Let me be direct: if you’ve delegated property management, you haven’t delegated accountability. Yet most investors I talk to barely glance at their monthly statements before filing them away. They assume their PM is handling things efficiently and fairly. That’s a dangerous assumption.
The relationship between investor and property manager is built on trust, but trust isn’t blind faith. It’s informed confidence based on clear financials and transparent practices. Without that transparency, you’re essentially writing checks and hoping nothing is wrong.
Here’s the reality: not all property managers overcharge, but the incentive structure almost always favors it. The less visible the overcharge, the less likely you are to catch it. After years of analyzing owner statements for investors, I’ve identified patterns. These seven red flags show up repeatedly in accounts where PMs are quietly eroding returns.
Red Flag #1: Maintenance Markups Without Disclosure
This is the most common silent fee killer. Your PM contracts with vendors for repairs and maintenance, then bills you at a markup. That’s fine—they deserve compensation for vendor coordination. But many PMs never disclose the markup percentage or philosophy.
You might pay $500 for a service your PM sourced for $350. That’s a 43% markup. Is that reasonable? Maybe, depending on the service. But if you never see the actual vendor invoice, you’ll never know.
What to look for: Request the itemized vendor invoices on your next three maintenance charges over $200. Compare the vendor’s invoice to what you’re billed. Most transparent PMs happily provide this. The ones who resist or delay? That’s your first warning.
A legitimate markup is typically 8-15% for small jobs and 10-20% for larger projects. Anything consistently above 25% needs justification. Some PMs charge 30-50% markups by burying them in vague line items like “coordination fee” or “administrative processing.”
Red Flag #2: Management Fees Charged on Vacant Units
This one burns investors every time. You have a $1,200/month property under management. It sits vacant for six months. Your management fee is 8% ($96/month).
Here’s the question: did your PM charge you $96 for six months while doing basically nothing to manage an empty unit? Most do—and it’s not always disclosed in the way it should be.
Some PMs argue they’re still maintaining the property, paying utilities, coordinating inspections, and preparing it for the next tenant. Fair points. But if you’re also paying for separate maintenance and turnover costs, you’re potentially paying management fees on costs that are already being deducted separately.
What to look for: Pull six months of statements. For any months with $0 rent collected, check whether the management fee line item still appears. Call your PM and ask directly: “Do you charge management fees during vacancy?” Listen carefully to the answer. If they get defensive or vague, that’s a problem.
This fee might cost you $500-1,500 per property per year depending on your vacancy rate and unit price. Over a five-property portfolio, that’s real money.
Red Flag #3: “Miscellaneous” or “Administrative Fees” That Never Get Defined
Look at your owner statement. Do you see a line item that says “Administrative Fee: $47” or “Miscellaneous Charges: $82”? If so, do you know what it covers?
The problem is that vague fees create easy hiding spots. Some PMs use these categories to bury percentage-based surcharges, processing fees for routine tasks that should be included in their base management fee, or “coordination” charges that may or may not be legitimate.
One investor I know was charged a $35 “lease renewal administrative fee” every 12 months. That seems reasonable until you realize it’s the same fee charged across five properties—$175 a year—for what amounted to reviewing a renewal document his PM was already obligated to handle.
What to look for: Challenge every vague fee. Send your PM an email: “Can you break down exactly what was charged for [that fee] and why?” Request it in writing. A good PM will provide a clear, detailed response. A problematic one will either ignore you, give you a generic answer, or tell you “it’s just how we bill.”
Accumulate these vague fees across all your properties and all 12 months. You might find $200-500 annually per property in unjustified charges.
Red Flag #4: Inflated Vacancy Timelines and Turnover Costs
Your PM tells you it takes “an average of 30-45 days” to turn a unit. That might be accurate. Or it might be artificially padded.
If your PM owns or has relationships with turnover contractors (cleaning, painting, repairs), the incentive is to overstate the timeline and maximize the work performed. A unit could be market-ready in 18 days, but the PM schedules contractors with gaps in between, extends timelines, and authorizes additional “while we’re at it” repairs.
Beyond just time, the actual turnover costs can explode. You approve a $1,200 turnover budget. The PM gets you new carpet ($850), fresh paint ($320), plumbing repairs ($180), and “general improvements” ($400). That $1,200 estimate became $1,750 with minimal communication about the overages.
What to look for: Track your actual turnover timelines. Document when a unit becomes vacant, when it’s ready for new tenants, and when new tenants move in. Compare this to what your PM claims their average is. If your actuals are consistently faster, they may be padding timelines.
For turnover costs, request a detailed estimate before ANY turnover work begins, not after. Then get before-and-after photos. Compare your PM’s quoted turnover costs to three local vendors’ quotes. You’ll quickly see if your PM’s pricing is competitive or inflated.
Expect turnover to cost $1,500-2,500 depending on unit condition and market. If your PM routinely hits $3,000-4,000, dig deeper.
Red Flag #5: Late Fees and Collected Payments That Disappear Into a Black Hole
Tenants pay late. That’s a reality of rental property. Your lease likely includes a late fee—maybe $50-75 per occurrence. When collected, where does that money go?
Some PMs include late fees in your owner distribution (the good way). Others collect them and keep them without explicit disclosure. They might argue it covers the “administrative cost” of processing late payments or sending notices. But if you’re not seeing an accounting for these fees, you’re losing money you’re legally entitled to.
I’ve seen PMs collect late fees on behalf of 20-30 properties. Over a year, that’s potentially $10,000-20,000 in owner funds they’re keeping without transparency.
