Did I hire a bad property manager?
Did I hire a bad property manager?
Background: We own a house in the SF Bay Area but decided to move to AZ after the schools failed to reopen. We rent a condo in AZ. Because we're not in the area, we hired a property management company. Our initial search included looking for someone who was willing to deal with our request that we try to list the house with only a six month lease because we didn't know what our plans were, but they couldn't find anyone on those terms so we went with a year (which is fine because our school district is showing no signs of returning to normalcy). The property manager got like 80% of first month's rent as a placement fee and $75/mo.
The situation: the repair bills are ridiculous, and the property manager isn't reliably waiting for our approval even after we asked them to. For example:
1. The tenant reported that the heater wouldn't come on. After attempting battery replacement on the thermostat, the PM sent out a HVAC guy to get an estimate, and he gave an estimate for replacing the whole heater. We told them to get another quote, they sent out another one who gave a reasonable quote for the thermostat (around $300 IIRC) and we approved and all good.
2. The tenant reported a slow drain. PM sent out a plumber who came back with a quote for $800 to snake it. We said try again. Got another plumber to do it for like $400.
3. My wife just found on the most recent statement that they paid an electrician $490 to diagnose the outlet losing power and replace the fuse (a handful of circuits are on fuses -- old house). They never checked with us before sending someone out, and that price seems ridiculous, even for the bay area.
My questions:
Did we actually hire the world's worst property management company? They seem to be acting like they have no incentive to use common sense and manage vendor costs.
What can we do about it? I'm thinking I don't have a lot of great options. I haven't reviewed the contract but I suspect that's mostly only relevant when I start talking about dropping them and they won't care because their fee is very front-loaded.
The situation: the repair bills are ridiculous, and the property manager isn't reliably waiting for our approval even after we asked them to. For example:
1. The tenant reported that the heater wouldn't come on. After attempting battery replacement on the thermostat, the PM sent out a HVAC guy to get an estimate, and he gave an estimate for replacing the whole heater. We told them to get another quote, they sent out another one who gave a reasonable quote for the thermostat (around $300 IIRC) and we approved and all good.
2. The tenant reported a slow drain. PM sent out a plumber who came back with a quote for $800 to snake it. We said try again. Got another plumber to do it for like $400.
3. My wife just found on the most recent statement that they paid an electrician $490 to diagnose the outlet losing power and replace the fuse (a handful of circuits are on fuses -- old house). They never checked with us before sending someone out, and that price seems ridiculous, even for the bay area.
My questions:
Did we actually hire the world's worst property management company? They seem to be acting like they have no incentive to use common sense and manage vendor costs.
What can we do about it? I'm thinking I don't have a lot of great options. I haven't reviewed the contract but I suspect that's mostly only relevant when I start talking about dropping them and they won't care because their fee is very front-loaded.
- unclescrooge
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Re: Did I hire a bad property manager?
PMs will rob you blind if you are out of state.
I had to go through several before I found I reliable company.
Fire them ASAP.
I had to go through several before I found I reliable company.
Fire them ASAP.
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Re: Did I hire a bad property manager?
What value are they adding? Do you even need a Property Manager in your situation? Sounds like you’d be better off just managing it yourself.
IMO most of them are terrible - especially if you have one property. They just want to spend the least amount of time possible to get paid.
IMO most of them are terrible - especially if you have one property. They just want to spend the least amount of time possible to get paid.
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Re: Did I hire a bad property manager?
Review your contract.
Repairs over a certain dollar amount should require owner approval and that should be stipulated in the management contract.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
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Re: Did I hire a bad property manager?
Genuine question: what incentive do they actually have to reduce your costs?
Your costs are not their costs, their costs are higher the more time they have to spend managing your property.
Why would they phone around for multiple quotes to save you money if this costs them more time, and the contract means they don't get a cut of any resulting savings? Wouldn't it be common sense for them to do exactly what they are doing, since they don't pay the maintenance bills?
Re: Did I hire a bad property manager?
No, there are worse companies.
You haven't reviewed the contract? Clearly, that's your first step.What can we do about it? I'm thinking I don't have a lot of great options. I haven't reviewed the contract but I suspect that's mostly only relevant when I start talking about dropping them and they won't care because their fee is very front-loaded.
Then, find a new property manager. This time review the contract before you sign it.
