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Updated over 2 years ago on . Most recent reply
![Gardy Saturne's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/1329436/1621511378-avatar-gardys1.jpg?twic=v1/output=image/crop=2088x2088@0x0/cover=128x128&v=2)
First Rental - Negative Cash Flow & Questionable Property MGMT
Hi Guys,
I am an out of state investor that purchased my first duplex in Cleveland, OH last year. I'm already negative cash flow on this rental because of unexpected repairs and tenants not paying. After turning over the unit to get it rent ready - I had to replace upstairs stove, two hot water tanks, and get the furnace serviced, and a plumbing job in the basement. My upstairs tenant fell behind for 3 months - received some assistance just to catch up, but now has not paid this month. Also since I closed on my property - my downstairs tenant has paid on time until this month. This is the first month where both my tenants have not paid. In the beginning I attempted to self manage my property out of state with using boots on the ground. It didn't work out as well which is why I hired my property manager. The property manager that came in was after the tenants have been placed.
My property manager doesn't inform me when tenants pay late, when tenants call in for repairs etc. I only know when tenants pay late when I received my owner's statement. But this is received by the 15th of the month. By too much time has gone by for late notice, eviction letters etc. They let me know when they are repair issues that need to be addressed - hence the plumbing job and the furnace. Property manager quoted me 2500 for furnace replacement. My boots on the ground was able to get it serviced to get fixed for 729$. At this point I am eating the cost of supporting my rental from my W2 salary. I am in a 2 year contract with my property management company. To cancel the contract is 500$.
These are my thoughts of where I am at .. If I have to evict either upstairs tenant or both, I'm strongly considering moving into the property. My job will be 100% remote by September. I do have the capacity to move from NY to Ohio. I would have the opportunity to leverage my W2 salary for FHA loans, continue to house hack - I'm also going to continue to wholesale as well. I'd figured me being there I would have more power to turn this property around. My second thought is I could search for another property management company . Then pay to cancel the contract with my current property manager. I'm just looking get some insight on if the property manager is mismanaging the property how do I go about it lawfully. If I have to evict my tenants how would I go about that being out of state. I'm willing to answer any other questions that can provide more insight on this.
Thanks again.
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![Tjimon Louisy's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2426396/1686100537-avatar-tjimon.jpg?twic=v1/output=image/crop=3024x3024@0x503/cover=128x128&v=2)
Firstly, the PM needs to go. They are charging you money and not providing any service and also appear to be heftily marking up maintenance. Take this as a lesson for throughly vetting any PM you contract (a good PM cannot save a bad deal but a bad PM sure can kill a good deal).
Your boots on the ground person seems to be a valuable resource, I suggest using them to find an attorney or other appropriate professional in the area to handle the eviction process (your current PM performance leads me to believe asking them to handle the eviction is a bad idea).
While you missed out on the low down payment benefit of the house hack, I still think it is your best option here if your job offers the flexibility to move to Ohio. Live in one unit and rent out the other unit. I can assume your cost of living will go down compared to New York. Additionally, I recommend self-managing for at least a little bit, as it will allow you to get hands on with the property and develop an understanding of maintenance costs among other things (this experience will allow you to better vet PMs in the future). Use the time in Ohio to build out a team to support you as an out-of-state investor, especially if you are looking to continue to invest in Ohio. Once you feel satisfied things have stabilized, you can move out and let the team you assembled take over.
What does not kill you makes you stronger. I obviously have no insight into the actual deal or your life, so take my advice and apply your context. For example if the house is a money pit (lots of maintenance) or not set-up to cash flow, then you might be better off selling it to cut your losses.