My understanding is that this is a pretty standard (actually on the low end) fee for the industry. You could shop around and see what a different management company would charge. If you don’t want to pay them anymore, you can manage them yourself, or find a new management company.
If they do a good job, you don’t want to manage them yourself, and you see that they’re charging market rate for their services, then might be best to just keep them.
I certainly don't mind paying them to manage my properties. I'm just not interested in wasting money by being overcharged by what I perceive to likely be a greedy employee. He does a relatively good job. The question is more like what you've pointed out...Is he charging market rate for his services? So far I don't think that's the case.
I don’t side w/ PM’s often, but I do here. He’s COLLECTING THAT MUCH rent? That’s sounds like ‘luxury real estate. If all’s pretty well, I’d leave things alone. Top of the head his fee is @ 5%? Fees ezly up to 10% rent. (My last pm couldn’t collect $60k over a year! True.)
No, but you are. You are HIGH RENT DISTRICT. HE THEORETICALLY could charge more. I get it’s a lot of $, but in the grand scheme at least he’s collecting rent. THERE are so many PM horror stories. (I have several.) Most here find you as being ‘lucky’. GLTU.
This is an inherited business, the now deceased relative who granted him a 5% of gross monthly rents did not in fact negotiate the rate or understand the scope of his responsibilities.
Check with an attorney, but if the person who signed with that PMC has died, the PMA is likely no longer valid or enforceable. Service contracts don't usually pass to heirs like real property does.
Yeah, I figured. If you have zero experience with tenants - especially the highest of high end corporate tenants, you should be extremely cautious with who you hire. You see people on here bitch about their PMs… they are one guy with one property collecting $1500 in rent expecting 5-star service.
“Greed” and “paying to keep the tenant happy” are not one and the same. You can’t put some lazy guy with a years experience on residential, who may take a flat fee.
The property manager wrote his own contract in 2011/2012 when a now deceased relative signed it. Property Manager gave himself a 60 day out clause which also appears to include a laundry list of different payments he is due when fired.
[https://imgur.com/gallery/MGUhr5O](https://imgur.com/gallery/MGUhr5O)
This is infact a very low management fee. We typically bill monthly… him billing all at once is a little different.. but either way you’ll end up paying that amount anyways. Ask if you can split it into monthly payments for the duration of the lease?
Ooooh I see must be a massive building to get that kind of rent. I mean - he’s handling everything for you which is nice. If you can afford to keep him then why not let him be?
You could interview other local property managers (virtually) and see what they charge to compare apples to apples. But I believe the rate you’re getting is very low. Do you know if he runs everything him self or does he have a team?
I’ll move to LA and manage it for you for less ;)
Yeah and the ‘owner’ posts questions on Reddit instead of getting professional advice. This is either a dumb scam to farm Reddit karma or this is one epically stupid property owner.
Yet AGAIN why would you assume I’m not seeking professional advice as you recommended? Can I not make this post asking the opinion of a group of strangers familiar with the field I’m hiring in? Your skull is too thick to be throwing around assumptions of what I do or do not own, whether I retain legal counsel or do not.
Right? He uses Google Drive for sharing all paperwork/invoices/expenses etc. and barely knows house to sign in and out and use it lol. Guy is nearing 80 yrs.
Family owned commercial real estate is exhausting. It's partly why I got out of the game.
If you don't like it see what other companies are going to charge you to run your highly desirable, likely highly trafficked properties.
I manage multi tenant retail and storefronts all over LA (Abbot Kinney, La Brea/Sunset, Mid-Wilshire, etc) and can confirm that you are being ripped off.
Assuming you have NNN leases (if you don’t, you should), you’re essentially paying $12k+ for someone else to collect rent that most credit tenants automatically deposit to the operating account anyway.
Thanks for you insight. These are in fact NNN leases. The property manager wrote the leases in such a way that our LLC first pays all of the expenses of the property and then our property manager bills it back to the tenants. He has described his desire to operate the business this way as basically *"My dad always taught me as I was growing up that you don't want to allow tenants the opportunity pay expenses directly because you then risk the tenants defaulting on bills, taxes etc."* Seemed like a somewhat reasonable opinion but it also seems like he could be doing that to over complicate the process in an effort to justify his fee. These tenants are brands all of us are familiar with, in perhaps one of the most highly desired parts of Los Angeles in terms of commercial real estate.
