Why You Should Never Hire a Property Maintenance Company
As an experienced real estate investor with a great deal of rentals and having bought and sold over 150 rental properties in the last 8 years, I have never met a single successful real estate investor who hired a property maintenance company. In fact, I have never even heard of a successful investor hiring one of these companies.
A property maintenance company is by definition an overpriced third party vendor. Why are they overpriced? Because this company has to support:
1) Massive Overhead – which is office rent, company trucks, accounting person, receptionist, the list goes on and on.
2) Owner’s Profit – if the company is a decent size, you can rest assured the owner is not out there doing any of the maintenance work.
3) Management Salaries – it is likely at least one manager has been hired to supervise the maintenance staff.
4) Tons of Advertising – they need a lot of business to support the costs above so you are also paying for overpriced yellow page ads, direct mail pieces, and perhaps a full-time marketing person.
Why? Because property maintenance companies are obscenely over-priced. Successful real estate investors seek and find one and two person size vendors. In other words, we look for a plumber without a fancy truck, no office, no advertising, and no staff (except for his helper and maybe his wife) that is licensed and insured and been doing plumbing for over 20 years. These guys are really great at the plumbing, electrical, carpentry, roofing, or whatever. However, they are usually not very good with advertising or budgeting their money.
This unique type of vendor needs work. More specifically, he needs steady work. He can make more money doing maintenance work for home owners, but since he only works by word of mouth, this is a feast or famine segment of his business. If he can hook up with a large landlord or a Tampa property management company, he doesn’t have to stress about paying his bills every month, especially when times are slow (like right now).
You might pay $80-$120 an hour for a maintenance company to perform carpentry, plumbing, or electrical. Plus, these guys usually mark up materials at least 300%. Not to mention, I find they are much more likely to lie to you and claim that an AC condenser has to be replaced when it is really a $20 part and 2 hours of labor. Or they might say the electrical box is too small and must be replaced for a charge of $3000 when there is room to add a couple more breakers for a minimal cost. If business is slow, these guys have to make a certain amount of money or they go broke. Remember, these maintenance, plumbing, or electrical companies have huge monthly overhead.
By hiring a much smaller company—preferably one or two person company—you will receive volume discounts. These people really appreciate the steady work. Just be sure you do not take 30 days to pay them. A good tip is to turn around their invoices within one week and be open to paying them the same day if they are a bit tight that week.
We normally pay 50-90% less than landlords who hire those large companies. Our vendors are much more loyal and responsive. Not to mention, less likely to rip you off, mark up parts 300%, or pad their bill. The small guys are the owner and the worker at the same time.
A Tampa property management company or investor should really think carefully hiring large companies to do any of their work.