Time to find a new property manager ?

Question

So I have a Duplex in Columbus, OH (Weinland Park) that was recently renovated and I found a property manager that was highly recommend by my Realtor Brokerage. Once the first side of the duplex was complete they found a tenant fairly quickly at $2450/Month and things were going great. They handled everything as they said in the beginning and there was no complaints. The other side was finished in the middle of March of 2022 and they had it listed for a tenant in the beginning of April 2022. My family had moved to Florida and February and with no reason to believe they couldn’t handle the unit, I moved with them once the unit was listed.

It is now about to be the beginning of July and they have still yet to find a tenant for this side(after dropping price to $2100 after they stated comps in the area were going for $2500).

To make matters worse the original tenant they signed for the other side broke their lease early and left before June 1st. This is when we started running into more issues. They advised they would be able handle any unit turnovers and once the tenant left they advised the unit mainly needed paint and it would cost $6500. I asked for a new quote and they said they couldn’t secure quality for a lower price. I reached out to a contractor I used in the past and he walked the unit and did everything they asked and more for $3500. They were happy with the quality after another cleaning are ready to list it.

My question is should I start shopping for a new property manager? They are the only property manager I have ever used as I am fairly new into rentals, they charge the full first month rent of any tenant plus 10% revenue of the remainder of the lease. My concern isn’t the price they are charging but more so the red flags that have occurred in the last 3-4 months that make me believe they are either dropping the ball of this or that since I only have 2 units through them I am not a priority for them. Is it usually for a property to be ready to rent and sit vacant for 3 months ?

Other red flags were once my contractor was ready to walk the unit with them they showed up 20 mins early and said the contractor was still working and they didn’t want to disturb him, when the contractor said he was just doing minor touch up waiting on them. They then said they were behind schedule and couldn’t schedule another walk through for 5 days. Another red flag was that they advised me to remove my existing washer and dryer from the units as they weren’t in the best condition and they said it would be better to have the tenant to bring their own so that we didn’t have to worry about fixing them and that it would also cause them to want to stay in the unit longer. Now that we are having trouble finding tenants they said they found a tenant who would move in if they were provided a washer and dryer and asked if I minded providing one.

I guess I’m asking is this just something that most have to deal with using property managers and I just need to work through it with them ? Or should I look into finding a new property manager?

Leo R. · Answer

@Josh Uadiski there are a few weird things going on here...

First, if I'm understanding you correctly, the unit was remodeled (which presumably means it had new paint), a tenant was there for a few months, terminated the lease early, and now your PM says you need to spend 6500 on new paint?  How on earth did a tenant cause that much damage to the paint in a matter of months? Moreover, how much space are you painting and how high quality is this paint that it would cost 6500? (that seems like an absurdly high price for some interior paint).  Even 3500 seems very high to me (assuming it's not an enormous unit that needs a complete re-paint).

Second, if the tenant broke the lease, there should be a significant penalty to help offset the costs of property damage and/or vacancy. Did your lease have an early termination fee, and if so, did the PM collect that? Did the PM retain the deposit because the tenant broke the lease?  ...in any case, the PM should be getting you some money for the broken lease to help you offset the unexpected vacancy...

Third, when you hired a contractor to paint the unit at half the cost the PM quoted, what was the PM's response? It seems to me that they should explain why their quote was so far above the market price.

Fourth; you asked if it's normal for a ready-to-rent property to sit vacant for 3 months...3 months is a long time, but it also depends somewhat on the market and your target tenant. You mentioned you're in Columbus, which I know is a big college town--if students are your target tenant, then I'm guessing there are some seasonal decreases in occupancy when the students leave town?  ...but even then, 3 months does seem like a long vacancy if your property is in a major city. 3 months of vacancy probably indicates that A) the PM is not marketing the property correctly, or B) there's something making the property non-competitive (perhaps it's not as nice as other properties in the area, perhaps it's in an undesirable location, or maybe the rent is too high?)...or, it could be a combination of all those things....