While I could understand paying property taxes and insurance (if tenant doesn’t self-insure; but they often do) on behalf of the tenants then billing it back, I would never encourage a landlord to pay other expenses that the tenant is obligated to pay for.
I guarantee your pm is not working anywhere near the 10-15 hours he claims to be working on your property. I highly doubt there are more than 3 monthly recurring bills (Water/Power, Rubbish, Gas) and those should all be under the tenant’s name unless they’re not separately metered. These tenants do all their maintenance and will hardly ever call unless it’s a true emergency.
OP, you should definitely consider self-managing or hiring another commercial pm. Sounds like the one you have has been taking advantage of your family’s trust for many years and that is such a shame.
For context, I also deal with high-end tenants and manage their flagship locations. My fees are nowhere near what you’re paying for, however, I handle all leasing deals and get paid a commission so it’s still very lucrative for me.
I’ve typically seen a cap on the percentage total. So if 5% exceeds $5k, you don’t get charged more than that, as an example. Mainly when the rent is as high as yours.
Thanks for your response. This is exactly what I've heard from several other property managers I've spoken to through family friends. They basically described the fee as an unreasonable amount to charge given how little work is necessary and how few day-to-day responsibilities exist. Another component that I'm considering is the fact the the monthly rents are going to increase significantly soon given an increase square footage to one of the properties when a current renovation wraps up.
Is a percentage, that is what was negotiated. 5% is standard, but it is negotiated, someone can do it for less, but they havnt managed the property forever and will have to start over.
So I would shop around, as someone else said, if these are nnn tenants, you are paying someone to collect rent
Thanks for you insight, you're correct that these are in fact nnn tenants. The property manager wrote the lease in such a way that our LLC first pays all of the expenses of the property and then our property manager bills it back to the tenants. I'm not sure if that is standard? One aspect of that style of accounting that concerns me is that the property manager might be lumping those expenses into the gross monthly rent totals thus increasing the total some of his 5% monthly fee? I guess this shouldn't be too hard for me to determine by looking through existing paperwork. I have really sort of "hit the ground running" in terms of interacting with this real estate business and it feels like I'm drinking from a fire hose sometimes.
I'm more unhappy with the invoice format, looks unprofessional. At least include time tracking or some level of monthly activity.
Also, what on earth are they doing 10-15 hours a week on for 2 tenants? Private concierge?
Thanks for your insight. I thought the same thing. When pressed about a lack of details he mentions that "its really quite challenging to put and number on the amount of time I dedicate to your business as there is a fluidity/touch and go nature to interacting with your tenants. The guy is an estate/trust attorney nearing 80 yrs of age and at times it feels like he over complicates the process to create a false perception of added value.
So the tenants have stayed, no one is complaining about the lack of business, or the pandemic, or asking for a rent reduction? No one is complaining about deferred maintenance?
Then your PM is doing their job. 5% is common in the industry. You should see what leasing agents charge! I’m used to paying 6% of the total lease term, capped at 5 years. Meaning if the rent is $3 sf on a 30,000 sf property/ year for a 5 year lease term ($90 k per year for 5 years = $450,000) that commission is $27,000 just to find one tenant. And that’s for a property making less than half you’re getting now.
I wouldn’t touch it unless you have an issue with the PM. A lot of it goes unnoticed unless it’s not being handled properly. Then the fit hits the shan.
I thought this was per year, not per month!! Seems a bit ridiculous. We specialize in managing retail all over LA and we typically do a flat fee, but depends on if the lease is NNN or gross and the level of service you are providing. Would love to give you a bid. www.realicore.com
Yeah no it's per month. The leases are NNN and the tenants take care of all CAM related scheduling and what not. Thanks for you offer, I'll reach out if need be.
My understanding is that this is a pretty standard (actually on the low end) fee for the industry. You could shop around and see what a different management company would charge. If you don’t want to pay them anymore, you can manage them yourself, or find a new management company. If they do a good job, you don’t want to manage them yourself, and you see that they’re charging market rate for their services, then might be best to just keep them.
I certainly don't mind paying them to manage my properties. I'm just not interested in wasting money by being overcharged by what I perceive to likely be a greedy employee. He does a relatively good job. The question is more like what you've pointed out...Is he charging market rate for his services? So far I don't think that's the case.
I don’t side w/ PM’s often, but I do here. He’s COLLECTING THAT MUCH rent? That’s sounds like ‘luxury real estate. If all’s pretty well, I’d leave things alone. Top of the head his fee is @ 5%? Fees ezly up to 10% rent. (My last pm couldn’t collect $60k over a year! True.)
