Property Managers

11 Replies

Hello Fellow Investors!

I just closed on a rental property in Austin, Texas about 3 weeks ago, and I have property manager in place already.

My question is:

1) What are some of the main things I should be aware of?

2) What checks and balances should I have in place to prevent unscrupulous managers from taking advantage of me (I am located in Southern California and I have a full-time job as an investment banker).

3) Because my rental is in a hot market, my property manager was able to rent it out in less than 2 days.  I have yet to see the contract but the tenants are paying.  Is it normal for the owner to see the contract between the PM and the tenant?

4) If anyone can provide me with their suggestions, I would highly appreciate it.  I'm more of a hands-on person, but because of my full-time job, I am not allowed to do so.

Thanks everyone in advance for their expertise,

Crystal

The best way to keep anyone from taking advantage of you, is to know more than they do.  Learn Austin landlord-tenant law.  Austin has more laws than the state laws require.

Question all expenditures.  It would have been best to get a contract in place that says they MUST contact you before spending any of your money - no matter what - including "emergencies."  It's my belief that if you were managing it yourself, and your tenant could call you in the middle of the night to tell you about an emergency, then your PM can, too.

In fact, you might want to put in writing now, that you want your PM to contact you for permission before they can spend any of your money, including emergencies.

Austin is not a cheap market anymore.  I'd advise you that if you can afford to invest in Austin, that you might want to look closer to home.  You can never truly manage a property or a PM from so far away.  In my experience.

steve crossland has a pretty good property management blog.  Whatever he does is pretty much what your pm shoukd do. Most pm's should use the TAR lease which you should be familiar with...you can get a cooy online at avarious sites.  There are blanks in the lease.   You should be aware of how your pm fills in the blanks.  Obviously, amount of rent, but late fees and a variety of details.  I state that my sheds are not warrantied to be water tight and if fhere is a refrigerator in the property,  i do not warranty it.

It is readonable dor a pm to ask for a repair escrow and to be allowed to make repairs under a certain amount without having to contact the owner.  A leaking water heater needs to be repaired or replaced.  People need to be able to take a hot shower in the morning, and having a succession of mornings with cold showers while the pm waits for approval to be able schedule a repair in a market where it can be hard to get a plumber right away  is just bad business and ineffecient.. 

You should get receipts for any repairs.  I guess You can call the vender...or the tenant to ask how well the repair was handled  if you want to check up on your pm.

1) What are some of the main things I should be aware of? - responsiveness, I would test them, send them emails/calls, see how quickly they respond. Hidden fees and overcharged rehab costs.

2) What checks and balances should I have in place to prevent unscrupulous managers from taking advantage of me (I am located in Southern California and I have a full-time job as an investment banker). If you have to rehab the property and the price feels high, get another bid.

3) Because my rental is in a hot market, my property manager was able to rent it out in less than 2 days. I have yet to see the contract but the tenants are paying. Is it normal for the owner to see the contract between the PM and the tenant? You can absolutely request the contract. In fact, you really should review it to make sure you are comfortable with the terms.

I know where you are coming from. Given your background in ibanking, you probably think there are norms or rules and regs around PMs. The truth is that the PM world is the wild wild west and you can and should demand to have things done your way on your terms. Don't be afraid to be assertive and demand high quality. I can promise that no one cares about your property as much as you do so ask the tough questions and never assume the PM is looking out for your best interest.

We like the service provided by Craig Hecht and his wife at Hecht Real Estate Group.  You may want to call them to discuss Austin. 

I'll vigorously disagree with Sue above on two points.  First, you do not want to have to approve every penny spent.  Sometimes, as in a water intrusion or pipe leak event, quick action is essential to prevent much greater expenses.  They should be able to spend $250 to $500 without any approval.  Of course that works if they are good managers, not crooks.  Second, we have owned in many states outside of California, and there are good mangers all over the USA.  There are also bad ones, and you have to manage any manger.  It is not armchair investing.  It is best to go see properties before buying.  We've had success not going, but also problems when we did not go.  We've had fewer problems when we did go to look/shop before buying.

Originally posted by @Marian Smith :

steve crossland has a pretty good property management blog.  Whatever he does is pretty much what your pm shoukd do. Most pm's should use the TAR lease which you should be familiar with...you can get a cooy online at avarious sites.  There are blanks in the lease.   You should be aware of how your pm fills in the blanks.  Obviously, amount of rent, but late fees and a variety of details.  I state that my sheds are not warrantied to be water tight and if fhere is a refrigerator in the property,  i do not warranty it.

