Buying a Property that is Managed

12 Replies

I've been marketing to absentee owners, run down properties and properties with favorable zoning for some years now. It has been a great way for me to grow my portfolio at prices that make sense for my goals. I recently came across a property in which the owner responded to one of my pieces of marketing. He had his attorney review the contract I sent to him and agreed to the terms and conditions. 

I then found out the property was managed. The management company was not happy that I had gotten one of their properties under contract and didn't go through them. Part of what I offer owners is not paying sales commissions. 

We close on this property next week. I am reflecting on the process and am trying to determine how I would go about this in the future. Do I pump the breaks when I hear the property is under third party management and go through the management company? My initial thought is that, this individual had his attorney review the contract and still felt comfortable moving forward and I need not worry about the effected management company.  What are your thoughts?

Screw the management company, if they have a sales clause in their management agreement they can take it up with the owner, however they should not be able to hold their clients hostage if they want to sell.

Originally posted by @Aaron K. :

Screw the management company, if they have a sales clause in their management agreement they can take it up with the owner, however they should not be able to hold their clients hostage if they want to sell.

That is kind of where I am at with it @Aaron Klatt. I've talked with a couple of different folks, one who was the president of our local Board of Realtors and discussed the scenario with him and his words were "sour grapes".

It was unfortunate how the management company dealt with it, as it was extremely unprofessional. Move on and move forward I think.

@Patrick Soukup Ask to review the management agreement and make sure you are not bound for any reason to use them going forward. Unless there is something in the agreement or the property is listed for sale, neither you or the owner were obligated to go through them. 

You should not have to avoid properties with third party management companies. If the seller wants to include them, they will, if the seller does not, that is their decision.

I am a private buyer, so the mgt co can save it.

You must be an agent, Patrick?  That changes the whole discussion.  If you're not, then boohoo.  If the mgt co was doing a better job, their client wouldn't be selling!

@Steve Vaughan One of those days where I just follow you around BP. If there’s a sale clause in the PM agreement then likely the seller would have to pay that at closing. Either way that shouldn’t really affect you as the buyer
Originally posted by @Steve Vaughan :

I am a private buyer, so the mgt co can save it.

You must be an agent, Patrick?  That changes the whole discussion.  If you're not, then boohoo.  If the mgt co was doing a better job, their client wouldn't be selling!

I am, yes. I wanted to make sure that everything was on the up and up and not anything to raise concern. Everything was disclosed to the buyer throughout the process. 

Buyer contacted his attorney AND the management agreement and even THEN still signed the contract. 

More than anything, I want to make sure that the "right" thing is done, not necessarily the legal thing. I don't have any concern of any legal issues with the contract or process at this point, but did I do the "right" thing. Moving forward would I change anything, that is where my head is at.

Originally posted by @Caleb Heimsoth :
@Steve Vaughan

One of those days where I just follow you around BP.

If there’s a sale clause in the PM agreement then likely the seller would have to pay that at closing. Either way that shouldn’t really affect you as the buyer

 I don't believe there is. I haven't yet seen the management contract. I've talked with the property manager and she is more pissed off than anything and is at a point where she would need to start making up bad names for me because she's used all the other ones in the book.

Originally posted by @Bob Floss II :

@Patrick Soukup Ask to review the management agreement and make sure you are not bound for any reason to use them going forward. Unless there is something in the agreement or the property is listed for sale, neither you or the owner were obligated to go through them. 

You should not have to avoid properties with third party management companies. If the seller wants to include them, they will, if the seller does not, that is their decision.

Fort Collins management contracts typically have a cancellation fee, but no obligations for anything more than 30 days.

Even if I wanted to avoid properties that are managed by a 3rd party, there is no database of properties that are managed by 3rd parties. The due diligence on the front end researching that for a 1% chance of getting the property has the smallest if not a negative ROI on anyone's time haha.

Thanks for the response!

I would agree with @Aaron K. on this... The management company should have no bearing in if you do the deal.

In the past however, we have continued to run the same management company as prior to closing for our larger deals. We've found that they know much more about the details of the properties and we can learn from their experience. 

... That said, we transition away from them within about 60-90 to our own property management company that works well and knows our processes.

@Nic DeAngelo I agree. These are smaller multifamily dwellings. I feel comfortable taking on the management right away. Anything more than 4 units, I probably would keep the current management company on. 

Update on Duplex purchase: walked the property today and it is in phenomenal condition. The PM was there (her employee) and was very professional. Maybe once the anger subsided, professionalism can take its place.