DEAR NOAH: Am I overreacting or is it time for a new Property Manager?

Question

"Dear Noah, I need help deciding what to do about the property manager of my out-of-state property. It's a duplex in TN. I've owned it for 5 years and have never seen it. It wasn't in awesome shape when I bought it, but nothing major or urgent to fix. The original property manager was a local company and then they were bought by a larger corporation. I've been telling my new PM for several years now that I was willing to put money into fixing things up, give the tenants a stipend for painting or gardening or anything they wanted to do to make it their own (long term tenants, most stay several years at least), etc. The response was always like, "We don't really fix things until they're broken and everything is fine." I asked for a thorough inspection report and months later I finally got it. This place looks pretty damn gross to be honest. I'm wondering if I just move on from my PM and find someone who's willing to take on a bit of a fixer upper, or keep the current PM for now, hire out someone myself to do all the work needed, then find a new PM. Or, am I overreacting and PMs truly just lease the property, hold on to deposits, and fix things when they're broken? Is it too much to think that he would proactively tell me when the stairs are literally crumbling and the gutter is falling off the side of the house?!Thank you, Hannah"GOT A QUESTION FOR NOAH AND THE BIGGERPOCKETS TEAM? Submit it here.

Drew Sygit · Answer

Account Closed

The challenge for any PMC is trying to keep ALL their owners happy - despite owners having various approaches to maintenance ranging from:

1) Slumlord

2) Over-improving like they will live there

Our best approach to all this is to, "Maintain to the Neighborhood".

We also try to note everything wrong that is readily visible and then categorize each issue as:

1) Health & Safety

2) Property Preservation

3) Marketing Negative Impact

4) Miscellaneous

This can help owners make better decisions on which repairs to prioritize, especially if they have a limited budget.

Drew Sygit · Answer

@Greg Scott great post!

I'll add that the other common demoninator through 5 PMCs in your example is - THE PROPERTY!

We've seen so many newbies by an affordable Class C property, yet expect Class A results.

NEVER GOING TO HAPPEN!

Even the best PMC can't make that happen.

Yet, many owners cycle through multiple PMCs and blame them for their bad purchase.

Greg Scott · Answer

I'm going to make an unpopular post.

The PM may be good or may be bad. There is not enough information here, so we don't know. The problem may be you.

I hear owners say "I have tried 5 property management companies in 3 years and they are all terrible. My property is still under-performing." My only thought is the common element over 3 years is the owner. With that in mind, I must ask, are you doing what it takes to change the situation?

You offered money to the PM to make improvements. You offered to let the tenants choose the repairs they would want to make. (Side note, I would never do that!) You offered to let many other people make decisions on your behalf. Have you ever directed them to make specific updates that you decided were important? Who has ultimate ownership of your business, you or others?

I'm asking provocative questions with the intent to help, not accuse or anger.

Noah Bacon · Answer

This is one I'm sure many investors are feeling right now, and don't know where to turn if they decide to fire their property manager. I just wrote an article about how to recognize when it is time to move on, and how you can do it swiftly.

I see time and time again property managers, owners, and tenants having a great debate on what is functional necessity and what is decorative. As the the lines get blurred on who is interpreting the definition of these terms correctly, the desire from the owner to update a property that from the naked eye needs work should be absolutely heard. The scope of your property managers responsibilities will vary, and it is crucial to read your property management agreement whenever a dispute arises to familiarize yourself with your rights.

Speaking from personal experience on the management side of things and on the owner side of things, if you are paying a property manager 10% of your rent collected, they should absolutely be responsible for the coordination of proactive repairs based on their teams property inspections. I have had turns where things are recommended to repair based on the field operator and my property managers notes, and I would expect the professionals with eyes on the property to have the best opinion on when the inevitable concern arises.

I do not think your concerns are unreasonable, and the response from your PM being aware that the property is falling apart is more alarming. Being aware of issues and taking no action is absolutely a red flag in my eyes. Additionally, from the PMs perspective, why would you turn away an owner who is willing to improve their asset that you manage? If the owner is happily paying for repairs, the PM gets paid, the owner improves the value of their property, and the tenant now have improved living conditions.

As the great Michael Scott would say: win, win, win.

Maybe my expectations are too high due to the quality of my property manager.

Do you agree that a PM should be proactively pointing out future maintenance issues, or am I expecting too much as well?

Bob S. · Answer

YES you are overreacting, Are the tenants happy? There are not any unsafe items that MUST be repaired. Are they paying rent on time? Yes, if something breaks fix it, but if all ok just not cosmetically acetic then leave it alone. Ask the tenants if they would like a fresh coat of paint, if not, move on

Good luck

Corby Goade · Answer

If you want the place fixed up and don't want the PM to manage the process, fire the PM, fix it up and bring a new PM on once it's ready.

As a PM myself, there are things in your email that we wouldn't do- no stipends to tenants for "improving" the property. We have a hard stop at allowing tenants to be paid for anything, creates way too many issues.

Jasmine Vida · Answer

I agree with this. If the tenants are not reporting maintenance tickets during the year then you should not worry about it, but if something comes up on your yearly inspection report then yes I would try to get it fixed. If you are wanting to do updates to your property I would recommend exterior that way you do not have to bother the tenants. For example at one of my properties I added gutters and got some stumps grinded down.
But also if you are specifically asking your property management to do something and they are not willing to do it for you then I would maybe look at other companies. They work for you so they should abide to your requests.

Alyssa Wright · Answer

I totally agree with Noah and don't think you're overreacting at all!

It seems like your current PM is bordering on negligence by not only failing to get these repairs done/keep the property in shape but by failing to even bothering mentioning any of these things to you!

Especially considering that you seem fairly open to having the work done and even working the long term tenants & PM to keep the property in good condition, there is no reason your PM shouldn't be taking you up on that.

Colleen F. · Answer

Account Closed if you go on google maps does it look like the rest of the neighborhood? If the stairs need replacing did you give the PM that directive to get estimates and have them replaced and what did they do? That is a safety issue. I would judge the PM differently if you have a clear issue you requested action on and they didn't act. Now gardening I wouldn't so much worry about and tenants shouldn't be offered concessions to do it.

DEAR NOAH: Am I overreacting or is it time for a new Property Manager?

DEAR NOAH: Am I overreacting or is it time for a new Property Manager?

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