Property Management Issue

[Nancy E.]

We have been using the same PM for 8 years and have been happy for the most part. However, the latest turn required extensive maintenance and upgrades. We kept the security deposit but it was about 1/8th of the total bill. Some of the repairs we authorized but some were done without our consent - we were just billed. From our calculations, in 2024  we will lose 1/2 our income on this single-family property in Florida.

Any suggestions on our response to the PM? We would prefer not to fire them. The damage by the outgoing tenant was not that extensive to warrant all the upgrades. Our PM has previously said they must have properties they manage up to a certain ‘standard’.

We do not want to pay legal fees for Small Claims Court.

Any help is appreciated.

Stephen E

[Andy Nathan]

Few questions.

First, will the rehab help you rent the property to better tenants at a higher rate? In other words, are the upgrades an expense or investment?

Second, can you flip the property now and get a better return on your investment to flip to another property? 

Third, if you self managed would you make these changes? If not, why?

[Drew Sygit]

@Nancy E. what pecentage of the spent funds were authorized and the percent that wasn't approved?

You'll need to really read your management contract to figure out what your PMC can and cannot do regarding RentReady repairs. 

Also, how long was this tenant in the property? At some point, either after a 3-5 year single tenant stay or after x number of tenants, you do have to spend a decent amount of funds to keep a property looking "fresh" enough to get +95% of market rent..

[David Niles]

Hi Stephen, you state "required extensive maintenance and upgrades" , required by who? Were these discussed between you and your PM? If so, maybe they mistook the conversation as authorization?  

We never do any repairs or upgrades without crystal clear discussion and authorization from our owners.  I would recommend just contacting them and be as open as you were here and have a discussion on what transpired, why and where any confusion came in from either side. 

[Adam Bartomeo]

It sounds like you need to have a serious conversation with your PM about what was approved and what was not. Your PMA may explain what authority they may have in these types of situations. When it comes to safety or preventing further damage to the property, we will make decisions with or without the owner's permission as that is stated in the PMA. 

[Sean O'Keefe]

@Nancy E. interesting, thanks for sharing. 

• Good news, you may be able to take accelerated bonus depreciation / expenses repairs immediately and get a tax advantage from this
• Bad news, you still need to deal with this issue from tenant/PM.
  • I found this thread from @Bob Beach helpful where he shares some read flags on property managers. 

If you are looking for unbiased feedback on PMs we get a lot from our customers and would be happy to pass it along if we have intel in your area. 

[Sean O'Keefe]

Another great post here from @Luca Giani I forgot to include in above post

https://www.biggerpockets.com/forums/48/topics/1198241-seeki...

[Gabe R. Gonzalez]

@Nancy E. Stephen - if you have the scope, itemized invoices and pictures I’m happy to give you my thoughts on if the work was justified or not ( I’m not saying that them doing unauthorized work is okay) 

I’m assuming deposit was more than $1k.