The No. 1 Reason Rental Owners Fire Property Managers (& How to Avoid It)

The No. 1 Reason Rental Owners Fire Property Managers (& How to Avoid It)

5 min read
Mark Ainley

Mark Ainley is an investor, managing broker, and property manager with almost two decades of experience in real estate. Mark has been a speaker at numerous events across the country including investing summits in Dallas, San Francisco, and Chicago.

Experience
Mark’s extensive experience allows him to share his knowledge and experience on many topics like property management, scaling a business, rehabbing and flipping, out of state investing, asset stabilization, market analysis, and more. Mark found his way into real estate by purchasing and flipping condominiums prior to the Great Recession, and since, he has built his own portfolio of rental portfolio alongside co-founding GC Realty & Development LLC (GCR&D), a full-service real estate brokerage, property management, and investment firm, and GC Realty Investments (GCRI). He has rehabbed and stabilized over 450 properties and currently manages over 900 investment properties throughout the Chicagoland area.

GCR&D consults with both local and out of state investors on the acquisition, stabilization, and management of their rental property portfolio, as well. In recent years, both companies have grown to include over 25 full- and part-time employees, running the management and development divisions with 27 additional brokers getting deals done.

Mark was featured on CNBC’s TV show The Deed, which chronicled one of his rehabs. He has also been featured on podcasts like the BiggerPockets Podcast, The Real Estate Mogul Podcast, Joe Fairless, REI Diamonds, and Positive Phil. In 2017, he was featured on the cover of Top Agent—Property Management Edition.

Mark loves to give feedback to beginners or less experienced entrepreneurs on what steps not to take or what steps to take sooner in growing a younger business.

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Over the past 18 months, I have had the opportunity to speak with over 300 owners looking to replace their property management. I asked all of them one question…

Why are you firing your current manager?

It’s a great question, and one I am sure to ask any potential client who contacts our new business department. If an investor is currently working with a property manager, my main goal is to learn about the owner’s pain points and to ensure we have systems and processes in place to avoid the same frustrations.

It’s imperative we are able meet the expectations of potential new business, so we can provide exemplary service to an owner. We strive for long-term relationships, as we definitely don’t want to be in the same position four to eight months from now.  

About half of the new investors we partner with are owners who have never hired a property manager. Perhaps they just purchased this rental or are moving out and turning their personal residence into a rental. Or maybe they are self-managing.

The remaining half are owners who currently work with a property manager; however, they are looking to hire a new one for various reasons. In this instance, asking the question above provides considerable data to help us understand what owners are seeking in terms of property management.  

Why Do Rental Owners Fire Property Managers?

Prior to conducting the poll mentioned above, my company and I reviewed our past relationships with owners. Following are five commonly-cited reasons owners and our management company severed ties over the years:

1.) Owner was unable to relinquish control.

Some owners want to hold onto all the details, know about every text a tenant sends, or would like to fix every light bulb that goes out themselves. Hiring a property manager gives an owner the ability to relinquish control and surrender the day-to-day responsibilities. This is what the owner pays for through their management fees.

2.) Owner was financially incapable of being a proper landlord.

The goal of owning an investment property is to build wealth, but building wealth does require investment back into a property. At times, we have partnered with owners who are one work order away from having to file bankruptcy. Maybe not literally—but when the time comes to replace a 20-year-old furnace or broken hot water heater, it is a struggle to do the right thing for their investment or tenants. 

Despite advising owners to plan for these expenses in advance, we have struggled to work with owners who inhibit us from providing the product and service needed to be a quality owner and landlord.  

pointing-the-finger

3.) Owner is emotionally attached to property.

Often times, this is directly related to whether or not one has the ability to relinquish control. However, it also includes owners who are not operating their investment property like a business. Instead, they are emotionally attached to the home they lived in for 10-plus years, remembering the many great times and special moments shared there.

