Bottleneck on Property Management, Seeking Suggestions

[Xiaoyu Liang]

I want to share my experience in purchasing this investment property. It is quite a journey, and I feel like I've been dealing with a lot. I want to see if anybody had a similar experience or how would you deal with it moving forward if you were me. 

I closed a duplex investment property with inherent tenants on 1st August 2022 near Lakeland, FL. My realtor was stellar. He gave great suggestions and was very professional throughout the process. I trusted him so I used his company for property management after closing. The PM had 30 days to bring the property up to standard for inspection for insurance (I am paying high insurance because of the water leak and the electrical issue at closing, plan to switch out once the repairs are done). 

Right after boarding the tenants, one of the tenants broke the lease and left, it was a good opportunity to do maintenance on the property anyways I thought. It took the PM 3 weeks to get me a quote on the project, which was a bit over budget but I agreed, thinking I need to finish the project on time, within 30 days. 2 days before the due date, the contractor found out they need to replace laundry box and quote me for $900. I felt it was overpriced, so I searched around other contractors and got it replaced for $375. I went back to the PM questioning for the overprice and was told they used their long-term partner general contractors, it might be expensive, but the quality of work is guaranteed. 

On the day of inspection, it was found out the contractor replaced the wrong water heater, and the installation was not up to standard. PM came back to me and wanted me to replace the other water heater stating they were both old anyways. I negotiated a deal with the PM to replace the other water heater at a discounted price and asked them to fix the improper installed one. It has already passed the deadline at this point. 

The contractor went the next week, and the tenant was not home so they couldn't complete the task. The contractor also had disagreement with the inspector on the standard for installing the water heater. After communication, the contractor scheduled another week later to install the water heater the right way. It's 2 weeks past the deadline at this point. Re-inspection was scheduled right away after the installation of the water heaters. But the tenant did not open the door again, and the inspector couldn't get in to check. 

So here I am now. 2 weeks past the deadline and $2k over budget. Also, unit B has been vacant this entire time due to the tenant breaking the lease and leaving, and this unit is still not on the market yet. It has been more than 30 days.

I am so frustrated at this point with this property, but I am so lost at the same time. I don't know what I could do to improve my situation. I signed a contract with the PM. PM also manages contractors. What would you do if you were me?
 

[Nathan Gesner]

I agree. Read the PM Agreement to see how to terminate. I would give the current PM notice of termination for failure to perform. They may have termination fees, but I would argue there should be no penalty because they've failed to do their job properly. At the same time, I would spend every available moment looking for a new PM. Interview several and have one at the ready. Explain your problems and a good PM should be able to tell you how they would solve those problems quickly and efficiently. For example, when a tenant doesn't open the door for a scheduled appointment, I open it with a key. I don't cancel appointments and schedule them for another day just to let the tenant refuse entry again.

Here are some suggestions for finding a new PM. Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!