Sold Rental - Didn't Make Any Money - Now What?

Question

I owned a rental for about 3 years with a 3rd party manager. It was my first investment property.

Because I work full-time, I was very limited on options for management. I did some repairs when I first bought it to upgrade and add value, but they weren't anything impressive - mostly mechanical and QOL improvements (although some were very expensive).

The house was also not a very good purchase, because it had a lot of issues. I will be far more selective on future investments and more thorough when inspecting before buying.

However, my real question for the BP community is what to do about Property Managers... I was constantly getting requests from tenants (via my PM) to upgrade, replace, and fix the most mundane, minor, and unimportant things - sometimes for very high fees. (Repairs for things that wouldn't even bother me in my own home)

If I said "No" to these requests, the PM would try and bully or guilt-trip me into doing them anyway. They wouldn't take no for an answer, which was frustrating, since I owned the house!

Are all Property Management companies like this? What has been your experience? Is this a problem with residential as an asset class?

I would like to continue investing in real estate, but I'm reconsidering my strategy. This was a bit ridiculous.

Thanks,

Tyler

Jules Aton · Answer

In my experience there is no hands off brick and mortar RE investing and depending on the property, neighborhood and your PM you may have to do more work than others.  Selling that property if not appreciating or cash flowing is likely smart to avoid sunk cost fallacy and take time to be thoughtful before deciding if you want to do it again. Like @Eric Gerakos noted RE isn't for everyone and TBH other than diversification and tax advantages of holding a few properties the low cost total stock market index funds especially for young people with years to build would be a no brainer for me.

Bo Smith · Answer

Sounds like your PM was either inexperienced or making money off every repair. Good ones have clear thresholds and push back on tenant wants vs needs. Ever considered self-managing the next one to learn what's actually necessary?

Jules Aton · Answer

IDK if you ask me re: brick and mortar RE single family residential LTR for someone who doesn't want to be hands on is probably the lowest hanging fruit. The big thing I found when I was young and didn't have the funds to just pay for whatever is buying within a 90 minute radius of my home made things way more manageable, better able to oversee and know the actual market.

Lee Burns · Answer

Ha, I took a similar route to start my journey.  I bought my first duplex and fixed up a few basic QoL items and after I moved out I created an LLC and S Corp then hired a part time handyman to be my property manager since I was busy at work and not very handy.  He now manages 2 of my duplexes and I'm looking to expand

Kenneth Garrett · Answer

Account Closed

I’ve been self managing my properties for over 15 years.  Mostly SF with a mix of 2 and 4 unit buildings.  I BRRRR’d them and so maintenance issues were at a minimum.  Provided you have a decent handyman, the time to manage my portfolio was probably less than 2 hours a month except for when I had to replace a tenant and get the unit ready.  If I was fighting my PM, they wouldn’t be my PM anymore.

Just offering a different perspective on this.

Adam Bartomeo · Answer

If they were minor or mundane then why wouldn't you just fix them to keep the customer happy. The tenant was likely paying $24,000/yr. Making a few easy fixes keeps them paying on time and reduces turn over. Its not about what makes you happy in your home, its about what makes them happy in their home.

Account Closed · Answer

No, it was about $12,000/yr. They were minor/mundane as far as the issue went, but the cost was almost never minor. Definitely seems this was just a matter of a bad purchase and a bad PM relationship.

Eric Gerakos · Answer

Sorry, but no one should be able to bully or guilt-trip you into doing anything. Yes, they would take NO for an answer. Real estate isn't for everyone.

Drew Sygit · Answer

Legally, PMCs are usually required to tell an owner about every little thing:(

Can be a pain for owner and PMC.

To address this, we break things down as best we can into categories: Health & Safety, Government Required, Property Preservation, Marketing/Retention, Miscellaneous.

We will push back hard on owners that deny Health & Safetey repairs, because we don't want to be part of a potential tenant lawsuit.

Same goes for Government required because we're the ones usually ticketed (not the owner).

The rest we will consult with the owner to confirm they understand their options and corresponding pros & cons, but at the end of the day it's their property, their decision.

If your PMC was pressuring you more than this, then find a new PMC!

Sold Rental - Didn't Make Any Money - Now What?

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