Remote owner challenge with Rentals getting consistently trashed

Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes

Hi @Raul Sai P - what a bizarre scenario to be in... how can units be consistently thrashed UNLESS they're located in a place that attracts the tenant characters that makes them think its ok to do that.

It may just come with the territory but if you're not open to just selling and investing in better areas, you should personally screen all tenants yourself the next time you have turnover.

Your PM may be incentivized to flip a unit in order to collect their brokering/managing fee.

For my units, I focus on 2 main things: Credit, and work history. Credit/background report will tell me everything I need to know about someone.

5 Reply

Raul Sai P

OP

Homeowner · OR · Member since 2022 · 19 posts · 4 votes

2y

Thanks Mo.

Like I mentioned at the start of my post - This was not always the case with maybe 5-10% rate of the rental properties getting damaged before Covid (and with a different PM company). Then I would see a damage of at most around $3-4K in one house out of four. However, now I am seeing around 90% case of properties getting trashed and the damage is a lot more ($10K+).

1 Reply

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

2y

So it is either the new PM or the market. Maybe the market attracted a bad tenant base post Covid or the new PM is just bad as its job. You can either try a new PM or a new market. With a dozen properties over almost 25 years I probably had 1 turnover that cost more than $1,000 for intentional damage. I’ve certainly had several run a few thousand for new carpet and paint after a 5- 10 occupancy but not intentional damage over the security deposit. That obviously includes pre-post and even during Covid. There just wasn’t any change.

If you don’t want to put in the effort of finding a new PM list it for sale and do a 1031, almost any property will perform better once you eliminate the damage.

2 Reply

Rosalind Pistilli

Investor · CO · Member since 2023 · 7 posts · 14 votes

2y

I would be looking for a different property management company as soon as possible. I would also be traveling to the area once a year to do my own walk-throughs. You've indicated you live in Kansas and the property is in Missouri, that should be a manageable trip to take once a year, walk through, inspect all of your properties and be present. To me, the property management company is taking advantage of you being absent. Scheduling a walk-through once a year will cause both the management company and the renters to be on alert.

7 Reply

Raul Sai P

OP

Homeowner · OR · Member since 2022 · 19 posts · 4 votes

2y

Thanks, please let me know if you have any recommendations on a good PM company in the Kansas City area. I would like one that can hold such tenants accountable in the worst case and recover some part of the damage done.

0 Reply

Tien Pham

Member since 2020 · 2 posts · 5 votes

2y

Hi @Raul Sai P,

My name is Tien. I'm located in KCMO and am also an active buy-and-hold investor in both KCMO and KCK areas. I manage 12 units by myself. I completely relate with you regarding the headaches of dealing with tenants who have no regard for our properties. I'm currently helping my friends from CA to invest in the rental market in KC and also help them manage their properties. Let's connect to see if there are any values I can provide to you.

4 Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

Quote from @Raul Sai P:

Some background - Around 5-6 years ago, I was getting decent tenants for the most part and a pretty good PM company to manage the rentals in MO state.

While I understand that it is part of the game to have a rental property trashed every once in a while, I am currently facing a situation where pretty much all of my 3-4 homes are getting severely trashed every year. I am talking of move-out repairs around $9000-$12000 in damages for each property, which obviously goes way beyond the security deposit. It costs $2000 to just remove the piles of trash before I can fix the rental. There is not a single aspect that's not trashed with intentional damages like big holes in walls, intentionally ripping out carpets, trashing new appliances, kids drawing in all rooms, broken doors, window shades, screen doors, lost garage and fireplace remotes etc. Most Tenants do not even stick around for the move-out inspection. These damages are so extensive that it's wiped out years of breakeven cost that I initially managed to get. Plus $10K is a significant loss when the house itself is in the $200K range.

My challenge is that I am a remote owner and cannot visit my rentals every month so I have limited options. The original PM company was acquired by a bigger one a few years ago and takes care of everything from getting tenants/screening them to collecting rent, repairs etc. This PM company does follow a good screening process: credit check (with a score of 550 or higher however if lower PM company will not decline solely based on the credit score itself), rental/mortgage history, employment/income verification of 3 times the amount of rent, and a criminal background check. The approval is made on a combination of these 4 items.

One option that I tried was to sign up for six-month inspection at additional cost from the PM company but that did not help. The PM company does send the damage bill to Tenant, notice through a lawyer and follows all the process for collections, but I am yet to see a cent back.

