Stuck with a Bad Property Manager in Detroit

[Yvette Daniels]

Hello, 

I own a single family home in Detroit. My property manager has never been good with paperwork, but I am at my wit's end. The property manager has a contract with HUD, where she rents out properties to tenants in the HUD program. The first couple of years, things were bearable, like I mentioned, the team was not great with paperwork, but I was receiving the rent. Well, I noticed several months went by and I had not received a payment. When I inquired about it, I was told there was a clerical error with housing and they were working to get it fixed. Fast forward, months have passed, I have been going back and forth with the property manager, turns out Housing is claiming that repairs need to be completed and the rent/property was put into abatement. My property manager claims to never have gotten any notice from housing about the repairs.

The tenant has vacated the property, approximately one month ago.  A "squatter" has moved in and they are moving slowly to rectify the situation.  From my understanding, the "squatter" is a friend of the previous tenant and will move out, but this team of people are not aggressively managing this situation. 

I want to fire this property management team, but fear that if I do, it will be a nightmare collecting the back rent.  Not sure if I should cut my losses and hire another team to either manage or flip this unit, and hire a lawyer to audit the property management team.  A lawyer will probably end up costing more than the actual revenue of the property. 

I am really not sure of the best move to make.  A lot of this could have been avoided if the property management team paid more attention to the property.  Open to all suggestions at this point. 

Thanks, 

Yvette

[Nathan Gesner]

Quote from @Yvette Daniels:

1. Move your properties now. You need to stop the bleeding and start making money again. Then you can focus on getting money from the old PM. I'll provide some help below.

2. Once you are ready, file a complaint with the state: https://www.michigan.gov/lara/bureau-list/bpl/complaint/occ/... When you file the complaint, the state will typically contact the PM to let them know a complaint has been filed and see if the PM is willing to "reconcile" with you. Most agents don't want the State investigating their files, so they will try to negotiate a settlement with you or something to make the problem go away. Make sure you know exactly what is owed and exactly what you are willing to settle for.

HOW TO FIND A PROPERTY MANAGER

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!