Rehabbing a multi-family

6 Replies

I purchased another five unit multifamily a few months ago.  I hired a PM who promised the world, but has delivered nothing.  He hired a guy who bid on one project to combine two units into one.  Reason being, the units are small, so making it into a three unit will increase the rents.  The PM allowed the worker to deal directly with me and I brought him down from 6600 to 4400 plus materials.  He kept on finding issues, and had to rewire meters and such, so for the additional work, I agreed for another 1000 on top of the initial bid.  It was supposed to take a month, we're now on month 3.  I promised him last month if he's done within a week, I will give him a cash bonus, he said it was too much work, and was unable to complete.  He's a one man operation, so we hired a worker for him, but still was unable to complete the job.  He said he'll now be ready by this Saturday.  Over the time period, he's been texting me, I have no money for food, rent, his cell is being shut off, etc.  The PM had advanced him already about 4k, but he now says the bonus is the only thing keeping him going.  He said this is/was a 12k job and I am getting a deal of a lifetime; I digress.  I didn't answer on the bonus as he's 3 weeks late.  My wife suggests I give him something, but the business side of me says he missed the date, no bonus.

In addition, I will not be using him moving forward.  Not that he doesn't do good work, as he does, but he doesn't stick to the time table.  In addition, I am terminating the PM as well.  His team (of 3 people) managed to receive a full building and then over time, there's now only one tenant left.  The others all left.  He says he shows the units, but no one is submitting apps.  I went to the place the other day, just says for rent and no number or site address.  There was a slot for apps, but it was empty. When I was there, four people walked up to me asking if there are apts. to rent.  Obviously, this guy and his team care very little about my building.

What do you guys think on firing the PM and not giving the bonus to the worker?  He started in February and stopped occasionally to do other jobs as well, thus pushing the completion back.  The PM thought a bonus would make him work faster and complete the job, but no luck.  I have a heart and feel bad he has a bad time managing money, but the building is basically empty since the company has taken it over and the guy has been working on combining two units into one for four, almost five months.  My mentor suggested you're this far in, might as well wait until he's done and then get rid of him.  I've been getting excuses after excuses, etc.  I'm at my whits end.  Plus, I've been managing a mortgage, taxes and other fees where the building's one tenant doesn't cover it.

The PM knows I have other buildings managed by other PMs.  I am curious why he thinks I'll stick with him and his team?  Ideas?

@Kenny D. I would immediately fire the PM a they are your biggest problem. I view them as a separate issue from the contractor. The PM's only job in life is to keep good paying tenants in your unit. If they can't/won't do that you should immediately move on. 

Your contractor issue is tough, but he may not be as dishonest as you think. A lot of these one man operators do good work but are terrible business people. Not knowing your scope of work, I can tell you that 4400 plus material should be enough to completely re-do one unit in an apartment in my experience. This is about what I paid contractors in labor to do a complete kitchen, bath, repaint, floors, etc. What you may have is an excellent handy man trying to do the work a full crew should be doing. Maybe this guy would be great for smaller projects, but is in over his head. 

Yes John, I agree.  He quoted $4400 for job, plus materials and after two months he said he had to do extra work, and wanted to hire another person to  help him complete.  I went to the building several times, and he does good work, but his time table is horrible.  We're missing the key season to fill the unit up.  We already have our other PM company ready to take the unit over.  We're just waiting for him to be done so we can pay what's owed and fire the PM.  I was advised not to say anything while the job is being done or something can go wrong.  We'll be changing the locks the day after he's finished as well.  I am just going along with this time frame of being completed this Saturday (hopefully), and then send the other team in.  We still prob. cannot rent that unit out yet as we have to now fix the hallway walls.  He said he had to break into the walls to run a new vent line to the roof.  It's just a mess.  The contractor is really bad with money and time management.  I think the PM doesn't care because basically no money is coming in due to the work of this one guy is so slow.  I also think the work is being done peacemeal and he takes other jobs to keep him going, instead of banging it out and getting it done ASAP.

What do you think of this bonus that he's expecting though?  The bonus was for work being completed three weeks ago.  I never answered him on that issue.  We gave him extra money for workers, supplies, etc.  Very strange how this simple job turned into a nightmare.  As for how the PM lost three tenants, I have no answers.  They all left within about 60 days since he took over.