I am hoping to explore some options and ideas from the fellow community especially in the MO area.

- Any screening process that you follow differently to improve tenant quality?

- Any options or recommendation for a PM company (ability to find good tenants and recover some damages from tenant in the worst case)

First thing I would do is not accept a tenant with a score under 620. Also what type of neighborhood is this in? Are these $30-$50k homes that you were getting $1000-$1200 in rent? Most low dollar homes never cash flow because of these situations

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4 Reply

Michael SmytheBusiness Member

Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes

2y

As other have said, it's either the area has changed or the PMC is not doing good screening.

Maybe worth your time to visit the area (it's a write-off) to check it out. Schedule meetings with real estate agents if necessary, to get an idea of the areas your properties are in.

Regarding the screening issue - ask a LOT of questions of your PMC! Many of the big companies have automated their screening processes so much, that no one really reviews anything. Worst of all, they no longer do verifications of rent with previous landlords!

We don't have a minimum credit score, but if it's under 620, we require a LOT more data: W-2's, bank statements and written explanations for issues on background checks. We also will NOT approve an applicant under 620 unless we can verify their previous 2-year rental history.

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3 Reply

Karl B.

Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes

2y

And this is why I self-manage. Even when living in Los Angeles I self-managed 6 doors in Pennsylvania.

Although I've had minor damage to properties it's never come close to 10-12K.

I deal in C-Class properties. My acceptance criteria is 625 credit, 3.5 earnings AND NO PRIOR EVICTIONS.

I continued to accumulate properties in my PA market and after living two years in Missouri I decided to move back to PA to continue buying as my properties more than pay for my standard of living.

I recommend you make yourself familiar with some KCMO real estate groups (such as The Apartment Association of Kansas City) and perhaps go to one of their meet-ups (the cost will be worth it) so you can network and try and find a PM who doesn't suck.

I still have a duplex in Columbia, MO that I self-manage from PA and while living in Columbia I quickly learned most of their PMs were hot garbage (my duplex is in a neighborhood consisting ONLY of duplexes and many were managed by PMs); that's typically how it is in most markets. The few good PMs out there tend to manage A and B class as they're spoiled for choice.

3 Reply

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

2y

The new PM company is not doing a good job with the screening and they are either ripping you off and charging you for repairs that don't happen with every turn over (no way every property should turn over every year and each of those have $10K in repairs) or something else is going on. I'd find a new PM.

3 Reply

Caleb Brown

Real Estate Agent · Kansas City · Member since 2018 · 5k+ posts · 3k+ votes

2y

What area are they in? There is a some rough spots in KC. Having a great PM would help limit bad tenants but if the area stinks then there's not much you can do

0 Reply

Jordan Myer

Member since 2023 · 84 posts · 35 votes

2y

Quote from @Raul Sai P:

Some background - Around 5-6 years ago, I was getting decent tenants for the most part and a pretty good PM company to manage the rentals in MO state.

While I understand that it is part of the game to have a rental property trashed every once in a while, I am currently facing a situation where pretty much all of my 3-4 homes are getting severely trashed every year. I am talking of move-out repairs around $9000-$12000 in damages for each property, which obviously goes way beyond the security deposit. It costs $2000 to just remove the piles of trash before I can fix the rental. There is not a single aspect that's not trashed with intentional damages like big holes in walls, intentionally ripping out carpets, trashing new appliances, kids drawing in all rooms, broken doors, window shades, screen doors, lost garage and fireplace remotes etc. Most Tenants do not even stick around for the move-out inspection. These damages are so extensive that it's wiped out years of breakeven cost that I initially managed to get. Plus $10K is a significant loss when the house itself is in the $200K range.

My challenge is that I am a remote owner and cannot visit my rentals every month so I have limited options. The original PM company was acquired by a bigger one a few years ago and takes care of everything from getting tenants/screening them to collecting rent, repairs etc. This PM company does follow a good screening process: credit check (with a score of 550 or higher however if lower PM company will not decline solely based on the credit score itself), rental/mortgage history, employment/income verification of 3 times the amount of rent, and a criminal background check. The approval is made on a combination of these 4 items.

One option that I tried was to sign up for six-month inspection at additional cost from the PM company but that did not help. The PM company does send the damage bill to Tenant, notice through a lawyer and follows all the process for collections, but I am yet to see a cent back.

