All Forum Posts by: Raul Sai P

I own 5 properties in KC MO and have worked with 2 property managers. I presently self manage as I found myself pulled into numerous situations and ended up questioning why I was paying the property manager. In the end, I think I have learned a lot from self managing and I'm a better investor for it. I now don't get vague cost descriptions or tenants reaching out because property management is unresponsive. I found the biggest issue even when I reached out (after signing on with them) was responsiveness... if they're not responsive to me as their customer... they are definitely not responsive to the tenant (which is my customer).

I would (as others have said) ensure that any fixes over $X require your approval. They are also probably just placing anyone and you're paying the cost. They make money on the placement, repairs and the turn. If you're just in a really bad area it may be time to sell but I think it may be more of a tenant placement issue.

another reason not to do passive investment, better buy local rental and we become the only PM.

 Do you think they might be damaging the property out of spite for being treated in a cruel manner by management.

I mean do you think the property manager is for lack of a better term, pushing their buttons, with how they are being treated?

Or do you think that the particular tenant base that you're housing, this is their modus operandi no matter where they would live.

Tear out the walls, et cetera...? 

Because it seems like there could be two reasons [maybe more] That would make them expend the extra energy to damage your stuff.

Although I do understand in some of the lower income individuals there seems to be a fun aspect to damaging things. Which might also be at work here.

So it's probably important to ascertain why this is happening over and over. 

Good Luck!

What zip code? 

Frank Lewis- 816 890 9800 (business line)

Leave him a message and he should get back to you. He hosts the KC Northland Real estate monthly meetup. stand up guy. I refer most of my KC investors to him, and no complaints yet.

I get it, there is a cost of doing business, and I have paid my fair share of move out repairs, but 9-12k?! I understand the damage was extensive, but *big whistle* that's pretty steep for repairs and refinishing, especially when considering it was not a 'one-off' and has been consistent with all your properties.

Most I have ever paid was around 2k, and while the property was not demo'd, it was banged up pretty good by teens who broke in while it was vacant and threw a party and 'vandalised' it, requiring patches, replaced doors, new carpet, repaired cabinets, repainted walls, etc (this was in Columbia MO)

Part of the difference between before and now might be explainable by how much labor and material costs have increased during the last few years, and it sounds like the change in management ownership has been a change for the worse. But it's also a bit par for the course when investing in certain areas remotely, while depending entirely on a management company that due to low margins needs to have hundreds of units under management as well as automate everything as much as possible in order to stay afloat/ earn a decent profit. Something is definitely off beyond these factors however because you shouldn't be seeing that much turnover and those turnover costs are absurd. I could see a major turnover expense running up to that range if the property hadn't had a make-ready in 15-20 years, but not after just a year or two, that's obviously not sustainable. You must be losing a ton of money on these properties as I can't imagine rents are sufficient to cover these expenses. 

My first thought would be to sell and 1031 into better properties in a better location. But if you want to try and turn things around before doing that, I'd get a new manager and be a part of the screening process more. Have them run every prospective tenant that they recommend approving by you before final approval. 550 is a terrible credit score, and if that's the best you can do in that area then I'd definitely consider selling and looking into a better location. 620 is the minimum my PM uses, along with income at 2-3X rent, no prior evictions, good rental history and references, consistent work history in a decent career, etc. and once approved they send the info they've gathered to me and I do a little sleuthing on my own (check them out online, social media etc. anything I can find). I also have my PM do quarterly inspections, and it's worth the nominal fee they charge for that. You can also probably "harden" your units more by using different materials that are more tenant-proof, such a LVP flooring, use 1x4 wall cleats mounted on the studs for towel racks, door stoppers, only the necessary appliances for your market, semi-gloss paint and the same color throughout, simple or no landscaping, remove screen doors and replace with plexiglass, remove as many things that break as possible, remove any pull chords on fans and blinds that tenants always break, etc. Do a better job with turn overs addressing these issues fully instead of bandaid on top of bandaid like many landlords tend to do. 

However, all of these efforts may be in vain if your properties are in a location where good tenants wouldn't want to live and good PM's don't want to manage. I suspect location may be your underlying issue. What you're probably seeing is the difference between cashflow via spreadsheet magic vs. reality. Low value properties can provide wonderful cashflow in theory, but the low rents that go along with low values often can't support the baseline expenses required to operate a rental property. Paying more for a property in a better location with less initial cashflow usually leads to better overall returns as the years go by. 

What area are they in? There is a some rough spots in KC. Having a great PM would help limit bad tenants but if the area stinks then there's not much you can do

What zip code? 

You need to screen tenant applicants better, and it might take 2 months on the market to find a decent tenant.  Find a PM company that will do this or you need to screen tenant applicants yourself. I have a class C house in a class D neighborhood in Indiana. The current fair market value of the home is about $60K.  My minimum screening criteria are:  credit score at least 600, gross income at least 3.5x the rent, no evictions.  My current tenant (just moved in last month) and my previous tenant all had credit scores of at least 650.  I screen the tenant applicants myself, and I live 3000 miles away from the property.  I have a local realtor who does showings and other tasks for me. 

The PM company might be ripping you off regarding the repairs. How do you know it really needed $10K in work?  Do they have maintenance people on staff that they pay $20/hour plus medical benefits but then they bill you $60/hour for their work? That can be a huge source of revenue for the PM company. 

Good luck! 

 It's pretty easy to determine if it's the neighborhood. What's the unit rent for? Under $1k/mo & you're probably in the hood.