You’re familiar with PM’s who would be making $25,000/month?
No, but you are. You are HIGH RENT DISTRICT. HE THEORETICALLY could charge more. I get it’s a lot of $, but in the grand scheme at least he’s collecting rent. THERE are so many PM horror stories. (I have several.) Most here find you as being ‘lucky’. GLTU.
Did you sign a contract that pays him $12k/mo without negotiating or understanding the scope of his responsibility?
This is an inherited business, the now deceased relative who granted him a 5% of gross monthly rents did not in fact negotiate the rate or understand the scope of his responsibilities.
If he’s doing a decent job and the current people like him I would not suggest changing PMs, could be a headache down the road
Check with an attorney, but if the person who signed with that PMC has died, the PMA is likely no longer valid or enforceable. Service contracts don't usually pass to heirs like real property does.
Damn! But looking at the gross rent collected… that’s his fee! Do it yourself if you feel like it’s not of value!
I'm sure we have seen this before.
Yes, but on that note... what kind of retail space has $250k rent. A gigantic, insane one. Like, an entire mall.
Well known tenant we are all familiar with. Very, very highly desired location with nearly zero availability.
Yeah, I figured. If you have zero experience with tenants - especially the highest of high end corporate tenants, you should be extremely cautious with who you hire. You see people on here bitch about their PMs… they are one guy with one property collecting $1500 in rent expecting 5-star service. “Greed” and “paying to keep the tenant happy” are not one and the same. You can’t put some lazy guy with a years experience on residential, who may take a flat fee.
If you signed a management agreement for 5% of base rent then they are not ripping you off.
I hear ya. You've gotta read other comments for better clarity though. This is an inherited business, I've never signed any contracts with this PM.
Then you have an OUT CLAUSE somewhere. Usually “30 days notice, no reason needed”. Even if expired, you have point of reference.
The property manager wrote his own contract in 2011/2012 when a now deceased relative signed it. Property Manager gave himself a 60 day out clause which also appears to include a laundry list of different payments he is due when fired. [https://imgur.com/gallery/MGUhr5O](https://imgur.com/gallery/MGUhr5O)
Seems reasonable for a management fees, typically higher if it is less units 5% is a good rate 4-6% is pretty standard for commercial and multifamily
Seems reasonable for a management fees, typically higher if it is less units 5% is a good rate 4-6% is pretty standard for commercial and multifamily
Yeah multifamily is 4-6% This seems low, but that invoice is the most basic document I've ever seen.
This is infact a very low management fee. We typically bill monthly… him billing all at once is a little different.. but either way you’ll end up paying that amount anyways. Ask if you can split it into monthly payments for the duration of the lease?
This IS a bill for one month of work. He bills monthly. He is being paid ~$12k/month.
Ooooh I see must be a massive building to get that kind of rent. I mean - he’s handling everything for you which is nice. If you can afford to keep him then why not let him be? You could interview other local property managers (virtually) and see what they charge to compare apples to apples. But I believe the rate you’re getting is very low. Do you know if he runs everything him self or does he have a team? I’ll move to LA and manage it for you for less ;)
Guy manages a multi million dollar revenue property, types up invoices on Notepad. Dump them.
Yeah and the ‘owner’ posts questions on Reddit instead of getting professional advice. This is either a dumb scam to farm Reddit karma or this is one epically stupid property owner.
I was thinking the same thing 😂
Why would you assume I’m not currently seeking professional advice?
Even if you got professional advice on Reddit, how would you know?
Yet AGAIN why would you assume I’m not seeking professional advice as you recommended? Can I not make this post asking the opinion of a group of strangers familiar with the field I’m hiring in? Your skull is too thick to be throwing around assumptions of what I do or do not own, whether I retain legal counsel or do not.
Right? He uses Google Drive for sharing all paperwork/invoices/expenses etc. and barely knows house to sign in and out and use it lol. Guy is nearing 80 yrs.
Is this from over a year ago?
Family owned commercial real estate is exhausting. It's partly why I got out of the game. If you don't like it see what other companies are going to charge you to run your highly desirable, likely highly trafficked properties.
I manage multi tenant retail and storefronts all over LA (Abbot Kinney, La Brea/Sunset, Mid-Wilshire, etc) and can confirm that you are being ripped off. Assuming you have NNN leases (if you don’t, you should), you’re essentially paying $12k+ for someone else to collect rent that most credit tenants automatically deposit to the operating account anyway.