Yes, those memories are to be cherished or valued. And while we appreciate the time an owner lived there—perhaps raising their amazing children or spending time with elderly parents—we want them to understand that when choosing to convert a personal residence to a rental property, you are turning that property into a business.

Related: How to Painlessly Switch Property Management Companies

As in any business, decisions need to be made to maximize returns and investments need to be made to keep the business running smoothly. One’s unwillingness to do this becomes apparent when an owner is frustrated over a work order requested by a resident. We hear responses such as, “Why should I fix it?” Or, “It always worked when I lived there.” Or, “I lived with it that way for 10 years. Why can’t they?” 

More often than not, an owner will never live in this property again once converted. So, it is important for them to emotionally detach and operate it like a customer service and product business. Returns will be based on the quality of the service and product provided.

4.) Owner has unrealistic in expectations.

In the past, we have succumbed to partnerships where the expectations of what we provide as property managers and what an owner wants from a property manager do not align. Sometimes what they want is not even possible.

We do our best to pass along our Owner Handbook, thoroughly explaining our scope of services and are sure to answer questions very honestly when it comes to conveying realistic expectations to property owners.

To better ensure everyone is on the same page, it is important for owners to clearly and concisely present their expectations up front, as well.  

5.) We, as the property manager, dropped the ball.

Although this doesn’t happen often, we are humble enough to admit we are not perfect. However, I can be honest when saying this has been the reason cited by a very small percentage of owners we have lost. 

In some cases, a small issue may occur, and that issue may be “the straw that broke the camel’s back.” Unfortunately, we often discover the real issue stems from one of the four previous categories.

The five reasons above create stress and frustration among residents, owners, and our management company, so we want to make sure we are on the same page and that our expectations align before we start a new relationship.  

And now, the moment we’ve all been waiting for…

The No. 1 Reason Rental Owners Fire Their Property Manager

In our research interviewing 300 owners over the past 18 months, the number one reason 207 out of those 300 owners fired their property manager was: COMMUNICATION.

Communication has a broad definition, but when it comes to these 207 owners, they felt overall communication from their previous property manager was lackluster. A majority of the owners described the following as constant issues.

Businessman in the office staring at the clock, back view, time slave and stress concept

1.) Lag in response time

The property manager didn’t respond to the owner in a reasonable amount of time, often requiring the owner to contact the property manager two to three times to finally get one reply back—sometimes up to a week later. The part about response time that doesn’t come up often but is most likely a reality is, if a property manager is not responding to you as the owner, they’re unlikely to be responding to the residents either.  

2.) Lack of updates

Move-outs, late owner payouts, and upcoming renewals should all trigger a property manager to reach out to the owner. This is necessary in order to communicate the next steps. But the owners in our study often mentioned having to follow up with the property manager multiple times. The phrase “manage the manager” came up again and again when discussing this pain point.  

Related: 20 Questions to Ask a Prospective Property Manager

3.) Insufficient oversight

This ties into “lack of updates,” but when owners are not getting the information they should be receiving, the natural assumption is to think the property manager is not on top of day-to-day activities. Sometimes this may be true—the property manager is not performing as promised. However, many times the property manager is doing a good job managing the property. But with no communication to the owner, the owner assumes the worst. 

If you are experiencing any of these three issues with your current property manager, then be direct with them. Explain what you expect and how you see the issue being fixed. This will help you feel confident that if and when you terminate your contract, you tried all attempts to make it work.

Changing property management companies can be a process filled with unknowns and fears, so try to make your current situation work by communicating your expectations clearly with specific outcomes.   

If you don’t currently have a property manager and are interviewing them for the first time, this is hopefully some great information. Not every property manager is the right fit for every owner so it is important that you find a property manager where expectations are aligned.  

Asking the right questions throughout the process will help you avoid being one of the 300 owners in this post looking to replace their current property manager.

Have any property management horror stories? How did you remedy the situation?

Share below!