Is my property manager generating problems to fix unnecessarily?

Question

Finally rented out my first house and got a property manager to look after it while I moved out of state. The mortgage is $1350 and we are renting it for $2400. It has been 3 months and we have not broke even! The property manager keeps reporting problems and wanting us to fix them. We lived in the house 3 years and didn't have these problems, now the AC is going out, the garage door springs busted, the furnace needs to be replaced... Are tenants and property managers just more picky, or is the property manager looking for things to fix and get a kick back? Should I just keep fixing the problems as cost of business? My concern also is the property manager wont let us research our own contractors to fix things unless they are on their list. They claim their list is licensed and vetted places, but my wife seems to think their list is places that will give them kick backs.

It has been 3 months loosing money and my wife wants to pull the plug. Should we just hang out a little longer?

Julie Hartman · Answer

@Josh Barnett The policy of not allowing owners to use their own service providers, was this spelled out in the management agreement before you signed it? If so, it's tough to complain about it now. Did you give the house a good once-over before you turned it over to rent? We run into many owners who hand over a property they lived in only to have successive repairs right away which leads to confusion. When an owner lives in a house, they are used to the "quirks" whereas a tenant is not and it ends up being one service request after another. If you can't choose your own repair personnel, hopefully you can at least speak with the ones being sent out so you can hear for yourself exactly what the issues are. You should always have the opportunity to review an estimate and refuse it if you feel it's too expensive. If you are not happy with the PM, maybe you can negotiate an exit and find one you are comfortable with.

Brendan Miller · Answer

@Josh Barnett I’d check what your agreement says with the PM as it relates to repairs and which contractors to use. I know a lot of PM companies that don’t mark up repair costs for this reason since it removes the motivation to ‘find’ issues. If you feel these companies are overcharging, you could still get the work independently quoted to price check it.

Bill Ward · Answer

When I rented out my first home, there were complaints by the first couple that moved in that I took care of. It was more than I expected. Some of the complaints were just from having a fresh set of eyes. Stuff that ends up on your to-do list while living there that doesn't scream necessary to do immediately, but as a renter they expect everything to be in excellent condition. So some things I thought to myself, oh yeah I meant to get around to that I just had forgotten about it..how old was the AC and furnace? 20 years old, look at it as an upgrade to more efficient and safer. 5 years old...maybe it should be repaired.

Michael Plante · Answer

1 place I would manage it long distance get rid of the PM

Jody Sperling · Answer

How many properties do you have and how many are under management? If you have a portfolio of fewer than ten, a completely reasonable option would be to self-manage. You can self-manage even long distance as long as you systematize the process.

Connect with a few handypeople and contractors in your rental markets; look around for a landscaping company that can do minor landscaping in the spring and fall. You can have these people give you visual reports so you know if the tenants are destructive.

Otherwise, if you vet your tenants, you'll tend to get people who are respectful and care about getting their deposit back, so they will take good care of the property.

That said, property managers can't make money if they milk their clients dry. Perhaps you've had a bad run of luck. Ask around, and most real estate investors will say they've had a property or two that just seem to break, constantly. I know I have.

Best of luck, whatever happens!