In a Mess!

[Diana B.]

I have purchased 70 units (8 buildings total) over two years from a property manager. He also manages them from me.

A few problems. The main problem is that he doesn't pay rents on time - in the past the rents have been constantly 1-2 months late. Now they are at least 3 months late. He owes me at least $10,000 at this point!

At this point in time, I am not paying any property management fees because I bought the properties from him, but I now realize that this probably encourages him to be more relaxed about the whole thing.

I am currently out of state, and just had a baby 3 weeks ago, so it's not like I can hop on a plane to replace him quickly.

I would like to maintain a good relationship with the property manager, but how do I let him know that I want to replace him without ruining our relationship? Each time I email/call him, he has some promises about when he'll make the next deposit, but it's always very vague.

[Travis Lloyd]

You're paying no management fees on 70 units?

Stop right there. Before you decide to find a new management company, lets look at the overall status of the properties. Has your occupancy remained in the mid-high 90s for those 2 years? Are vacancies filled within 1 month? How high are your monthly/annual repairs/maintenance? Are you paying ANY management fees (most PM groups charge for their time above and beyond "normal" which is intentionally very vague) or is this guy literally managing 70 units for you for FREE (which should be read as "unheard-of"). Do you have any other complaints about the management other than his untimely deposits (or something I didn't cover above?). If the answer is no - that your ONLY complaint about this PM is the depositing, then I suggest you look into finding ways to motivate his behavior to be more inline with your preferences.

How might this be accomplished? Perhaps you could start paying him a management fee? Perhaps the % could be tied to the timeliness of his deposits? Realize that a new management company is going to charge you a significant amount. 70 units is a good amount, but if these units are not all located in 1 complex, then the % they will charge will be much higher than if they are all together. You could be looking at up to 10%, and then they could charge for their time - remember, anything over "normal". So what about offering your current PM 2% as a management fee - as a thank you for doing such a great job these last two years - and because you want to keep the good relationship (again, assuming he is doing a good job) and you want him to continue finding you buildings (rather than selling them to anyone who "appreciates" him). You could then add a 0.5% bonus for every month in which he deposits on time. Obviously the % is relative. We have a 200+ complex (single complex, multiple buildings) and the management fee is a lower % than most people pay on a 10 unit building. But the overarching message is that you should try to find a way to keep good people who do a good job. And the fact that he has managed this for free for 2 years is INCREDIBLE.

Good luck!