Managing property management?

Question

Hey folks. I am looking for ideas/strategies on how to best manage property management when one is OOS. Here's the issue: I've been with a property management company for the past 3-4 months. There's always something every month that is chipping away cash flow. Examples: gutter cleaning fee, door repair, dry-wall repair, plumbing etc. And these properties are good properties with work done on all of them. With $300-400 cash flow per month, the service/maintenance items make the profit flow slim and sad. The property management firm is reputable with good reviews on Bigger Pockets. I have some questions for y'all, especially the OOS investors:

• For any work order/request, do you ask your property manager to get your permission? With my firm, anything that's less than $250 - they do it themselves without informing me. 
• Do you ask your tenants, to always include you in communication? I have zero contact with my tenants and wanted to stay out of the picture but I am getting the vibe that I should micro-manage to ensure profits remain high. Should I ask tenant to include me on all communication and requests? I don't want my property managers to keep knocking on tenants' doors to find work. I know the properties are in good shape so I'd rather wait for a phone call with something gone bad rather then attending all their requests.
• Please also share any golden tips/rules to manage property management from OOS.

I've learned that it's equally challenging to keep properties cash-flowing profitably as it is to find/close good deals :o

Steve Maginnis · Answer

Hello Account Closed.  It sounds like you have little to no trust in this PM.  3-4 months in to your relationship, and that is understandable.  It can take time to build trust.  Are you questioning them making up work for their benefit?  I would assume if they are not fabricating issues, then tenants are reporting these issues. Do they make a profit from repairs?  Even if they do, it likely is not enough for gutter cleaning that it justifies trying to make up excuses to perform work. If the properties were in good shape when rented, you should not be providing drywall repair or anything else that should be tenant responsibility.  Most of our single family properties have tenants responsible for gutters also.

I think you should have a frank conversation with your PM and express your concerns.  Let them know it seems a little suspicious that you get hit with repairs every month and ask them to explain from their perspective.  Maybe the tenant needs some training in what they should expect?  Make it clear to the PM that you don't want to do repairs that are not truly necessary.  Our threshold for completing repairs without owner approval is $300.  However, we typically let owners know when there are any service requests (unless they made it clear they don't want to be bothered with it).  This just gives them a head's up so they will not be blind-sided when they get their statement.  Even though it's not necessary, most owners appreciate this.  You could ask if they would do the same for a while, just so you will be in the loop until you have built more trust with them.

It is rarely EVER a good idea for owners and tenants to be in touch with each other when a PM is involved.  The PM ends up being the bad guy/scapegoat every time.  Tenants may also use you for their benefit at the PM's expense, or vice versa.  If you let the tenant know or suspect you don't fully trust the PM, they will use that against you and the PM.  I've got some horror stories.

I agree there is a certain amount of "Managing your manager", but you should work with them to build trust (on both sides).  If you can't trust them, you may need to find another manager.  If you go through several, the issue may lie with you.  I think it's healthy to question actions taken by your PM, but you certainly don't need to micro manage them.  If you feel you need to, then there's no need to pay them to manage your property.  You can do it yourself.  I know how things can look negative to owners.  Most of the time it's a coincidence that we get a lot of work order requests over several months.  I actually feel bad for the owners, because I can see that they may be wondering if we are taking them for a ride.  I try to be preemptive and give them all the information and proof I can provide.  If things are not going well, and I know it reflects negatively on our company, even if we did nothing wrong, I don't mind letting an owner go on good terms instead of trying to rebuild trust that may likely never come.  Best of luck.

When you do speak with your PM, I advise you not be accusatory and get them on the defensive.  As mentioned, trust goes both ways.  If you have a PM who resents you, it may translate to sub par handling of your properties, even if it is subconsciously.

Peter Tverdov · Answer

I deal with this type of skepticism every time we on-board a new client for property management. The problem is most owners are not dealing in reality. Everyone's property is in great shape, no problems at all. Then we take over management: roaches, back porch falling off, dryer vent duct not even hooked up, fridge broken, etc. Those are all issues we have dealt with since June BTW...

To limit our liability (and more importantly) treat the tenant properly, we need to make necessary repairs. As the property is kept up properly, the amount of repair requests usually dips but in the beginning it can be rocky with new properties sometimes. You don't want the tenants contacting you and I think the $250 fee repair threshold is generous, our limit is $500. You hire a PM company to free up your time. Don't meddle. Ask for receipts or even pictures of the work if you're suspicious. This is a low margin business, we're not Scrouge McDuck swimming in gold coins, I promise.

Kenny Dahill · Answer

Hi Account Closed, here are some thoughts from a non-PM.

Condition of home:  What is the condition of home when tenants moved in?  If it's brand new (or remodeled) then you're going to have living condition punchlist items.  Every time I have a tenant in my completely remodeled single-family units, the first 2 months have a lot of issues that arise.  It's because we only test the sinks 5 mins at a time, not 50 mins.  We don't run the dishwasher fully loaded 2x in a day.  There are many more stresses when somebody lives in the unit.  If the unit is old and outdated then you can expect more to break.

Min. Threshold:  $250 is a low amount for PMs, I'd say the average we've seen on Burbz is typically around $500.  Although you can accomplish a lot of mini-repairs under the $250...

Unlivable Damages:  What's important to consider are the repairs that make the unit unlivable.  HVAC goes out, doors won't lock, plumbing issues: all major repairs.  What you need to avoid is having a handyman go out for every little repair like loose door handles, drywall repair, etc.  Either the tenants are wrecking the place a few months in or the PM firm has to fulfill their handyman's hours.  You can sneak in a lot of unnecessary repairs under that $250 clause.  For those little repairs, consider having a quarterly/semi/annual repair trip for their handyman to address all the tenants little issues.  It'll save time for the handyman and dollars for you.

I won't jump to the conclusion and assume you're the issue.  You're 3-4 months into a new relationship and a healthy Storm/Form/Norm will occur.  You're at Storm phase.  Have a conversation with them in regards to your thoughts and listen to their explanations.  Make the decision if it's reasonable or not.  You have a few options to proceed with:

• Fire Them!:  A lot on BP jump to this suggestion too fast.  Understand all their termination fees before you fire; typically they request all their future-fee's.  If you're going to pay the same amount anyways it won't do much good.  I always advise to make the best attempt to work it out between parties, unless there are ethical or legal issues.
• Set Boundaries:  Now you know more how they operate, work out a plan that can work for both of you.  It might not be ideal but you're paying them, they can also fire you.  Give them a list of scope that they either can or cannot proceed without your permission, regardless of the $250.  Determine a good maintenance schedule to address all the small items.
• Hire New:  If you make the decision to hire new then make sure to keep your relationship in good standing until their agreement expires.  Last thing you want is a PM who knows you're going to fire them in 6-8 months.  Learn lessons from this first PM and find a PM who will accept more of your demands.
• Self Manage:  If you continue to struggle with PM's then consider self-managing.  It's not ideal to be out of state but with technology it is easier than ever to self-manage anywhere.  You can take the maintenance calls and coordinate vendors.  Look for a realtor to help with the leasing.  There are software companies to help for rent collection and tenant screening.  You can find the right balance for you and hopefully increase your profits.

Account Closed · Answer

Thanks Peter. I appreciate the honest feedback. I am learning everyday. It's tough when you're a new OOS investor.

Account Closed · Answer

Hey Steve! Thank you for such an excellent reply. I'll take your advice and work on developing the trust and relationship with my PM.

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