I am hoping to explore some options and ideas from the fellow community especially in the MO area.

- Any screening process that you follow differently to improve tenant quality?

- Any options or recommendation for a PM company (ability to find good tenants and recover some damages from tenant in the worst case)

Sounds like your PM is not screening well enough. Proper screening and due diligence on prospective tenants will take care of this.

I am with a PM based out of Overland Park, KS but we also manage on the Missouri side. We do extensive screening and rarely have properties that get trashed when a tenant moves out.

0 Reply

Timothy Howdeshell

Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes

2y

Something is not adding up. You may spend quite a bit of time trying to get to the bottom of this, but the short answer is that you need to find a new property manager immediately.

If the p.m. is doing inspections on a bi-annual basis then they should catch ongoing damage. Is the tenant simply trashing the house in the last month before moving out or they damaging it continuously over time?

One trashed house out of four every few years is probably just bad luck but every house every year? Something's wrong.

2 Reply

Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

2y

Part of the difference between before and now might be explainable by how much labor and material costs have increased during the last few years, and it sounds like the change in management ownership has been a change for the worse. But it's also a bit par for the course when investing in certain areas remotely, while depending entirely on a management company that due to low margins needs to have hundreds of units under management as well as automate everything as much as possible in order to stay afloat/ earn a decent profit. Something is definitely off beyond these factors however because you shouldn't be seeing that much turnover and those turnover costs are absurd. I could see a major turnover expense running up to that range if the property hadn't had a make-ready in 15-20 years, but not after just a year or two, that's obviously not sustainable. You must be losing a ton of money on these properties as I can't imagine rents are sufficient to cover these expenses.

My first thought would be to sell and 1031 into better properties in a better location. But if you want to try and turn things around before doing that, I'd get a new manager and be a part of the screening process more. Have them run every prospective tenant that they recommend approving by you before final approval. 550 is a terrible credit score, and if that's the best you can do in that area then I'd definitely consider selling and looking into a better location. 620 is the minimum my PM uses, along with income at 2-3X rent, no prior evictions, good rental history and references, consistent work history in a decent career, etc. and once approved they send the info they've gathered to me and I do a little sleuthing on my own (check them out online, social media etc. anything I can find). I also have my PM do quarterly inspections, and it's worth the nominal fee they charge for that. You can also probably "harden" your units more by using different materials that are more tenant-proof, such a LVP flooring, use 1x4 wall cleats mounted on the studs for towel racks, door stoppers, only the necessary appliances for your market, semi-gloss paint and the same color throughout, simple or no landscaping, remove screen doors and replace with plexiglass, remove as many things that break as possible, remove any pull chords on fans and blinds that tenants always break, etc. Do a better job with turn overs addressing these issues fully instead of bandaid on top of bandaid like many landlords tend to do.

However, all of these efforts may be in vain if your properties are in a location where good tenants wouldn't want to live and good PM's don't want to manage. I suspect location may be your underlying issue. What you're probably seeing is the difference between cashflow via spreadsheet magic vs. reality. Low value properties can provide wonderful cashflow in theory, but the low rents that go along with low values often can't support the baseline expenses required to operate a rental property. Paying more for a property in a better location with less initial cashflow usually leads to better overall returns as the years go by.

3 Reply

Lisa Hammond

Real Estate Professional · Newton, KS · Member since 2016 · 44 posts · 36 votes

2y

It's impossible to determine how much damage a tenant will cause based on credit score and really you can't even get an honest reference from previous LL any longer due to liability scares. Some of the worst damages we've ever handled were in a high end home with excellent credit scoring tenants. In the past 24 months there's been a huge shift in tenant perception and it's stunning how little care they have for their homes now, it's sort of scary. Top that with contractor and materials cost going up 30-40% and it's a nightmare for the owners.

1 Reply

Milton ChamberlainPro Member

Real Estate Agent · Kansas City, MO · Member since 2019 · 236 posts · 108 votes

2y

Frank Lewis- 816 890 9800 (business line)

Leave him a message and he should get back to you. He hosts the KC Northland Real estate monthly meetup. stand up guy. I refer most of my KC investors to him, and no complaints yet.

I get it, there is a cost of doing business, and I have paid my fair share of move out repairs, but 9-12k?! I understand the damage was extensive, but *big whistle* that's pretty steep for repairs and refinishing, especially when considering it was not a 'one-off' and has been consistent with all your properties.