When you interview candidates, talk to them specifically about checking with you before spending any money over a certain amount. Ask for references and check them.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: Did I hire a bad property manager?
We list former rental properties every year and the owners are always complaining about their Property Managers. In the PM's defense they are a bit stuck. They have to send out licensed and bonded repair persons. As noted before, they have no incentive to spend several hours shopping around for you.
Tenants are often quick to call the city if repairs aren't made in a timely fashion so the PM's have their "go to list" of repair people that can get there quickly.
The homeowner can send Joe the Handyman out but a property manager can't, esp. for electrical or gas, because the liability would be on them.
Tenants are often quick to call the city if repairs aren't made in a timely fashion so the PM's have their "go to list" of repair people that can get there quickly.
The homeowner can send Joe the Handyman out but a property manager can't, esp. for electrical or gas, because the liability would be on them.
- Brianmcg321
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Re: Did I hire a bad property manager?
Isn't being a landlord fun.
"It's passive income." they said.
"It's passive income." they said.
Rules to investing: |
1. Don't lose money. |
2. Don't forget rule number 1.
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Re: Did I hire a bad property manager?
Yes its passive income, the income passes from you to the property manager...Brianmcg321 wrote: ↑Thu May 06, 2021 6:49 am Isn't being a landlord fun.
"It's passive income." they said.
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin
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Re: Did I hire a bad property manager?
What does your contract with your PM say about how calls for service from the tenant are handled? When you are looking for a new PM - ask them for the contract and make sure it's got what you want in it before you sign it.
The contract I signed with my PM has all sorts of sometimes detailed sections that deal with everything from how they "market" my rental (what "reconditioning" the unit means and how that is paid for and what services the PM uses to do the reconditioning - and what document outlining the costs/recommendations I can expect to get... and on and on)
to how they handle calls from the tenant. to how they handle service calls on Holidays.
There's a section that outlines what level of expense the PM can go ahead with (I've got a $300 limit - as that would get a toilet, drain, electrical outlet, light fixture replaced on a Holiday in my rental's area). For a big expense (the 15 year old AC finally failed after many duct tape and string 'repairs') the PM was required to get me 3 estimates. For emergency fixes - something the tenant cannot live without for a day or two OR something that is damaging the unit (a water leak, a broken window, the front door lock fails, etc...) the PM contacts me right away and we talk strategy/potential costs for getting the issue resolved (or patched until a an actual solution can be implemented) and it gets done.
My PM has it's own "handyman" and then "select" repair people/businesses. The "handyman" goes out first (that $300 limit) to do a repair or to access the problem. Sometimes the "handyman" can handle the full replacement/repair of a thing. If additional estimates are needed there's the PM goes to another tier of businesses to get the second and third estimate. I can recommend a business they should get an estimate from if I want.
All this is outlined in the Contract I signed with the PM. My rental is in a populated area and my PM handles many rental units (in the subdivision my rental is in) as well as in other subdivisions and areas. Maybe it's the size of my PM's business that gets me the consistent good service (and predictable pricing)? Maybe it's because I'm familiar with how to do basic "house upkeep" and how these things are priced when hiring a "handyman"? So, I feel comfortable talking with/questioning the PM about repairs and estimate sheets I get? Don't know. I like my property manager for the most part - I hate that it costs up to $300 to do what would be simple DIY repairs (parts under $30 and 1 to 2 hours of "work"). It's the cost of "labor" and "time" that's the biggest expense.
The contract I signed with my PM has all sorts of sometimes detailed sections that deal with everything from how they "market" my rental (what "reconditioning" the unit means and how that is paid for and what services the PM uses to do the reconditioning - and what document outlining the costs/recommendations I can expect to get... and on and on)
to how they handle calls from the tenant. to how they handle service calls on Holidays.
There's a section that outlines what level of expense the PM can go ahead with (I've got a $300 limit - as that would get a toilet, drain, electrical outlet, light fixture replaced on a Holiday in my rental's area). For a big expense (the 15 year old AC finally failed after many duct tape and string 'repairs') the PM was required to get me 3 estimates. For emergency fixes - something the tenant cannot live without for a day or two OR something that is damaging the unit (a water leak, a broken window, the front door lock fails, etc...) the PM contacts me right away and we talk strategy/potential costs for getting the issue resolved (or patched until a an actual solution can be implemented) and it gets done.
