Property Managemnent Fraud?
I have recently contracted with a property management company to manage an out of state rental that I currently own. I am having a situation and would like the advice and suggestions of some of the more experienced folk out there.
The agreement with the company was that I would be given an estimate for any work to be performed and we would go from there. The first job that the company did was the painting of the interior of the unit. They estimated that it would cost $400 but the final bill was more like $600. I didn't really mind because they did a good job and I was happy with it. The next job was to replace the lower panel on the garage door. The estimate was $112 for the door and $35 for installation. The final bill however was $230. When I confronted the company about the bill, they said they had not included the cost of paint, cost of bolts and hardware for the door and the labor for painting the door.
Now, they are telling me that one of the windows in the upper level bedroom was broken by a storm. ( I am extremely skeptical about whether the window was really broken by a storm, but that is a whole different story). The estimate is for $60 but I am worried that this is just like the previous two times and it will be a much higher final bill.
Has anyone had a similar experience with management firms? Am I just being paranoid by believing that the company intentionally lowballs their estimates to get me to approve the repairs and then hits me with a higher bill? What recourse do I have when it comes to receiving and approving estimates? Can I refuse to pay over the estimate (not very likely since they collect the rent). They have a very reasonable hourly rate for their workers ($16/hr) but I feel that maybe they offset this by padding the number of hours it takes to do a job.
My apologies for the long post. I would appreciate any comments on this issue.
Thanks,
JS. :-?
PM's frequently markup the repair bills and this is considered part of their pay. They are basically acting as a general contractor hiring out subs to do the work. They should tell you this if you ask them but they don't always volunteer the information. The only way I know to get around it is to inform them that if they are going to do the repairs for you, they are going to have to agree to stick with their estimate, just as any other sub would, even if it costs them money. Otherwise, just come up with your own list of subs that they must call, and require them to get at least two written estimates before doing the work. The bottom line is, it is always going to cost you more to do business out of state, but hopefully the opportunities will more than pay for the setbacks.
Having been on both sides of this fence. Let me say $16 an hr. is an excellent rate of course we promote up to that as most of our workers start considerably less and as they become skilled the make more. The Mordita is part of the business. On single family properties it is hard to get around.
When I have been in your position I play the two hands. I have of course a management company. I also usualy have a broker friend, acquaintance, who wishes me to use him, think about him. expose deals to him whatever. I use him to go by and check each time I have a repair or an improvement. Thus I get another little look at the property.
If I have more then one property or if I have a multiple near by. I may use my resident manager who also owns a tool belt to do small repairs.
One thing I have found out. You should go to visit at least twice a year. You will be amazed what you will find out from nearby tenants, the tenants and even an occasional shop owner.
Lucius 8-)
I deal with repair estimates on my out of state properties by having the management companies fax me a contrator's written estimate of repair.
I sign and fax back my approval, or I may modify some aspect of the project scope and ask for a new estimate. The management company pays the invoice for the approved amount and then bills me an extra 10% "supervisory fee" for their efforts in coordinating the work, monitoring the work, accepting the completed work, and processing prompt payment.
A couple of years ago, I was talking with a lady from Arlington VA who owned (still does to this day) a rental townhome. About ten years ago, when she converted her property to a rental, she used a property manager affiliated with a real estate firm. One day the manager suggested she completely repaint the interior when a vacancy came up. She agreed to the work (and I presume a cost). The manager gave her a property management company "bill" for $1200 which she paid without hesitation. Later she happened to run into the painter somewhere and discovered that the painter really only charged $750 for the job. I bet she would have paid a lot less if she had demanded a written contractor's estimate instead.