It is readonable dor a pm to ask for a repair escrow and to be allowed to make repairs under a certain amount without having to contact the owner.  A leaking water heater needs to be repaired or replaced.  People need to be able to take a hot shower in the morning, and having a succession of mornings with cold showers while the pm waits for approval to be able schedule a repair in a market where it can be hard to get a plumber right away  is just bad business and ineffecient.. 

You should get receipts for any repairs.  I guess You can call the vender...or the tenant to ask how well the repair was handled  if you want to check up on your pm.

 You see, this is where I vehemently disagree with the repair clauses where they don't have to contact an owner if the repair is an "emergency" or is under a certain dollar amount.

Are you saying a PM really can't contact an owner between the time a tenant calls and says a water heater is leaking and the time it takes them to get a water heater repairman to the property?  

Seriously?

And a PM really doesn't have to call an owner if the tenant wants to have a lightbulb replaced, and the PM wants to charge the owner $200 to send out their own guy to replace a lightbulb?  Because the agreement says that any repairs or maintenance under $201 don't require a phone call or permission of the owner?

Yep.  That's what this translates into.  It's a rip-off.  There's no justification you can convince me of that a PM can't call an owner to get permission for things that cost a certain amount of money or is an "emergency."

Another example: A tenant of my daughter's complained to the PM that she was afraid a limb would fall off a tree in the backyard and hurt her 5 pound dog.  

Many days passed, and the tenant was having a barbecue in the backyard (with the dangerous tree), and a gardener and the PM showed up to trim the tree.  The PM charged my daughter $500 for higher weekend rate for this "emergency" tree trimming.  And by the way, they destroyed a beautiful tree, while the tenant and her family tried to enjoy a barbecue while watching this guy use a chainsaw on the tree.  

At no time did the PM contact my daughter - even after she explicitly, in writing, told them they must contact her for everything.  In about 5 months, they blew through about $6,000 of her reserve funds - and never contacted her until they needed more money, because they'd spent every cent she had in a reserve account with them.  Yep, all were supposedly maintenance costs under the limit, and "emergencies."

Give a PM carte blance, and this is what can happen.

There is absolutely no scenario that I can imagine where the phone the PM picks up can't be used to call the owner before calling whoever they supposedly need to call.

Now if an owner is okay with all of the above, and would rather subsidize the PM's profit margin, rather than receive a phone call or deal with anything, and can afford to do so, that's another story.

@Crysta Chang Be very careful. I live in California as well and I own a rental property in Austin. I am now on my third property manager (I bought the property mid 2005). Not all property managers are created equally.

You need to have the contract between you and your management company and a copy of the tenants leasing contract.

Stay on top of your PM company and hold your property manager accountable.

Feel free to contact me if you need any help

I have never used a pm, but managing my own properties I can see the need for an escrow account and "emergency authority."  I cannot imagine spending 6k in repairs on an occupied property.  The blog I Referenced above estimates 10-12% repairs, which is higher than I have experienced.  

However, I typically buy reo properties and put in new valves (plumber...with bath remodel) and supply shut offs and rebuild the toilets ($25 in parts but $150 by plumber) new water heaters if older than 10-12 and newer appliances, etc.  i have suggested in forums that Austin non-local landlords replace bath cartridges on new purchases...as we have hard water and it would likely save a repair call in the future...got shot down on that one.  But we do it...if not a total bath remodel.

Sounds like "emergency" repairs should be hammered out in contracts as well as what should be repaired at higher rates on weekends.  Blog I referenced states, if I remember correctly, he does not consider a/c a weekend qualified emergency, nor toilets if one is functioning.  I have paid to have a/c guy out on weekends.  I feel that is fair.  I have hired people for cheaper on weekends because they moonlight.

And possibly some sort of book rate for repairs.  I would think a large pm company could give you a range for everything.  The same repairs are done over and over.

Marian, I also have a plumber go through the whole house when I buy it and make sure everything is 100%.  Same thing with the electrician and HVAC.  I ask these trade guys to fix anything they think will prevent a problem in the next two years.  It typically cost me $1000 when I do this, but I don't have many repairs after that.  

@Ed Neuhaus Good idea. Can you share contact info for these guys and any other tradespeople you trust please?

Originally posted by @Nick L. :

@Ed Neuhaus Good idea. Can you share contact info for these guys and any other tradespeople you trust please?

 I have a few contacts in San Antonio, Austin, and Houston.  Where do you need them?

Thanks @Ed Neuhaus . This would be in Austin.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.