Houston Property management should I fire them now?

Question

I'm in need advice on what to do with my property management company. Here is the story, Im currently going through an eviction with one of my tenants in my Quadplex I recently purchased the past June. This is my first investment property and didn't know how valuable vacant units were when buying (lesson learned). I unfortunately inherited 3 problematic tenants that are routinely late but as of now only one of my tenants have not paid despite 3 day notices and so forth. Here is the issue, it was I that had to notify my PM that the tenant missed a payment. I received rent for 3 units minus this tenant on the 10th of Aug. At this time my PM did not notice that one unit did not pay nor did they notify me. After I made reference about missing rent, they then reached out to the tenant for the rent plus late fees.They did not begin the eviction process immediately because the tenant that they would bring the rent plus late fees the following week. We are now in Sept and the tenant has not paid Aug nor Sept rent and the eviction hearing is now set for the 14th of this month. To add to the headache another of my tenants have not paid this months rent. My gut feeling is saying this company is allowing the tenants to pay late because of the late fees that they are getting. My question is should I fire them now although im going through an eviction or wait till this eviction is complete? Ive heard of difficult PM stories but this is crazy. Im just releived I noticed this issue now. BTW the company name is Real Property Management Preferred Houston TX.

Also if any investors have a suggestion on upstanding PM company in Houston please let me know!!!!!

Also if any investors have a suggestion on  upstanding PM company in Houston please let me know!!!!!

Nathan Gesner · Answer

It really doesn't matter how your PM agreement is structured or who gets late fees. If you have to notify the manager that a tenant is late on rent, they are not doing their job.

In Houston, a 3-day Pay or Quit Notice can be issued the day after rent is due. If tenant fails to pay within the 3-day period then the PM can file for the eviction (forcible entry and detainer). It's my understanding that an attorney or decent PM can have the tenant physically removed within 30 - 45 days in Texas.

There are multiple points of failure:

1. PM failed to notice rent was late. This is their primary job!

2. PM failed to notify you of the unpaid rent.

3. PM failed to serve the tenant notice at the earliest opportunity.

4. PM failed to follow through the full eviction process.

The PM is not a professional and you should fire them. I recommend the following:

1. Work hard with the current PM to evict these tenants. If any of the tenants are on a month-to-month, give them the 30-day notice to vacate and get rid of them. If any are late, hit them with the proper notices and evict or get them back on track. Even if they get back on track, hit them with a 30-day notice and get rid of them (if able).

2. Start looking for a new PM. See my checklist below.

3. Once the new PM is located, give notice to your current PM that you are firing them. DO NOT let them charge termination fees or other penalties for terminating management. They failed at their primary job and you shouldn't be obligated to stay with them.

Start by going to www.narpm.org and search the 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.

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 addendums. 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 or problem tenants. 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.

I hope this basic guide helps. If you have specific questions about property management, I'll be happy to help!

Darlington Agu · Answer

@Tony Castronovo I chose this company because I met with them face to face. They seemed respectful and well run. I now know looks can be deceiving

Vijaianand Thirunageswaram · Answer

I see many long time investors gave solid advice.

@Dave Chapa was right on!  Not all PM are made equal. It's all the relationship which matters when comes to managing property.  Also I agree with dave again that it's setting the expectation property and talking about your goal with PM will help long way.

We manage around 15 doors for few investors. Not a big business but still we take care of both sides properly to avoid turn over rates to increase more return to the owners by taking care of tenants quickly and rightly. That's what important. I do agree with sticking on rules and regulations by giving notice and filing eviction but sometimes you gotta give a break to the tenants who fall behind on a month out of a year. I have a tenant who pays on 29th every month but may be once a while he pays late due to personal needs and he will inform me timely. We will work with him to waive fees or charge small fees. You cannot follow everything by books, all are human and things happen. It's should be mutual relationship between with all parties.

Michael Dang · Answer

I suggest before you clean house of any tenants, consider what your plans are.

Are you going to rehab or not?

What are your tenant qualifications?

Do you have reserves to float the property for X # of months if you don't find a tenant?  Minimally it takes 1 months to fill a vacant unit with a qualified tenant.

If you plan to rehab all the units, I would do it as units become available so you have cash flow.

Consider interviewing your inherited tenants and see if they pass your new tenant qualifications. You maybe kicking out a good tenant because you just want to clean house.

Just my opinion.

Dave Chapa · Answer

@Darlington Agu First, how is your contract structured, are they collecting rent or are you?  If you are collecting rents, then how are they notified about late payments? We have our PM collect rents, and it’s their responsibility to follow up on late payments. Also, you should negotiate all aspects of the contract. We negotiated an existing contract with a 30% 70% split on late payments, we receive 70%.

Second, you should clean house after buying the property. Out of all my properties I only have one that I retained all the original tenants and that’s because it’s a class B property, and all the tenants were qualified. All the others; my apartment and two houses, were served a 30day notes to vacate. Then renovated and filled with qualified tenants.

When I was looking for a PM and a friend of mine referred his PM to me, He just stated with them to manage is 11 house portfolio. I interviewed and like what I heard, I negotiated their contact and hired them. Since then my friend fired them because off all the “issues he was having”. However, I am still with them and very happy. So, why did the same PM work well for me and not for my friend? Because of communication and real expectations. I’m not saying it was all bliss, it’s been give and take with the PM, there were times I needed to set back and let them do their job and there has been times that I needed to intervene. However, maintaining clear communication and realistic expectations. Now, I hardly get involved unless it something major.

So, my advice is, go back to your PM and have a serious conversation about your expectations as the owner and, be willing to listen to their expectations as the PM before you decide to fire them. Set a clear plan and goal with them on what you are trying to achieve with the property. i.e. renovating, repositioning, cleaning house.

Edward Liu · Answer

How is your contract with PM structured?  For me, all late fees comes to me (not just in Texas, also across all properties around the country), so there is no incentive for PM to purposely allow tenants to be late. Is this related to the location of your property?  I know in certain areas, hard for tenants to pay on time and hard to get good tenants.  So PM are lenient given these tenants could be as good as they come.  You should double check the area.  I do own properties in some C/C- neighborhoods in other states where similar issue with tenants not keeping up with rents at times.

I actually use Real Property Management to manage my properties in Sugarland and Richmond areas of Houston.  They have been okay for me over the years - quietly manage properties without issues.  I have been lucky with these Houston investments where tenants live 2-3 years minimum and never late on rents (probably due to location).

Darlington Agu · Answer

@Michael Dang I plan to do a small rehab on the units as they become vacant. My biggest concern is the time of year this eviction came around. it will may be difficult to find a renter now

Ronald Rohde · Answer

So did you evict/judgment/postpone? hearing was today, right?

Darlington Agu · Answer

@Edward Liu yeah it seems they must have a good relationship with you. I just can't seem to understand why they would miss a tenant paying an entire months rent. I hope your experience continues to be good with them.

Houston Property management should I fire them now?

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