Most I have ever paid was around 2k, and while the property was not demo'd, it was banged up pretty good by teens who broke in while it was vacant and threw a party and 'vandalised' it, requiring patches, replaced doors, new carpet, repaired cabinets, repainted walls, etc (this was in Columbia MO)

[email protected]573-356-1607

2 Reply

Mark Cruse

Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes

2y

This is a no brainer. Your PM sucks and/or doesnt care at all. They get paid no matter what. I have had the worst of the worst bottom feeding communities of all time and never ever had every damn tenant deliberately cause that degree of damage. Yea, it can happen but in all my years I´ve never heard anyone say every tenant destroys the property. PM needs to be fired immediately. Next, get on a plane, spend some time and get familiar with what is exactly going on. Know and understand the community you are in. In some of my class d experience I didnt even check credit score because anyone coming there (in most cases) would sucks no matter what. If its a serious super hood type of neighborhood you have to get the best out of the bottom feeders that are trying to get it. Contrary to what some may tell you here, all or not even most of those people are savages. You just happen to be getting the ones that are. Often times reputable and viable PMs wont manage certain communities thus leaving the stupid and incompetent ones to do it. This is why I had to manage my stuff from Afghanistan. No matter what, you have to get the right tenant. I was sold a turnkey multi once in my early days that was packed with unstable stooges that had zero ability to ever be stable. One even left after taking a dump on the kitchen floor. None of them could manage to get by even 2 months of paying rent. The problem there was not the community. It was the incompetence and possibly some dishonesty of the people I got it from.

2 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

2y

Quote from @Mark Cruse:

This is a no brainer. Your PM sucks and/or doesnt care at all. They get paid no matter what. I have had the worst of the worst bottom feeding communities of all time and never ever had every damn tenant deliberately cause that degree of damage. Yea, it can happen but in all my years I´ve never heard anyone say every tenant destroys the property. PM needs to be fired immediately. Next, get on a plane, spend some time and get familiar with what is exactly going on. Know and understand the community you are in. In some of my class d experience I didnt even check credit score because anyone coming there (in most cases) would sucks no matter what. If its a serious super hood type of neighborhood you have to get the best out of the bottom feeders that are trying to get it. Contrary to what some may tell you here, all or not even most of those people are savages. You just happen to be getting the ones that are. Often times reputable and viable PMs wont manage certain communities thus leaving the stupid and incompetent ones to do it. This is why I had to manage my stuff from Afghanistan. No matter what, you have to get the right tenant. I was sold a turnkey multi once in my early days that was packed with unstable stooges that had zero ability to ever be stable. One even left after taking a dump on the kitchen floor. None of them could manage to get by even 2 months of paying rent. The problem there was not the community. It was the incompetence and possibly some dishonesty of the people I got it from.

Would you say the "stooge" who poo'd on your kitchen floor was a savage? Sounds pretty savage to me...

4 Reply

Mark Cruse

Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes

2y

Quote from @James Wise:

Quote from @Mark Cruse:

This is a no brainer. Your PM sucks and/or doesnt care at all. They get paid no matter what. I have had the worst of the worst bottom feeding communities of all time and never ever had every damn tenant deliberately cause that degree of damage. Yea, it can happen but in all my years I´ve never heard anyone say every tenant destroys the property. PM needs to be fired immediately. Next, get on a plane, spend some time and get familiar with what is exactly going on. Know and understand the community you are in. In some of my class d experience I didnt even check credit score because anyone coming there (in most cases) would sucks no matter what. If its a serious super hood type of neighborhood you have to get the best out of the bottom feeders that are trying to get it. Contrary to what some may tell you here, all or not even most of those people are savages. You just happen to be getting the ones that are. Often times reputable and viable PMs wont manage certain communities thus leaving the stupid and incompetent ones to do it. This is why I had to manage my stuff from Afghanistan. No matter what, you have to get the right tenant. I was sold a turnkey multi once in my early days that was packed with unstable stooges that had zero ability to ever be stable. One even left after taking a dump on the kitchen floor. None of them could manage to get by even 2 months of paying rent. The problem there was not the community. It was the incompetence and possibly some dishonesty of the people I got it from.

Would you say the "stooge" who poo'd on your kitchen floor was a savage? Sounds pretty savage to me...