My PM has it's own "handyman" and then "select" repair people/businesses. The "handyman" goes out first (that $300 limit) to do a repair or to access the problem. Sometimes the "handyman" can handle the full replacement/repair of a thing. If additional estimates are needed there's the PM goes to another tier of businesses to get the second and third estimate. I can recommend a business they should get an estimate from if I want.
All this is outlined in the Contract I signed with the PM. My rental is in a populated area and my PM handles many rental units (in the subdivision my rental is in) as well as in other subdivisions and areas. Maybe it's the size of my PM's business that gets me the consistent good service (and predictable pricing)? Maybe it's because I'm familiar with how to do basic "house upkeep" and how these things are priced when hiring a "handyman"? So, I feel comfortable talking with/questioning the PM about repairs and estimate sheets I get? Don't know. I like my property manager for the most part - I hate that it costs up to $300 to do what would be simple DIY repairs (parts under $30 and 1 to 2 hours of "work"). It's the cost of "labor" and "time" that's the biggest expense.
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Re: Did I hire a bad property manager?
I think their incentive is to manage a rental unit that is in good working order so that every month the only "work" they are doing for their "monthly cut of the rent" is processing the rent and sending the owner of the property a check. Their incentive is to try to get a tenant into the unit who will pay every month, won't be hard on the unit (or overly needy*), and may "stay" an extra year or two - so the PM doesn't have to spend time dealing with the cleanup/marketing/interviewing potential renters.pseudoiterative wrote: ↑Thu May 06, 2021 3:47 am
Genuine question: what incentive do they actually have to reduce your costs?
Your costs are not their costs, their costs are higher the more time they have to spend managing your property.
Why would they phone around for multiple quotes to save you money if this costs them more time, and the contract means they don't get a cut of any resulting savings? Wouldn't it be common sense for them to do exactly what they are doing, since they don't pay the maintenance bills?
I'm guessing a Property Manager that wants to build their business (or have time to get additional clients or branch out into other areas or have a positive cash flow from their business after they've paid their employees) would want to have a "stable" of units they are managing that they spend as little time and "work hours" on each month. That would be their "Passive Income".
I strongly suspect the repair and upkeep of units is NOT their bread and butter.
* I've had a "needy" renter - they had service calls every month - they didn't like the way bedroom door closed (it stuck on the new carpeting), the shelves in the bedroom closet were not even, the toilet paper holder was ugly, could they repaint the living room? and on and on and on... I did OK some of the "repairs" as it kept my unit in good working order or was something that improved the appeal of the unit (the bedroom closet got an upgrade in 'closet storage' stuff as did the kitchen pantry). the PM and I would laugh about this tenant. They were a good tenant - they cleaned everything the unit was in better condition when they left than when they moved in - they stayed two years. They paid on time and didn't fuss too much about being denied some of the monthly requests. I got lucky.
Last edited by LittleMaggieMae on Thu May 06, 2021 10:15 am, edited 2 times in total.
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Re: Did I hire a bad property manager?
Many Asian real estate agents will enter into a deal where they manage your property for free, but you have to use them when you sell. So they end up juggling a small portfolio of properties for free. It also helps them get buyers when the former tenants are looking to buy. I did not know this until my parents used a Chinese agent and she was on the phone all the time with tenants, etc. Then I realized a former landlord was also likely on such a deal because the agent he bought from was also managing the place.
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Re: Did I hire a bad property manager?
I doubt you are going to get great results from a PM for just one unit. They typically manage a large number of units, hundreds or more, and they are not going to knock themselves out to get best price for a repair. Their focus is to get the problem fixed and if it costs more, so be it.
My son manages repairs for 2 clients, about 60 apartments, condos and small businesses. He does simple repairs himself and engages HVAC, electrician or plumber as needed. He quickly learned he could not dispatch one of these repair people to site without his oversight. Left to their own devices, many will do unnecessary repairs or charge ridiculous prices for simple stuff. Over time he has found more reliable and trustworthy repair people but that is not normal for that business. Your average PM is not going to take the extra effort because they are not paid to do so.
My son manages repairs for 2 clients, about 60 apartments, condos and small businesses. He does simple repairs himself and engages HVAC, electrician or plumber as needed. He quickly learned he could not dispatch one of these repair people to site without his oversight. Left to their own devices, many will do unnecessary repairs or charge ridiculous prices for simple stuff. Over time he has found more reliable and trustworthy repair people but that is not normal for that business. Your average PM is not going to take the extra effort because they are not paid to do so.
