What do I do with my Property Manager (PM)?

Question

Thanks for reading, I really need your inputs, thanks.

I am a typical small time buy and hold investor with future aspirations to be big. I have 3 SFR in solid B neighborhood that makes decent cash flow. Started with one in 2014 and bought second in 2015 and 3rd recently. I live about 2 hours from my properties and have PM managing it, he charges about 11% including tenant placement, may be increasing it to 16% in future not very sure at this point (does anybody think 16% is a lot?)

My property manager has some positives (has good tenant finding network, finds good tenants) but I cannot stand his poor communication style, in the past I have had to wait for days at a time to get his response sometimes none at all, few times he has dropped the ball on my inquiries about missed rent payment due to system errors until I asked him few times (nothing vicious). I strongly believe If I don't keep the pressure on him to get back to me he wont get things accomplished on time, also believe I have gained by doing this in terms of rents and tenant finding.

Currently trying to get a property under contract and on one of my recent queries about a contract document he totally snapped and started complaining about how I pester him a lot and went to the extent of saying he does not need my business unless I let him work in his own pace and wait for him to get back in his own time (wont specify how long), so we are at odds in terms of our communication expectations. He may have bagged some bigger projects since I started working with him, not sure if his recent attitude change is due to this or just long time bad feeling towards my communication style erupting.

What do you guys think? Should I stick with him for his positives or should I try to find other PM who would treat my investments with better attitude and communicate more effectively as I like?

Thanks in advance for your suggestions.

Dustin Davis · Answer

I'll echo Ron in his comments above but would also add my opinion. 1. I'd move them all. At this point you don't carry enough weight to get away with moving one. It sounds as if there might be some spite in the relationship (from his side) and last thing you want to do is allow him the opportunity to act on it. 2. Let it go... If you want to end on a high note leave him with that cash, best for the both of you and not worth the headache. Also, keep in mind you never know who you're going to run into down the road, best to part ways amicably. 3. I wouldn't put the tenant in the middle, they only need to know who to call and where to pay. If it comes down to them wanting to extend their lease why on earth would you be paying the PM another placement fee? Move them and make sure they have updated information. All in all, these situations are best with a CLEAN break.

Dustin Davis · Answer

I'd start shopping, I wouldn't trust my investments to someone that sees communication as a hassle... what else is he neglecting because it's a hassle?

Ron Rohrssen · Answer

Hi Ranga,#2 & # 3) I couldn't speculate how they may respond based on your contract with them. While receiving a prorated refund may seem reasonable, you are the one deciding to walk away, not the PM. I would think they are entitled to the finder fee. It wouldn't be fair to the PM to use them to find someone fire a 3 year lease, cut ties with them and then only give them 1/3 of the fee agreed upon.#1) Sure. It's possible the old PM would not service the remaining 2 units well once they lose the business of the third, especially if negotiations over the finder's fee don't go well. It sounds like this business relationship may not be going well if you have such concerns. Maybe you need to weigh your peace of mind with the costs of switching to a different PM.

Ron Rohrssen · Answer

It's absolutely time to find another PM. You're his client and he should always treat you professionally and respectfully.When you're shopping ask for some references that include PM clients similar in size and experience to yourself, as well as a couple of references from clients the size and property type that you want to be in 5 years.You should take some time to write down a list of features or services that are important to you, and then prioritize that list in order. As you are interviewing PMs, give them a score on each service from their perspective. Verify against the PM references later when you speak to them. Good luck.

Ranga Ramanathan · Answer

@Ron Rohrssen thanks again. I try to be fair, one month rent for 3 years is the deal but all tenants are not necessarily on 3 year leases. Currently all my tenants are on yearly lease, so if I pull out after a year and tenant does not want to extend then i have to pay the next PM finding fee for new tenant search..if current tenants decides to stay i don't mind my current PM taking his right fees. in any case something I have to talk to him about when coming up with exit strategy. thanks again for ur input.

Ranga Ramanathan · Answer

@Dustin Davis @Ron RohrssenThanks for your advices, I have been considering the same. I was in expansion mode and considering a lease with purchase option for my 4th property but now I have other priorities. Can you also please advice on the following.1) My leases expire at different months for my 3 properties, I believe per my agreement I can pull out at anytime, would you advice I try the new PM for one property and then transfer or pull all out? If I pull one and leave two property can it adversely affect my other property performances?2) Does not mention in my agreement what happens to the tenant finding fee (one month rent for 36 months), should the PM prorate it and refund for the third year if we are completing second year of the lease when I decide to leave?3) What happens to the tenant if I decide to leave him in the middle or transfer and the tenant wants to extend the lease? Can the PM make a fuss about that and demand a cut?Thanks for your time and expertise.