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Property Management Fees

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  • Property Management Fees

    Hey everyone,

    I have a question about fees for a property manager. I have a single family house that I rent out. The property manager charges 10% of the rent as her fee. We now need to sign a new management agreement because we've placed the house in an LLC for asset protection purposes. However, in the new agreement, our property manager has added a provision for them to be paid a, "20% allowance for any repairs over $1000 for any repair job requiring supervision, receipt and review of estimates, confirmation of completion of the work and other responsibilities to oversee the work order."

    Our old agreement with this property manager didn't include anything like this. However, she inherited us as clients when our old property manager retired about five years ago and the agreement that we signed at that time stated that there would be no changes to our old agreement other than the property being managed by a new provider. We've generally been pretty happy with this property manager, but it also hasn't required a lot of work on her end (other than finding new renters every couple of years). The property is about an hour from our house, so we could theoretically go out to supervise any major projects ourselves. However, we want to keep a property manager involved so that we don't have to deal with 2AM phone calls and the hassle of finding new tenants (we've rented to a lot of military families, so high turn over).

    Is this a common clause or am I getting hosed?

    Thanks for your insight.

  • #2
    6% collected and 15% on repairs over $1000. So not too far off the mark. We have a discount on the fees given the long History typucal of area is 8%


    • #3
      10% of collected on 1st 2 SFH's. 8% on 2nd SFH's. Nothing on top of repairs. 50% on 1st mo rent on new tenants.


      • #4
        I do not think this clause is reasonable. You are already paying them every month, most of the time just to be available in case. 10% of monthly rent pretty common around me, with discounts for multiple. Then again my wife manages the properties so we only comparison shop every few years.


        • #5
          Not reasonable. Where’s the incentive to keep cost of repairs down? And oversight of a 1k project does not take 2x the effort of a 2k project.


          • #6
            The property management company I am most familiar with has a very good reputation. They charge a flat monthly percentage and do not charge extra for repairs unless there is a major renovation project. They charge $1000 for placing a new tenant, and they charge $500 for lease renegotiation and renewal.


            • #7
              Sounds like you need to find a new property manager.


              • #8
                The most I've seen for an "up charge" for overseeing repairs/renovation is 10%. Negotiate the fee down.


                • #9
                  With a property manager, you want to align your goals with their goals as much as humanly possible. Your success and their success, your shared success should come from the same things.

                  With a percentage up charge on repairs and maintenance, your property manager is incentivized to hire the most expensive contractor to perform the repair because they will be compensated a higher amount. This represents a complete misalignment of goals.