Re: Did I hire a bad property manager?
Sounds like the property manager is overpaying by maybe $1k for some occasional maintenance, but at least they are getting things done. How much are you renting the house for? Is this cost that material in the greater scheme?
- Sandtrap
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Re: Did I hire a bad property manager?
You have to find a better PM. ASAPkevinpet wrote: ↑Wed May 05, 2021 11:15 pm Background: We own a house in the SF Bay Area but decided to move to AZ after the schools failed to reopen. We rent a condo in AZ. Because we're not in the area, we hired a property management company. Our initial search included looking for someone who was willing to deal with our request that we try to list the house with only a six month lease because we didn't know what our plans were, but they couldn't find anyone on those terms so we went with a year (which is fine because our school district is showing no signs of returning to normalcy). The property manager got like 80% of first month's rent as a placement fee and $75/mo.
The situation: the repair bills are ridiculous, and the property manager isn't reliably waiting for our approval even after we asked them to. For example:
1. The tenant reported that the heater wouldn't come on. After attempting battery replacement on the thermostat, the PM sent out a HVAC guy to get an estimate, and he gave an estimate for replacing the whole heater. We told them to get another quote, they sent out another one who gave a reasonable quote for the thermostat (around $300 IIRC) and we approved and all good.
2. The tenant reported a slow drain. PM sent out a plumber who came back with a quote for $800 to snake it. We said try again. Got another plumber to do it for like $400.
3. My wife just found on the most recent statement that they paid an electrician $490 to diagnose the outlet losing power and replace the fuse (a handful of circuits are on fuses -- old house). They never checked with us before sending someone out, and that price seems ridiculous, even for the bay area.
My questions:
Did we actually hire the world's worst property management company? They seem to be acting like they have no incentive to use common sense and manage vendor costs.
What can we do about it? I'm thinking I don't have a lot of great options. I haven't reviewed the contract but I suspect that's mostly only relevant when I start talking about dropping them and they won't care because their fee is very front-loaded.
This is not good. You are not being looked after very well and are being taken advantage of.
If your unit is in Phoenix, PM me and I'll refer you to someone better. Licensed Realtor who PM's apartments, etc.
PM me.
j
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Re: Did I hire a bad property manager?
Your son sounds like a good person with valuable skills.carolinaman wrote: ↑Thu May 06, 2021 10:13 am
My son manages repairs for 2 clients, about 60 apartments, condos and small businesses. He does simple repairs himself and engages HVAC, electrician or plumber as needed. He quickly learned he could not dispatch one of these repair people to site without his oversight. Left to their own devices, many will do unnecessary repairs or charge ridiculous prices for simple stuff. Over time he has found more reliable and trustworthy repair people but that is not normal for that business. Your average PM is not going to take the extra effort because they are not paid to do so.
Acutally, the PMs are paid to find reliable/trustworthy people to work for them (the handyman, the professional businesses to do bigger repairs/replacements). That's what the monthly fee that comes out of every month's rent is paying for.
In your son's case - his 2 clients are the "Property Managers" - they found your son - a reliable and trustworthy person to manage the repairs for their 60 "units". It's not his bosses job to find/manage the reliable/trustworthy repair people. It's your son's job. I'm sure if you son has too much work - he can appeal to his bosses (the 2 clients) for either more pay or to have another person hired to take the load off. If too many complaints from the 60 units reach the 2 clients ears - your son may be out of a job.
Property Management works just like any other business with employees and who provide a service.
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Re: Did I hire a bad property manager?
I have thought about doing a long distance rental, and because of the above, the only contract I would ever enter into would involve at least part of the contract stating that the the property manager would get a share of the profit. You have to give them an incentive to keep costs down.pseudoiterative wrote: ↑Thu May 06, 2021 3:47 am
Genuine question: what incentive do they actually have to reduce your costs?
Your costs are not their costs, their costs are higher the more time they have to spend managing your property.
Why would they phone around for multiple quotes to save you money if this costs them more time, and the contract means they don't get a cut of any resulting savings? Wouldn't it be common sense for them to do exactly what they are doing, since they don't pay the maintenance bills?
Re: Did I hire a bad property manager?