What to look for: Review your lease terms. Document what late fees you’re entitled to. Then cross-check your owner statements. Do you see late fee revenue reported? Some PMs show it as a separate line item. Others bury it or don’t show it at all.
Send your PM a direct request: “How much in late fees have been collected this year? Please provide a monthly breakdown.” If they can’t or won’t provide this, it’s a massive red flag.
This should be straightforward accounting. The fact that many PMs don’t track it (or claim they can’t) suggests either incompetence or intentional opacity. Neither is acceptable.
Red Flag #6: Unnecessary Vendor Coordination Fees or Bid-Shopping Charges
Your PM loves to talk about their vendor relationships. Great vendors, competitive pricing, trusted contractors. But how do you know?
Some PMs charge a “vendor coordination fee” or “bid management fee” for getting quotes on repairs. This is separate from the actual repair cost and the markup mentioned earlier. It’s a fee just for sourcing.
The argument: “We save you time and ensure quality.” The reality: this fee incentivizes your PM to use their existing relationships—which may or may not be the best or most cost-effective option.
A $200 repair might cost you: $200 (actual repair) + $30 (markup) + $25 (vendor coordination fee) = $255. But if you’d gotten three competitive bids, that same repair might be $160 from someone else.
What to look for: Ask your PM for their vendor list and pricing structure. Do they have an in-house contractor they heavily favor? Request that any repair over $300 be sourced from at least two vendors with quotes provided to you.
If your PM pushes back or claims they don’t have time to get multiple quotes, that’s a problem. That’s literally part of their job. The resistance reveals where their incentives lie.
Track repair costs over 12 months. If your PM’s per-unit maintenance costs are consistently 15-25% higher than market rates in your area, vendor coordination fees may be part of the problem.
Red Flag #7: Lack of Itemized Transparency in Owner Statements
This is the umbrella red flag that enables all the others. If your owner statement is vague, bundled, and doesn’t break down expenses into clear line items, you have no way to catch the previous six red flags.
A good owner statement shows:
- Rent collected
- Management fee (as a percentage or flat amount, calculated on actual collected rent)
- Maintenance costs with vendor names and descriptions
- Turnover costs with itemization
- Any fees with clear explanations
- Deposits held
- Your net distribution
A bad owner statement shows:
- A few bundled line items
- Vague category names
- No vendor information
- Mixed costs (repairs and turnover grouped together)
- Fees without explanation
- Inconsistent formatting month to month
If you can’t understand your statement without emailing your PM for clarification, it’s intentionally complicated. Don’t accept that.
What to look for: Request a sample owner statement from any PM before hiring them. Make it clear that you expect itemized detail. If they can’t or won’t provide that, move on.
If you’re already using a PM with vague statements, demand more detail. Tell them: “I need a fully itemized statement showing every expense, vendor name, and service description.” If they resist, that’s telling.
The Damage These Overcharges Add Up To
Let’s do some math. You own a four-unit rental building. Here’s a realistic year with red flags in play:
- Management fees on two months of vacancy: +$150
- Vague administrative fees (8 charges across 4 units): +$300
- Turnover costs 15% higher than market average: +$600
- Vendor coordination fees on maintenance: +$400
- Late fees not disclosed or kept: +$200
- Maintenance markups averaging 18% instead of 12%: +$800
Total annual overcharge: $2,450
That’s on a four-unit building with maybe $50,000 in annual rent. You just lost 5% of your gross returns to one property manager. Scale that to 10 or 15 properties and you’re talking about losing $20,000-30,000 annually—money that goes to the PM instead of your bottom line.
What You Should Do Right Now
Step One: Pull your last three months of owner statements and read them like you own the data. Don’t skim. Highlight every line item you don’t understand.
Step Two: Email your PM with specific questions about the items you flagged. Ask for itemization, vendor invoices, and clarification. Watch how they respond. Transparent PMs respond quickly and helpfully. Problematic ones get defensive or vague.
Step Three: Compare your maintenance costs and turnover timelines to other investors in your market. Are you in the same ballpark? If you’re consistently higher, there’s a problem.
Step Four: If you see patterns of unjustified fees or lack of transparency, start the conversation about expectations. A good PM will welcome the accountability. A bad one will resist it.
The goal isn’t to become obsessed with every $10 charge. It’s to establish clarity, catch systemic overcharges, and ensure your PM knows you’re paying attention. That attention alone usually eliminates 80% of the problem.
The Role of Transparency Tools
Managing all this yourself—especially across multiple properties with multiple PMs—is a lot of work. That’s why tools like DoorVault (formerly Knox) exist. They automatically consolidate owner statements, break down expenses, flag anomalies, and make it easy to spot the overcharging patterns we’ve discussed here.
You still need to verify and make final judgment calls. But you shouldn’t have to manually sort through six months of statements to catch a systemic markup problem or a phantom vacancy fee.
The best property managers actually welcome this kind of oversight. It proves they’re doing things right. The ones who get defensive? That tells you everything you need to know.
Final Thought
Hiring a property manager is a business decision, not an act of faith. You’re delegating tasks, not delegating accountability. You have every right—and every reason—to know exactly where your money is going.
These seven red flags aren’t accusations. They’re audit points. Most will turn out fine. But the ones that don’t could easily cost you thousands of dollars annually. That makes them worth checking.
Don’t let “it’s too much trouble to verify” become “I didn’t notice I was losing money.” Good property managers expect this scrutiny and welcome it. If yours doesn’t, that’s your answer.