That obviously was a savage or animal. However, the general description of low income or section 8 people is not that of a savage. I inherited that and in my early days I didnt understand how to really approach various aspects. However, because Iḿ a senior investor now with vast experience and I understand and respect the communities I operate in, I can weed out that element. In this environment, in no way, shape, or form is animal a generalized depiction. People who are too incapable of comprehending this project their own lack of abilities to others aspects.

2 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

2y

Quote from @Mark Cruse:

Quote from @James Wise:

Quote from @Mark Cruse:

This is a no brainer. Your PM sucks and/or doesnt care at all. They get paid no matter what. I have had the worst of the worst bottom feeding communities of all time and never ever had every damn tenant deliberately cause that degree of damage. Yea, it can happen but in all my years I´ve never heard anyone say every tenant destroys the property. PM needs to be fired immediately. Next, get on a plane, spend some time and get familiar with what is exactly going on. Know and understand the community you are in. In some of my class d experience I didnt even check credit score because anyone coming there (in most cases) would sucks no matter what. If its a serious super hood type of neighborhood you have to get the best out of the bottom feeders that are trying to get it. Contrary to what some may tell you here, all or not even most of those people are savages. You just happen to be getting the ones that are. Often times reputable and viable PMs wont manage certain communities thus leaving the stupid and incompetent ones to do it. This is why I had to manage my stuff from Afghanistan. No matter what, you have to get the right tenant. I was sold a turnkey multi once in my early days that was packed with unstable stooges that had zero ability to ever be stable. One even left after taking a dump on the kitchen floor. None of them could manage to get by even 2 months of paying rent. The problem there was not the community. It was the incompetence and possibly some dishonesty of the people I got it from.

Would you say the "stooge" who poo'd on your kitchen floor was a savage? Sounds pretty savage to me...

That obviously was a savage or animal. However, the general description of low income or section 8 people is not that of a savage. I inherited that and in my early days I didnt understand how to really approach various aspects. However, because Iḿ a senior investor now with vast experience and I understand and respect the communities I operate in, I can weed out that element. In this environment, in no way, shape, or form is animal a generalized depiction. People who are too incapable of comprehending this project their own lack of abilities to others aspects.

0 Reply

Henry T.

Member since 2022 · 1k+ posts · 1k+ votes

2y

Sorry, but 550 credit rating is for criminals. I've always been 720 and above. I'm now 750. The one time I took a 550 I ended up with a trashed house. 10k in damages. I've had damages from 720's but it does get worse the lower you go.

4 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

2y

Quote from @Henry T.:

Sorry, but 550 credit rating is for criminals. I've always been 720 and above. I'm now 750. The one time I took a 550 I ended up with a trashed house. 10k in damages. I've had damages from 720's but it does get worse the lower you go.

When you're in the hood, you're not gonna get a lot of 700+ credit scores.

2 Reply

Henry T.

Member since 2022 · 1k+ posts · 1k+ votes

2y

Quote from @James Wise:

Quote from @Henry T.:

Sorry, but 550 credit rating is for criminals. I've always been 720 and above. I'm now 750. The one time I took a 550 I ended up with a trashed house. 10k in damages. I've had damages from 720's but it does get worse the lower you go.

When you're in the hood, you're not gonna get a lot of 700+ credit scores.

I appreciate that. I've had to adjust to my surroundings. Seattle government and their insane laws forced me to tighten up. My first 10 years I never checked credit, if things didn't work out they got 30 days notice. As you know, it's not like that anymore. Hopefully you have better choices of enforcement than Seattle. Seattle is THE no go zone for landlords. Keep rockin'

1 Reply

Mark Cruse

Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes

2y

There are some suggesting raising the credit score. If the neighborhood is close to what he is indicating, raising that score wont work. Many of those tenants are there for a reason. Doesnt make them bad people but most are in bad situations with little stability. If they had those higher scores most likely they would not be trying to live there.

4 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

2y

Quote from @Mark Cruse:

There are some suggesting raising the credit score. If the neighborhood is close to what he is indicating, raising that score wont work. Many of those tenants are there for a reason. Doesnt make them bad people but most are in bad situations with little stability. If they had those higher scores most likely they would not be trying to live there.

You make it sound like people get a bad credit score by accident. You get a bad credit score because you borrow money or services and then don't pay it back. That's not someone in a bad situation, that's someone who is dishonest who's made a series of bad life choices.

4 Reply

Remote owner challenge with Rentals getting consistently trashed

Remote owner challenge with Rentals getting consistently trashed

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