Problem #1 –
Property managers usually collect more income from immediately leasing to a new tenant, instead of convincing the existing tenant to stay.
Yes, it’s more work for the manager, but the financial rewards are worth it for them.
For example, if an apartment rents for $1000/month, and you are paying a 6% management fee, the property manager receives $60 per month to collect the rents, deal with tenant issues, etc – obviously not a lot of money.
However, if the existing tenant decides to leave, the property manager can re-lease the apartment and, if you’re paying a flat rate, collect a $300 leasing fee – FIVE TIMES the amount of what they would collect in management fees. Ouch.
Problem #2 –
When a tenant leaves, there are ALWAYS other costs to consider – cleaning the unit, garbage disposal, painting the walls, and of course any repairs caused by move-out of the past tenant and move-in of the new one.
And if you use your property manager for the repairs and maintenance, they also get paid for the work – which is a conflict of interest as I’ll explain later.
Assuming the tenant is a good one, it is almost always in your best interests to convince the tenant to stay.
Find out why they are leaving and try to fix the problem or even give them a break on rent. It can be much cheaper than paying for all the typical costs in the move-out/move-in process.
Problem #3 –
Property managers can also handle the repairs and maintenance for a property.
They will either do the work themselves and charge you a fee, or they will markup the cost for outsourcing to tradespeople. Of all the property management fees, this is the type that is the most easily abused.
And sometimes the property manager won’t even realize it (they think they are helping the building owner by ‘keeping on top of every repair’).
What many people don’t understand is that it’s a conflict of interest to leave your property manager in total control of maintenance and repairs – The more problems they find, the more they get paid.
Does that mean you shouldn’t use your property manager to fix problems, or worse, you should become a ‘slum lord’ by not fixing anything? Of course not.
What it does means is that YOU should take control of when the repairs and maintenance are completed on your properties
You should base it on your cash flow, your expected short and long-term plans for the property, and any other considerations you find important
You should not allow your property manager to fix things every time they receive a phone call from a tenant, or every time they drive by the property ‘looking for work to do’.
One way to handle this, and not have your property manager calling you for permission on every repair, is to give them a maximum monthly limit for repairs they can spend before they must get permission from you.
For example, you could give them a $100 monthly cap, not including emergency items (with a strict list of what defines an emergency – e.g. no heat, major water leak).
This will go a long way towards keeping your maintenance costs under control and more cash in your pocket.
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