Have you ever been ditched by your Property Management Company because the tenant they put in your property never paid a dime above their move in cost and you dared to question their tenant selection criteria?
One measurement that most of the management companies are bragging about is their low vacancy rate. The lower their vacancy rate is, the higher their income is. The smart investors are looking for a Property Management company with low vacancy rate but no management company tells you how they are actually calculating it. And there are a lot of ways to bend the truth.
An excellent way to keep that rate low is to put anyone that can fog a mirror in as fast as they can. And to speed up that process, offer them a move-in special of 50% off their first month rent. The owner pays for any specials offered and they can start charging management fees immediately. Unfortunately this creates an incentive for some "professional tenants" to pay 1.5 months rent and stay in your property for 3+ months. That is 1.5+ months of free rent for the tenant. Meanwhile you, the owner, are stuck with no income, eviction expenses, lawyer fees, maintenance and repairs, taxes, insurance, loan payment, city code violation fees and vacancies. If the owner complains, you the management company dumps you immediately, unless they manage more than one or your properties. But if you have only one, it is best for them to get rid of you. And this is exactly what happened to me.
The industry's dirty little secret is getting rid of all owners for which you have high vacancies due to bad management and/or bad tenant screening. Doing it early and doing it often, will allow advertising low vacancies rates and lower their expenses because finding new tenants is too much time consuming. And this is something no one is talking about.
Not having to deal with complaining owners permits them to have more properties with owners/tenants that never complain or question your methods. This works for as long as they have more owners asking them to manage their properties. And if they have a high profile they would never run out of sucker.
Have you had any similar experience, please comment below.
Here is the email exchange that led to getting me dumped by my property management company (Zzz is not their real name. I have replaced/removed the names of the actual company/people names because they are big on BP and I don't want to get my post censured and/or removed. Everything else is copied verbatim):
On Thu, Jan 3, 2019 at 1:41 PM Support Zzz Realty wrote:
Hi Borislav,
Your previous statement is available to you on your owner portal under the documents tab.
As property management we can and occasionally do run move in specials - which is not uncommon and is often times first months free.
Without a move in special a tenant would be required to pay a full months rent plus deposit if moving in on the first of the month.
If they are moving in between the 1st and the 15th they are required to pay pro-rate plus deposit (no move in special).
If they move in between the 16th and the end of the month they are required to pay pro-rate, plus full following month, plus deposit (No move in special).
During times of cooler weather or historically slow months in terms of leasing, move-in specials are used as a means to place a tenant quicker without lagging in the pre-qualification area.
During slowing months if we don’t run a move in special - it could increase vacancy time immensely - especially during the colder months.
As has been explained to you before we have a very extensive application process for ALL tenants.
Bad tenants are a known risk to owning rental properties no matter who places the tenants.
It is very easy to look to your property management company for blame and if this is the way that you feel I do apologize and assure you that we do everything in our power to place good quality tenants that will stay and pay - but there is no way to guarantee that … nobody can.
If you choose, you may indeed take your business else where but we value you as an investor and would very much prefer you to trust us so that we can continue to manage your property.
Every choice made in this office is made with the best interest of our investors at the front of mind.
Your net income since August of 2016 is $13,944.26 based on the sales price of $55,997 that puts you at a 10% ROI year after year.
We started managing your property at that time and had a tenant placed in September or 2016.
That tenant paid on time for the majority of his tenancy and resided in the property for 2 years and the property needed minimal work before being re-tenanted in October.
The tenant was indeed a bad tenant - however, as explained this is a risk with rental properties and was not due to lack of research and diligence on our end.
There is also very minimal work needed to get the unit ready to re-rent as has been explained to you in a separate email and this will be covered by the deposit as well.
I do hope this answers all of your questions but if you do have any other questions, please let me know.
Thank you and have a wonderful day,
Zzz
On Jan 3, 2019, at 6:13 PM, Borislav wrote:
Thank you for the documents.
in the future, please do not offer 1/2 of the first month off on my properties.
If you want to have a special, give them 1/2 month off on the last month of their lease or drop the rent price.by 5%. Anything but let people in with less that 2 months of rent. If they cannot save for 1 month rent and full deposit, then they would have problems paying rent when something unexpected happens.
And for god sake do not tell me what is my return on investment because first, this is unprofessional and second you have no idea of what my expenses are. you are forgetting small things like, taxes, insurance, maintenance, evictions, code compliance penalties, vacancies, interest on the loan, etc.
Borislav
The Owner
On Fri, Jan 4, 2019 at 8:45 AM Support Zzz Realty wrote:
Hi Borislav -
We are very disappointed with your email below.
Our staff works very hard and we are dedicated to providing the best service possible to our investors.
We strive to maintain a professional and respectful relationship with all of our investors and do expect the same thing in return.
As your property management company your cashflow is of great importance to us.
We do apologize that you feel we have been unprofessional in any way as that was not our intention.
It is quite obvious that you don’t trust us and do not like that way that we manage your property despite the fact that you have had very little vacancy time in the 2.5 years we have been managing your property. (We began management in August of 2016 and placed a tenant in September of the same year. That tenant was a good tenant for 2 years. The turn was minimal and a new tenant was placed in the same month as the previous one vacated).
As much as we’d like to continue managing your property we feel it is best to allow this to be your 30 day notice.
Please take this time to find a new company to manage your property.
We will be closing out your account as of February 4, 2019.
Once you find a new property manager, we would be more than happy to provide them keys to your property as well as tenant information if there is a new tenant at that time.
We appreciate the business relationship that we have had and do wish you success and luck in all of your future endeavors.
We have done our best to provide you with the best service possible and feel like we have exceeded expectations.
It is very unfortunate that we have lost your trust somewhere throughout the way.
Please let us know if you have any questions or needs in the mean time.
Thank you and have a wonderful day,
Zzz
