The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Sugaree on October 22, 2018, 03:24:48 PM
-
I know most of you probably manage your own rental properties, but I'd like you to weigh in on a situation. My FIL rents out a SFH. Normally, he pimps out my husband to do the work, but for the last 8 months that's not been a viable option so he hired a property manager who is an absolute waste of skin as far as I can tell. The guy charges 10% of the rent amount each month to collect the rent check. Anything above and beyond that has an extra fee to go with it. The last tenants complained that service requests were only accepted through email and even then they were rarely, if ever, responded to. Those tenants have now moved out. The property manager's crew came in and took the furniture that the tenants left, but didn't do anything else in the way of cleaning up. The property manager wants something like $12k to fix the place up. That includes $5k to cut the brush in the backyard and $3k to paint the exterior of a mostly brick house. My FIL has thankfully decided to cut ties with said property manager, but we found out that the property manager has changed the locks on the house and we don't have keys. In addition, he has started to do work, what he called a "house flip," without permission. I'm sure that there is going to be a bill associated with that. If I had to guess, I'd say he's probably going to charge somewhere in the neighborhood of $500 for cleaning up, putting up new blinds, and maybe shampooing the carpet.
I guess my first question is, is this a typical fee schedule? I feel like I'm in the wrong business if I could be charging 10% just to collect a check every month. The other charges are absolutely ridiculous given the size of the house and yard. For various reasons, I'm not jumping at the bit to do it myself, but I don't want to see FIL get screwed either.
-
That includes $5k to cut the brush in the backyard...
What the living hell of the what?
-
My current PM charges 8%, IIRC.
That does not include any work like trimming trees or fixing the running toilet, but it covers the leg work of having someone do those things, or of selecting the new carpet when it was needed (running it by my for approval to the extent I want her to) and making all the arrangements for installation. Or finding a plumber or selecting a new fridge when the old one died.
Approval for any expense over $300 is required. (I was able to specify the number I was most comfortable with but that was her initial suggestion and it worked for me.) And I get receipts for any work she has done on our behalf.
She also finds and screens all new tenants and advertises the property when it is vacant, though I think we pay something ($200??) each time we turn over a tenant.
If there was a bill associated with work about which I wasn't informed and didn't approve (in my case beyond the $300 we agree to, I would not be paying. I'd likely consider small claims court if she didn't drop that and get me copies of the keys ASAP. In the end, rekeying a house isn't that expensive, so that might be the path of least resistance, even after you pay the locksmith to let you in.
To me, it's not so much that the fee structure sounds off in your case. I think 10% is fairly standard. Its more than they were taking advantage, overpaying for basic services (perhaps funneling work to friends and/or getting kickbacks), and doing things without permission and explanation. Your FIL has a terrible PM, but not necessarily an overly expensive one.
-
8% + 50% of one month's rent on a turn.
-
8% + 50% of one month's rent on a turn.
That's not bad.
We broke in Saturday and changed the locks out again. I wouldn't be surprised to find that the PM has had them bored out to get back in.
Honestly, the house needs work. I could see spending $12k, but not on the stuff that he's talking about. I would take down a tree in the backyard ($500 if I haul it off myself), spray some Roundup ($50), and maybe reseed it later on ($200). The front yard just needs to be cut. I'd pull up the nasty carpet and put down some kind of floating hard floor ($3k would take care of the entire 1250 sq ft). I'd hit the interior walls with a coat of semi-gloss neutral paint ($750, maybe). The master bathroom ceiling is peeling, so I'd just scrape the texture off and paint it with the same semi-gloss from the rest of the house. I'd paint the exterior, but it shouldn't be anywhere near $3k since it should just be eaves and soffits. It's worth noting here that the house has always been rented out with the understanding that the basement is not included because it's used for storage of FIL's things. None of the utilities or anything are down there, so it's not the end of the world. It's not something I'd agree to, but he's always discounted rent due to this fact and he's never had trouble finding someone to move in considering he charges about half of what comparable rentals in the neighborhood cost.
The whole thing has been a constant source of strife between DH and his dad since I've met them. Every time a tenant leaves, FIL decides that he wants DH to manage the property in exchange for being able to keep the rent checks. However, he doesn't ever give us time or money to get the place ready for new tenants. Then he gets anxious about the house sitting empty he'll go out and find random people to rent to. Like, we'll get a call letting us know that the new tenants will be moving in next week. That's why the kitchen walls are currently primed, but not painted. Then he keeps the rent checks so we're out any money that we put into the house. I'm over it. DH is trying to hold on to it because he's attached to the house and he's afraid that FIL will sell it. I don't want to see FIL get taken for a ride, but I'm not wanting to . Mostly because I believe that this is one way that this particular property manager's dad managed to amass a collection of 30 properties on a church music director income.