Lastly, the issue with the washer/dryer...if the washer/dryer you had was functional, it seems weird to get rid of it...if this is a luxury unit, then yes--you would probably need new high-end appliances to be competitive...but if it's just a typical C-to-B- grade rental, then an older (but functional) washer/dryer should be fine...do you feel that the PM is mentioning the washer/dryer as an excuse for not getting it re-rented?

Having said all that, before you jump the gun and fire this PM, it may be worth having a frank discussion with them about these issues (asking why it was left vacant for 3 months, asking why their paint quote was so high, asking what fees they charged the tenant who broke the lease, asking what they can do to help prevent tenants from breaking the lease again, etc.).  It is notoriously difficult to find a decent PM, and the incentives for the PM and the property owner are often not aligned...in fact, the PM is often incentivized to provide very poor service to the owner.  You are probably correct that you are not a priority for the PM since you only have 2 units--and because of this, they may not care if you fire them (they may even be happy about it if your portfolio isn't making them an ROI that they like)...unfortunately, you'll likely run into these exact same issues with other PMs, so I'd suggest first talking with the PM to see if you can work it out--and even if you can't work it out, try to make that discussion one that provides you with plenty of info that you can use if you have to hire and manage a new PM.

Although this is not my area of expertise, I would think that there must be ways to incentivize the PM in these types of scenarios...perhaps some folks on here who have more experience with PMs can describe some strategies to help align the priorities of the owner with the priorities of the PM.

Good luck out there!

Drew Sygit · Answer

@Josh Uadiski Like what @Leo Ray had to say.

It is DIFFICULT to find:

1) A PMC with integrity

2) A PMC that is competent

We disagree all the time with those that blindly think EVERY situation is the same and ALL properties should rent out in days. We've had some unique properties take months to rent. We've also had some owners that wouldn't agree to lower asking rent - that also took months to rent.

How do you know why it's taking so long to find a tenant? Ask for data from the MLS! You can try to get that from your PMC and hope they don't skew the data, or you may have to ask/pay a Realtor to get it for you.

Definitely get an answer about the paint cost! Very rarely does a whole unit need painting. Usually you can get away with touchups for 1-3 years, sometimes even 5 years. Did your painter repaint the entire unit or just do touchups? Did anyone give you pics/video to show damages to justify what needed to be done?- Going to guess your current PMC took the path of least resistance and was going to unnecessarily have whole unit painted, including all trim!

Regarding the W/D - pure incompetency! We have in our lease that all appliances are as-is and won't be repaired or replaced if they stop working. Why didn't your PMC pursue that option? What has been their response about telling you to get rid of them, but now telling you they're now needed? What did they do with the W/D?

I would say it's worth interviewing another PMC or two, just to see if there is a better option. Just make sure to ask a LOT of GOOD questions and really understand their processes.  See below standard template on this.

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

Patricia Steiner · Answer

Answer to your question:  Yes.

Questions:

Did you sign a contract with the PM that obligates you for a specific term?

Are you managing the PM?  Do you have at least weekly contact with them when a unit is not rented?  Monthly otherwise?  How do your units compare to other comparable sales in the market?  Why did the tenants break the lease - and did you receive an early cancellation fee from it?

The PM works for you but you don't turn your business over to them and walk away.  The whole concept of "passive income" is nuts...there is nothing passive about running a real estate business - even with a competent PM in place.

I recommend that you schedule a meeting with the PM and have your homework done beforehand. Check the rental listing online?  Are your properties marketed well?  How do your units compare with others that are listed for rent?  Check your PM contract and pull out the fine details.  Then you'll be prepared to have a detailed conversation with the PM on what they have done, what needs to happen to better market the units for rent, and avoid over-improving the units for the market.

This needs your leadership to turn it around.  Start there first...

Nathan Gesner · Answer

We're in a hot market. It shouldn't take months to rent a property for market value or slightly below.

Your first tenant was there for less than one year, but the entire place required painting? And cleaning? And they broke the lease? The law says that Tenant is responsible for rent until a new tenant is placed, so they probably owe you $10,000 or more on lost rent, cleaning, and repairs. Is anyone going after them?

Yes, you should consider a new PM. The guide below should give you some idea of what to look for. Feel free to PM me with further questions.

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!

Time to find a new property manager ?

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