I charge a 5% markup to my owners to make a little money and the owner still saves 5% from retail. I only charge markup on maintenance if it's a larger project that requires more coordination, supervision of the work, and inspection after completion. Examples include replacing a deck or renovating a kitchen. Lead paint testing requires no supervision or follow-up inspection. It takes a couple of calls to schedule, then they pay the invoice. That's not worth 15% of the job.

Another thing to consider is that some managers will charge low management fees and then add maintenance fees to bring in more income, while others charge high, all-inclusive management fees. You have to compare your expenses with each management style and find the option that works best for you. If you have a newer home that rarely requires maintenance, a markup fee and low management fees may be the way to go. If you have an older home that requires a lot of maintenance, you probably want to avoid the manager who charges a markup.

I recommend shopping around occasionally to see if your PM is procuring fair pricing or just marking you up to make money without justification.

As for expectations, you need to read the PM agreement and understand what is charged and why. If you don't understand something, ask the PM to explain. If they can't justify the charge immediately and specifically, then it's probably just a money grab.

Remember: lower fees don't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Try interviewing at least three managers.

1. Ask how many units they manage and how much experience they have. Feel free to inquire about their staff qualifications if it's a larger organization.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, a leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. A tenant complaining online might indicate that the property manager handled them appropriately, so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything possible to expose properties to the broadest possible market? Are their listings detailed with good-quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!