That's the challenge of people who serve as agents. A real estate agent does have a fiduciary duty in California, but that's a really vague requirement and leaves a lot of leeway for just laziness.pseudoiterative wrote: ↑Thu May 06, 2021 3:47 am Why would they phone around for multiple quotes to save you money if this costs them more time, and the contract means they don't get a cut of any resulting savings? Wouldn't it be common sense for them to do exactly what they are doing, since they don't pay the maintenance bills?
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Re: Did I hire a bad property manager?
I'm surprised your PM couldn't find a tenant for a 6 month lease, especially with everyone's employment uncertainty during the CA shut down. I ended up compromising and agreeing to a 6 month lease for my first choice tenants, I would have preferred a one year lease.
I selected a property manager by soliciting referrals on a local discussion board and asking for references from current tenants and owners. I pay a flat percentage of rent each month, about $200. The managers who take an upfront payment are less invested in ongoing service, and some of them don't even offer that option. I've been a little disappointed that my property manager doesn't seem to have good connections to local businesses. I've had better luck finding good contractors by searching Yelp reviews and contacting the businesses myself, then the property manager meets them on site and oversees the work.
The "good" news is that you can deduct your repair expenses from rental income, and you now have a new thermostat and fuses.
I selected a property manager by soliciting referrals on a local discussion board and asking for references from current tenants and owners. I pay a flat percentage of rent each month, about $200. The managers who take an upfront payment are less invested in ongoing service, and some of them don't even offer that option. I've been a little disappointed that my property manager doesn't seem to have good connections to local businesses. I've had better luck finding good contractors by searching Yelp reviews and contacting the businesses myself, then the property manager meets them on site and oversees the work.
The "good" news is that you can deduct your repair expenses from rental income, and you now have a new thermostat and fuses.
- TomatoTomahto
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Re: Did I hire a bad property manager?
I would think then they’d have the opposite incentive, to defer necessary maintenance.CoastLawyer2030 wrote: ↑Thu May 06, 2021 10:40 am I have thought about doing a long distance rental, and because of the above, the only contract I would ever enter into would involve at least part of the contract stating that the the property manager would get a share of the profit. You have to give them an incentive to keep costs down.
I get the FI part but not the RE part of FIRE.
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Re: Did I hire a bad property manager?
You probably did. Do you have friends who use a property manager? We got a recommendation from a friend, that is how we found ours. I have been very happy with our property manager.
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Re: Did I hire a bad property manager?
It is not likely he will be out of a job as both clients recognize his value. Part of his approach is to fix systemic problems. The previous person would fix the immediate problem but not the root cause. My son addresses the root cause and fixes that, thereby reducing the many symptom problems. He dramatically reduced maintenance costs for his clients as he eliminated a lot of recurring repairs. This is probably a rare trait in this business. This is only a part of his workload. He much prefers remodeling and renovating.LittleMaggieMae wrote: ↑Thu May 06, 2021 10:26 amYour son sounds like a good person with valuable skills.carolinaman wrote: ↑Thu May 06, 2021 10:13 am
My son manages repairs for 2 clients, about 60 apartments, condos and small businesses. He does simple repairs himself and engages HVAC, electrician or plumber as needed. He quickly learned he could not dispatch one of these repair people to site without his oversight. Left to their own devices, many will do unnecessary repairs or charge ridiculous prices for simple stuff. Over time he has found more reliable and trustworthy repair people but that is not normal for that business. Your average PM is not going to take the extra effort because they are not paid to do so.
Acutally, the PMs are paid to find reliable/trustworthy people to work for them (the handyman, the professional businesses to do bigger repairs/replacements). That's what the monthly fee that comes out of every month's rent is paying for.
In your son's case - his 2 clients are the "Property Managers" - they found your son - a reliable and trustworthy person to manage the repairs for their 60 "units". It's not his bosses job to find/manage the reliable/trustworthy repair people. It's your son's job. I'm sure if you son has too much work - he can appeal to his bosses (the 2 clients) for either more pay or to have another person hired to take the load off. If too many complaints from the 60 units reach the 2 clients ears - your son may be out of a job.
Property Management works just like any other business with employees and who provide a service.
He signed a contract with another PM several years ago that managed over 1,000 units and used several people like my son. This guy was only interested in fixing the immediate problem, making it go away and was not interested in fixing the root cause. He and my son soon parted ways as they were not a good match. My son thinks this guy's approach is more typical of the PM business.