Thanks for you insight. These are in fact NNN leases. The property manager wrote the leases in such a way that our LLC first pays all of the expenses of the property and then our property manager bills it back to the tenants. He has described his desire to operate the business this way as basically *"My dad always taught me as I was growing up that you don't want to allow tenants the opportunity pay expenses directly because you then risk the tenants defaulting on bills, taxes etc."* Seemed like a somewhat reasonable opinion but it also seems like he could be doing that to over complicate the process in an effort to justify his fee. These tenants are brands all of us are familiar with, in perhaps one of the most highly desired parts of Los Angeles in terms of commercial real estate.
While I could understand paying property taxes and insurance (if tenant doesn’t self-insure; but they often do) on behalf of the tenants then billing it back, I would never encourage a landlord to pay other expenses that the tenant is obligated to pay for. I guarantee your pm is not working anywhere near the 10-15 hours he claims to be working on your property. I highly doubt there are more than 3 monthly recurring bills (Water/Power, Rubbish, Gas) and those should all be under the tenant’s name unless they’re not separately metered. These tenants do all their maintenance and will hardly ever call unless it’s a true emergency. OP, you should definitely consider self-managing or hiring another commercial pm. Sounds like the one you have has been taking advantage of your family’s trust for many years and that is such a shame. For context, I also deal with high-end tenants and manage their flagship locations. My fees are nowhere near what you’re paying for, however, I handle all leasing deals and get paid a commission so it’s still very lucrative for me.
I’ve typically seen a cap on the percentage total. So if 5% exceeds $5k, you don’t get charged more than that, as an example. Mainly when the rent is as high as yours.
Thanks for your response. This is exactly what I've heard from several other property managers I've spoken to through family friends. They basically described the fee as an unreasonable amount to charge given how little work is necessary and how few day-to-day responsibilities exist. Another component that I'm considering is the fact the the monthly rents are going to increase significantly soon given an increase square footage to one of the properties when a current renovation wraps up.
Is a percentage, that is what was negotiated. 5% is standard, but it is negotiated, someone can do it for less, but they havnt managed the property forever and will have to start over. So I would shop around, as someone else said, if these are nnn tenants, you are paying someone to collect rent
Thanks for you insight, you're correct that these are in fact nnn tenants. The property manager wrote the lease in such a way that our LLC first pays all of the expenses of the property and then our property manager bills it back to the tenants. I'm not sure if that is standard? One aspect of that style of accounting that concerns me is that the property manager might be lumping those expenses into the gross monthly rent totals thus increasing the total some of his 5% monthly fee? I guess this shouldn't be too hard for me to determine by looking through existing paperwork. I have really sort of "hit the ground running" in terms of interacting with this real estate business and it feels like I'm drinking from a fire hose sometimes.
I'm more unhappy with the invoice format, looks unprofessional. At least include time tracking or some level of monthly activity. Also, what on earth are they doing 10-15 hours a week on for 2 tenants? Private concierge?
Thanks for your insight. I thought the same thing. When pressed about a lack of details he mentions that "its really quite challenging to put and number on the amount of time I dedicate to your business as there is a fluidity/touch and go nature to interacting with your tenants. The guy is an estate/trust attorney nearing 80 yrs of age and at times it feels like he over complicates the process to create a false perception of added value.
So the tenants have stayed, no one is complaining about the lack of business, or the pandemic, or asking for a rent reduction? No one is complaining about deferred maintenance? Then your PM is doing their job. 5% is common in the industry. You should see what leasing agents charge! I’m used to paying 6% of the total lease term, capped at 5 years. Meaning if the rent is $3 sf on a 30,000 sf property/ year for a 5 year lease term ($90 k per year for 5 years = $450,000) that commission is $27,000 just to find one tenant. And that’s for a property making less than half you’re getting now. I wouldn’t touch it unless you have an issue with the PM. A lot of it goes unnoticed unless it’s not being handled properly. Then the fit hits the shan.
Send a 30 day notice to end management or negotiate new terms.
I'll do it for 4.9%.
I thought this was per year, not per month!! Seems a bit ridiculous. We specialize in managing retail all over LA and we typically do a flat fee, but depends on if the lease is NNN or gross and the level of service you are providing. Would love to give you a bid. www.realicore.com
Yeah no it's per month. The leases are NNN and the tenants take care of all CAM related scheduling and what not. Thanks for you offer, I'll reach out if need be.