Fall of a Property Manager: The Rest of the Story

by | BiggerPockets.com

As a real estate investor and landlord you need to have a strong and trustworthy team in order to have a strong and vibrant business. Operating as a one-man-band is fine at first and a majority of successful people probably started just that way. However, trying to manage all aspects of your business while taking it to the next level can leave you about as efficient as a one-armed paperhanger, it’s messy and rarely works. A strong cadre of  real estate professionals is essential to your real estate empire. Unfortunately when a member of that team turns out to be a thief chaos often ensues.

Last year I wrote a series of articles detailing the trouble I was having with a property manager. I (part I) described how this individual started having financial problems and his solution was to rob Peter to pay Paul. This soon got out of hand and he could no longer repay Peter. He was collecting rent from tenants but not giving it to me and other landlords. I then wrote about uncovering others who had been victimized (part II) and how I fought back (part III). Now it’s time for the rest of the story.

A Quick Recap

Let’s quickly recap the steps I took after realizing what was happening. The first thing I did was terminate his services as property manager by having my attorney send a letter that also demand immediate payment of funds owed. I contacted the tenants and informed them that they were to send future rent checks directly to me. I filed a formal complaint with the state’s Real Estate Division. I also initiated a criminal complaint with the local sheriff. I didn’t stop there.

Through my real estate connections I got in contact with other victims. I advised them to file complaints with the state and sheriff as well. Surprisingly a number of people “didn’t want to get involved” even though they were victims. Fortunately a number of them did. The state investigator was able to build an iron-clad case and the sheriff was given plenty of evidence.

Last week I received a letter from the State of Nevada Real Estate Division. The property manager was made to appear to answer the charges. He was compelled to forfeit his license. He was also ordered to pay restitution to his victims by a specified date. Criminal charges may yet be brought and paying restitution may be his only hope of avoiding them.

But wait, there’s more…

I wasn’t done. Knowing full well that there is a high likelihood of additional victims, I contacted the editor of the local newspaper. We discussed everything that had happened and he confirmed things with the state, sheriff, and local court. He ran an article in the paper last week (see article).

It is up to all of us as real estate investors to take action against those individuals who take advantage of others. That action will not only keep others from being hurt, it will help keep the industry as clean as possible. If you are a victim or witness to illegal actions or scams report it to the proper authorities. I used every avenue available to me to check into the background of the property manager before I hired him and he came up clean. There had been victims before me but they never reported him, if they had I wouldn’t have been scammed. Taking action against these scammers can save others; wouldn’t you want others to save you? Then do the right thing.

 Rather fail with honor than succeed by fraud.Sophocles 

Photo Credit: Shane Adams

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  1. Investors hiring property managers shouldn’t think that they are no longer responsible for their own profit and loss. That’s like relinquishing responsibility for your investment portfolio to a stock broker. Property managers deal with the details so investors don’t have to. They should always be providing evidence of deposits (i.e. deposit slips with account numbers) for their investor clients to review, as well as invoices for repairs and replacement items – and evidence that the work has been completed. We happen to provide pictures of the items we repair (when viable, like painting, closet rods, etc.) and replace (appliances, toilets, A/C units, etc.). A smart investor hires a property manager who can help him maintain the highest possible ROI.

  2. This is the reason why you should only deal with a licensed real estate brokerage for your property management needs, Most states require them to have a seperate account with the owners money and comingling is a felony. This issue is easily preventable. Hope the information helps.

  3. I’m a licensee in Nevada, and I remember hearing that case discussed in our office meeting just a few weeks ago. Thank you for helping us get rid of a truly bad apple, and shame on those who “didn’t want to get involved.” They’re the kind of people who let victims of violent crime bleed to death.

  4. Richard,
    I actually just read the first three parts of this in the past week, as I was going back through the BiggerPockets archive.

    I was going to ask you about it at the REIA meeting this weekend if you’re attending (the one at the Rainbow Library). It’ll be the first one I attend, but I was hoping to meet you and ask you about this story. Now I won’t have to.

    Glad you followed up on it with this article, thanks! 😀

  5. Richard, it’s good to hear you’ve got some resolution. It’s a good thing you had your eyes open and caught this early because it could have been much worse!

    P.S. Your link appears to have a typo and comes up with a 404 Error. I had to search to find the article.

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