PM gave tenant 10 day notice then terminated management contract

[Tricia O'Brien]

Hello BP folks! I'd like advice as to what my top priority should be in the next 7 days with this problem. I'm an OOS investor with a rental SFR in Indiana.

1) The property manager did an inspection at my request April 24 (she hadn't been inside the property in about 6 months) 

2) The PM issued and delivered to front door a 10 day notice due to unauthorized pet (a dog) and $756 owed in April rent and late fees . She delivered that on April 26. 

3) She recommended I do not reimburse the tenants any money for a  floor replacement they did in the kitchen on  April 13  for $550 because it was not pre-authorized. They quality of the work is pretty good

4) Instead of paying April 1 rent, they instead spent $550 to replace the kitchen floor on April 13 through a vendor. They said was dangerous and caused them to trip several times with one of the tenants supposedly flaring up their back from tripping. They took "before " photos that show 8-10 floor tiles missing and some of them cracked at the edge. They felt the kitchen floor was an"emergency" and too dangerous to live with. They told the property manager about the floor in Dec or Jan. However, it appears to me that due to some miscommunications with the PM, and lack of persistence of both the PM and tenant, and PM not returning voice mails ,the PM never got in to inspect it before they tenants replaced the floor on their own.

5) There was also a problem with a railing at the exterior front staircase being "useless" because it only extends up 3 of the 6 steps to the front porch. This was installed by the same PM. 

6) The tenants are wanting a new railing installed at the back door, stating that one of them fell in the past 3 months at this staircase due to no railing and dislocated her shoulder. She told me she's not blaming me for her Mom dislocating the shoulder. She knows there was a lot of miscommunication about the work orders. She just wants it safer

7) Both tenants are are social security disability for at least since they moved in 18 months ago...both have had some hospital admission or emergency room visit in past 3 months.

8) The property manager sent me an email May 2 to terminate the management agreement.

Where do I start to attack the problem??

I told one of the tenants by phone  and email on April 30 I would reimburse her part of the floor replacement cost ($300) as a compromise if she pays all of the April rent by the 10 day notice deadline (May 6) and the May rent by May 30.  That was before the property manager resigned. 

I could ask the tenant to mail me the rent directly or deposit it in my online account until I get a new PM.

There is a No Eviction Order in Indiana so there's no ability to follow through on any eviction in the near future. Looks like they have most of the power to do what they want due to the non eviction order

Looks like I have these options:

1) Should I just ask them to "pay what you can for now" and let them deduct the cost for a railing at the back step from rent as long as they give me a written bid in advance that is reasonable?

2) Or should I take a hard line?

3) Maybe do nothing if they pay no rent and then hire an eviction service to evict them once the "no eviction " order is lifted if money is still owed?

4) Focus on persuade them to pay soon so I can give them $300 reimbursement for the floor I offered?

The entire time they've lived in my place they have often been late or made partial rent payments, but they would catch up in a couple of months.  They say the reason for the April non - payment was they were busy dealing with one of the tenants having surgery in Indianapolis (about 70 miles away). They really like the house. They just aren't paying yet this past due.

Sorry this was so lengthy and rambling! 

Any replies would be appreciated! :)

[Nathan Gesner]

There's a lot going on here, so let me start with the big issues.

1. You admit your tenants have paid poorly in the past. They have an unauthorized animal that is potentially causing damages that may cost you hundreds or thousands of dollars when they leave, and they completed renovations on the home without permission and without following the lease or the law. These are not good renters and you should get rid of them as soon as possible and start over.

2. The PM is not a good PM. They clearly don't communicate well with you or the Tenants. Any PM that terminates a client in just ten days is probably a PM that is running scared. They probably enjoy management...as long as there are no problems. In other words, they like collecting rent and getting their fee but they're not actually looking out for you or your property.

Do not negotiate with the tenants. They agreed to pay rent and that's their obligation. They made renovations without your knowledge or permission and probably didn't do a great job so you may have to spend money to fix what they've done. I would tell them (concisely, professionally, and kindly) that they need to meet their obligations or move out. They rented the property as is, not with the promise of renovations or improvements, and they can move if it no longer meets their needs.

Speaking of which, I get the feeling this is probably a C-class rental. You would do well to fix it up to ensure it's safe and robust before placing another tenant. It sounds like you or the PM were taking shortcuts and doing crap repairs - or no repairs at all - and that's only going to attract more bad renters.

In the meantime, start looking for a good PM. 

Remember: cheaper doesn't mean you'll make more money.

You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!