I stopped by today and nothing was done.  Same as last week.  Sheetrock not up, floor not laid down.  Nothing.  He said he had to stop the job again to do other  work.  I called him, no answer.  I texted him, no answer.  I called the PM said to tell the worker we've hired other people to finish the job.  You services are no longer needed.  Amazingly, the guy texts me and doesn't understand why he was fired.  Would you believe he's been working on the same job for 3 MONTHS.  He said we didn't pay enough, and others would had walked off the job.  I said, well, you do not have worry anymore, we'll finish it for here.  He's complaining about the job he bid, and that it wasn't enough?  We also gave him an additional 1500 on top of the agreed price.  He complains that we are ripping him off and we are screwing him.  I said how?  You are being paid in full.  He said no bonus.  I said why would you get a bonus if you didn't finish the job?  No answer.  This kept on going for nearly an hour until I said no more.  You will be paid what is owed and we're done.  

Amazing.  However, we know now what the issue was.  He was doing our job piecemeal, while doing other jobs ahead of ours.  Do you know how many times we've extended the deadline?  7 times.  He promised up and down in the text he'd be finished tomorrow.  There's at least another weeks worth of stuff to do.  I cannot believe he left our job again, which the PM already paid him 75% to do other jobs.  I'm temped to deduct the unfinished work, but not sure it's worth the headache for 1k still owed to him.  The locks will be changed tomorrow, but I do not want any damage caused to the home since we're about an hour away and it's basically empty. One person in one unit living in a five unit building.  

What do you guys think?

I only read the first few sentences of your post...

I’d begin interviewing property managers immediately. Seek only a reputable and experienced manager with the ability to manage renovations. Review the management agreement carefully and enforce it.

Too much drama here. 

Your experience with the contractor is all too common.  I've heard a lot of great advice from @Brandon Turner and @J Scott about finding a contractor.  Cheapest isn't always best and find the guys that are at Home Depot at 7am every morning.  Generally, this has been my experience when I went with the cheapest guy.  They take forever, want more money and never answer their phone.  I finally found a reliable contractor, and I pay a little more for him.  In terms of price he is what I consider in the middle, but he is reliable and trustworthy.  On my last job, I had complete remodel after an eviction and he was in the middle of another job.  He worked nights and weekends for me to get things ready to rent.  I paid him extra for going the extra mile.  Those guys are hard too find.  When you find one, take good care of them.

We have another PM who manages some of our properties in a neighboring county.  He's taking over next week.  We still need to put up walls, paint, flooring and this guy had to destroy the hallway in order to fix something he says.  I wasn't doing it on the cheap.  Our other PM team member seemed to have his plate full, so we went with this guy.  Until I said that he was fired, I never heard from him since a week ago.  He basically disappeared.  After all the texting back and forth, I called the PM, which I spoke to an hour before, went to vm.  No reply yet.  I wanted to see how much more we owe him.  I do not like screwing people over, but does he deserve to get paid for work he's not completed?  Or, we owe him about 1k, is it worth just paying him the 1k to get rid of him?

I swear, firing him was like getting rid of an old girlfriend.  I must had received an chapter of texts on why we screwed him over.  I asked how?  His answer all the work he did and then firing him.  I said, if you were able to finish on any of the past 7 extensions on the job, then you would not had been fired.  You are getting paid on what you are owed.  How are we screwing you?  He said it was a pride thing.  This went on and on for an hour or so.  Since no one is in the building basically but an old man in the downstairs apt, I didn't want him to trash the units.  So, I played nice and try to defuse the situation.  He didn't get that he was wrong.  It doesn't take 3+ months to complete a unit rehab.  All we asked him to do was repair, re-sheet rock, repaint, and lay new flooring.  Unreal.  My original PM who's taking over the job has a 8 person crew which he said would finish within two weeks (July 4th delays the work).  It's an unreal experience.  So much time lost trying to give him more time and I the one with egg on my face.  

Should I just pay the remaining 1k just to get rid of him even though he didn't finish the sheetrock work, painting nor the flooring?  Locks will be changed tomorrow, but since the building is not full, I worry that he could do something.

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