WHAT TO DO: Constant Evictions, High Maintenance Costs, Poor MGMT

Question

To say the least, we're overwhelmed. My mom has owned her rental property for the last 12 years located 2 hours out of state. She's been an absentee landlord for the duration, and we continue to encounter problems with our property management. Some of the issues are: rent rates are way below market, poor tenant screening, frequent evictions, excessive damage and repair costs. Our property management contracts work out to his father's company, who specializes in repairs. He charges $45/hr for labor. We receive constant invoices for poor quality work at high prices. This property is on a shared lot with a 5-Bdrm, 3-Bath, 2000sq foot rental home. Behind the home is the 6-unit apartment complex.

Within the apartments, we get approx 3-4 evictions a year. Each apt unit is 600sq feet, 2bdr with month/month rental agreements. They rent for $495-695/mo. for unclear reasons. Reno NV rental comps are about $650 for a 1bdr, and $750+ for 2bdr. Turnover costs per unit go as follows: Painting $550, Patch/Repair $1100, Materials $500, Cleaning $130. The eviction process typically exceeds it's rental income for the month. $600 for the most recent: for locksmith, rekey, lockout, multiple eviction notices etc. The grand total repair/eviction costs for a single unit totals over $3000. This last particular tenant lived there only 5 months. Among all the disrepair, trash litters the property due to management neglect. We've recently noticed all of this in the last few months during our frequent visits to the property. We currently have 2 vacant units, and we're using this time to determine where we go from here. At this time, Reno NV is only experiencing a 1% vacancy rate. Considering our property's prime location, we are attempting to reconfigure the quality of tenant and price of rent. We are considering upgrading everything from exterior paint and light fixtures, to interior floors and faucets.

All that said, we're optimistic with this upcoming downtown area. The lot is walking distance from new cute breweries, restaurants, shopping, coffee shops, entertainment, etc. We'd hate to have seen this little gem fall into disarray.

Bottom line, we're ditching our property management company. Our feelings are mixed; we feel this could be a great opportunity, but this could also be a sinking ship. What lengths should we go regarding renovating to rent vs renovating to sell? What should we be renovating? What is recommended for calculating rental finances and expenses? How much should we invest before we abandon ship? How do we prevent hiring another terrible property management company? How do we determine rental agreements? How do we know our invoices are accurate and honest? We want to crunch all of these numbers, but we don't know who or where to acquire them from. Any input is very much appreciated!

Becca Cross · Answer

@Natalie Vane, Thank you for the great ideas! I think at this point, you're right, we really have to help a higher quality tenant visualize the opportunity of this space. Furnishing a unit, updating the exterior of the property, and posting those photos on CL is a great way to explore our options.

I made appointments to speak with 2 different property management companies, painters and handymen, thanks to you. We won't be able to stay a full week, but we'll stay 3 days at the property. We also just found out there are 2 big roof leaks at the apartments, and many storms in the next few weeks, so diligently trying to process all of this chaos. I believe our flat roof has had it's last day.

We have to hire a new PM. I'm no accountant, but I've flagged 20-40 questionable bookkeeping items in the last 6 months. I can only imagine what the past 12 years has looked like. We found out yesterday that they "renewed" a lease to a tenant that had broken her lease 1 month prior, that cost us $1200 in property damage. Now she's back in the same apartment with newly broken window shades and blankets covering her windows.

Enough stewing! We just need to take control, whether it be by self-managing or hiring a more reputable, higher quality PM company. Thank you for all your input!

@Lynn M., Thank you for sharing your insightful experience! It's atleast somewhat satisfying to know other landlords have gone through the same PM neglect as we have! It's kind of bewildering to think that people/companies like this exist. It's not the end of the world, just a really good eye-opening, very expensive experience! We'll definitely be much more involved as we go through this process. As I mentioned above, I have appointments lined up for this week to interview/bid various jobs throughout the property. No more "stupid trips," we're taking hold!

PS: I was told that it is a great idea to have repair people (or your PM) take before and after photos of completed repair jobs. That way, it's documented, concise, and explainable to your bid price. Smart!

Thomas S., Very helpful, definitely a C propety in a B neighborhood! Thank you!

Jeff B. · Answer

OVER GENERALIZATION.  Issues are with very poor PM, conflict of interest and worthless screening.

Becca Cross · Answer

@Jeff B. Those are just the pertinent details I've been looking for! It seems that many PM's have additional cleaning, repair, maintentance "companies" built within their infrastructure. Wouldn't that create a conflict of interest? Perhaps in some cases it's easier, but it's extremely frustrating to feel bamboozled by those that should be supporting your interests. I'll gratefully take both of your recommendations as we go through this cleaning-out process! Thank you so much for the support!

Tobias Falzone · Answer

@Becca Cross - It sounds like screening is not being taken seriously by the PM, and your turnover costs look way too high as well for 600 sqft apartments that aren't being upgraded on turnover.  I would grill the PM about the work, but I wouldn't be afraid to fire them, and quickly.  I've heard too many horror stories about bad managers and it sounds like they are not managing the property well, to say the least.  However, It sounds like from your description you are well positioned in terms of location and with proper management and upgrades the property can probably be turned around.  I don't live too far from you or the property.  If you want a second set of eyes on this project, I'd love to help you out.

Jeff B. · Answer

Yes ditch the existing PM.  With the new one, insist upon using licensed contractors unrelated and unknown to the managers.

For a while,

• INSIST upon review AND approval of all new tenants. 
•  Also demand itemized invoices for all repairs

Be up front "We had a terrible manager experience before and we hope we can work together  to our mutual benefit".

Deanna McCormick · Answer

I read your BIO on BP.. If your serious about what you wrote, you need to move into one of the apartments and start managing the property  yourself for awhile and get things under control. You are to far removed and have limited experience in knowing what expenses should and shouldn't cost.

The PM company your using sounds as if they are using you.. you can do some research on new PM companies but basically you need to research rent rates for your type and size apts. If all the current tenants are on month to month start by getting them up to current rent rates. and do the work needed in any vacant units so they are ready for rent. Look at your leases make sure they are well written, and set your rental criteria for new incoming tenants within guidelines for income, credit, ect a better pool of tenants to rent to more stable.. you could have good tenants now, but the PM has trained them not to care or pay on time.. Give notices that late rent fees will be assessed and that rents are due on the 1st.

Baisally roll up your sleeves take a hands on I'm in charge approach and steer the ship. Study up on landlord tenant laws for your state and if you really want this to work your going to have to spend some time there to turn it around.. if after this it's to much at least your in a better situation to find a realtor and put if up for sale, or know your next PM will need more direction and supervision. Not easy from a distant location to monitor.

good luck.

WHAT TO DO: Constant Evictions, High Maintenance Costs, Poor MGMT

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