-
Sounds to me like FIL has no business owning rentals. He should sell them all. He should call an agent today and tell them he wants them all gone in a month. 10% commission.
-
I wouldn't be surprised to find that the PM has had them bored out to get back in.
I believe this is known as "trespassing", and if the PM does something like this, you should call the cops. Seriously, what the hell is up with this guy?
-
Sounds to me like FIL has no business owning rentals. He should sell them all. He should call an agent today and tell them he wants them all gone in a month. 10% commission.
I couldn't agree more. I don't want this falling on DH to deal with when FIL is gone.
I believe this is known as "trespassing", and if the PM does something like this, you should call the cops. Seriously, what the hell is up with this guy?
I haven't seen the contract that FIL signed, but I'm starting to wonder if there is something in it that would allow access to the house until X date.
-
Take a look at the contract FIL signed with the PM. He cannot bill you on shit that's not in the contract, nor go into the property without permission. Honestly I'd get a lawyer involved.
-
That includes $5k to cut the brush in the backyard...
What the living hell of the what?
Is your husband able to just stop being involved? If so, he could say something like “Dad, this is too big a headache. I think you should sell. In any case, I’m out.”
If not, then all you can do is tell your husband the same thing, and then try to distance yourself from it.
-
That includes $5k to cut the brush in the backyard...
What the living hell of the what?
Is your husband able to just stop being involved? If so, he could say something like “Dad, this is too big a headache. I think you should sell. In any case, I’m out.”
If not, then all you can do is tell your husband the same thing, and then try to distance yourself from it.
My husband doesn't want to sell it. His grandmother left it to him and he lived there during college. After he graduated he and his father "traded" properties and he moved into the farmhouse out of state. But apparently the paperwork was never done to officially transfer it to him (which ended up being a good thing because it is in a community property state and it kept his wife from trying to stake a claim on it). That house actually still has DH's great-grandfather's name on it (DH is a fourth) so I don't think anyone has done anything with that deed in decades. So now, all the houses are in FIL's name and every time he brings up selling the place he says that he'll just sell it and split the money between DH and BIL. Which I'm okay with. Whatever, it's legally his to do as he pleases. It's a bitch move, but BIL is the golden child so it's expected. There is an awesome little investment property on the other side of town that would be ready for tenants to move in immediately and would cost right at half of what the burden house should fetch. What I can, and have been, doing is refusing to pay for anything to do with that house. New blinds? FIL can buy them and DH can put them up if he feels so inclined.
-
My current PM charges 8%, IIRC.
That does not include any work like trimming trees or fixing the running toilet, but it covers the leg work of having someone do those things, or of selecting the new carpet when it was needed (running it by my for approval to the extent I want her to) and making all the arrangements for installation. Or finding a plumber or selecting a new fridge when the old one died.
Approval for any expense over $300 is required. (I was able to specify the number I was most comfortable with but that was her initial suggestion and it worked for me.) And I get receipts for any work she has done on our behalf.
She also finds and screens all new tenants and advertises the property when it is vacant, though I think we pay something ($200??) each time we turn over a tenant.
If there was a bill associated with work about which I wasn't informed and didn't approve (in my case beyond the $300 we agree to, I would not be paying. I'd likely consider small claims court if she didn't drop that and get me copies of the keys ASAP. In the end, rekeying a house isn't that expensive, so that might be the path of least resistance, even after you pay the locksmith to let you in.
To me, it's not so much that the fee structure sounds off in your case. I think 10% is fairly standard. Its more than they were taking advantage, overpaying for basic services (perhaps funneling work to friends and/or getting kickbacks), and doing things without permission and explanation. Your FIL has a terrible PM, but not necessarily an overly expensive one.
The OP property manager sounds a lot like my first one. This one, my 3rd, does exactly what your does. She does charge 10% but only $100 for renewed lease and $250 for a new one. I really like that she has collection of handyman, appliance repair folks that charged a lot less than my 2nd property manager. I like for things over $1,000 or so she will get 2 or even 3 quotes. Plus she manages to get new paying tenants in 4-6 to weeks and I'll have to do is pick which one I like best.
A good property manager, eliminates about 80% of the headaches associated with own rentals. A bad one adds to the headache, the OPs falls into that category.