Long term tenant and new property management company
Most Popular Reply
Roseville, CA · Member since 2014 · 50 posts · 55 votes
10ySunny,
Make sure to take a hard look at where the rent on your place is vs the market right now. Folsom is ALWAYS a hot market, the presence of great schools, Intel and the 50 business corridor makes it one of the most sought after zip codes in the area. A lease end in February is pretty good timing as well to get a nice home in nice neighborhood on the market for a Spring lease.
I don't want to minimize the potential expenses associated with a turnover, there are going to be costs with cleaning potentially paint, etc, but the product you are offering is very desirable and likely worth more than you think. Don't be afraid to at least look at what you would see in increased rent.
Good luck
13 Replies
- Real Estate Professional · Palm Coast, FL · Member since 2016 · 19 posts · 8 votes10y
Sonny,
It looks as if you have done all you can reasonable do to keep your tenants happy! Under California law do you have the right to refuse to renew their lease and if so what is the criteria? If you can refuse to renew,why not allow the property management company to find you a new tenant?
Good luck!
- Investor · Chattanooga, TN · Member since 2012 · 227 posts · 114 votes10y
most people hate change. a lot of times it is because they do not understand it.
First of all- I dont think there are any statues that you have to manage your property so, if the tenant wants too- they can do not have to renew their lease. On the other hand, an attempt to make the tenant understand the move might require a transition meeting.
Arrange a time (half hour max) to meet with the tenant with the property manager. Explain your time restraints and the benefits to the tenant utilizing a professional company to manage the property. - quicker service, more accessibility etc. - It may also be a good time to resign the tenant for another term! good luck!
- Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes10y
Everything depends on the law in your state. Your property manager should know the answers to these questions, that is why you hired them. Utilize them for what you hired them for.
- Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes10y
Hi Sunny,
It's tough to enforce rules on a tenant after establishing a standard of flexibility upon them. Although I do believe that flexibility should be given to outstanding tenants only, I have also seen how it can spoil an easy tenant and turn them into a difficult one.
I do believe a decision like this requires a fair amount of judgement, or "valuation" lets say, of your tenant. Please allow me to analyze the multiple components of your situation.
Long Term Tenant: At 4 years, this is a long term tenant, and this may incline you to say "I don't want to ruin the potential for future long term residency with this tenant. Long term tenants, as you know, reduce your turnover rate, therefore reducing your vacancy and re-rental costs. This is all assuming you have a QUALITY tenant. In your situation however, it appears that there are some confounding factors such as...
Management Effort: The reason you sought out property management all together. It seems as though normally, you would self manage this property. If you have an A or B class rental, with the right tenant you could easily mitigate the cost of property management (and just purchase a home warranty if possible). A good tenant would save you that 8%-10% fee and not create a ton of opportunity cost by eating up your time if you were managing it yourself. Sounds like a pretty reasonable approach considering you're about 2.5 hours away by drive. Also, theres the consideration of...
Maintenance Costs: So the tenant calls for a bunch of little things. This causes you annoyance and a bit of money, so you opt to hire a PM. Now, this tenant starts bugging your PM for little things. Your PM, under your agreement, will not need your authorization for repairs under X amount of dollars, and will likely send a handyman over at your expense to handle these little things quite often. Your PM's approach to managing a needy tenant will almost certainly cost you more than you managing it.
It looks like your tenant is a headache, is going to cut into your cash flow via management and maintenance costs, is displeased to be working with a property manager, and averse to re-baselining their standards for landlord accommodation.
Here are some questions that come to mind:
-Has this tenants 4 year stay been beneficial or detrimental to me once all factors have been considered?
-Do I really want this tenant to stay longer?
-How does the rent the tenant is paying compare to the market rent of the property?
-Could I easily fill this property in at an equal rent or greater?
-What asset class is this property? Would it be able to attract a tenant that would be easier to deal with, without having to pay for a property manager?
My personal opinion:
Sacramento rentals are in high demand, and rents have been increasing quickly (I believe one research firm ranking it 2nd nationally in annual rent increase, at something like 18%). If this is a property that can attract a quality tenant fairly quickly (i.e. an A or B class property), I would nix the property management option completely and provide a notice to the tenant that I will not be renewing the lease when it expires in February. I would immediately define an intensive tenant screening process, and use it to select a quality tenant. I like the screening guide provided here on biggerpockets (https://www.biggerpockets.com/renewsblog/2013/01/2...).
When interacting with tenant candidates, I would clearly define standards and communicate that these expectations ensure a higher quality rental experience for my tenants. Biggerpockets podcast #51 explores the "training your tenants" in great detail (https://www.biggerpockets.com/renewsblog/2014/01/0...).
The tricky part is that when marketing this property, you may potentially aggravate your current tenant. This can be a sensitive issue and requires you to consider how you might respond your current tenant's reaction. It may not be an issue at all either! Perhaps a more experienced property manager can weigh in on how to handle this element of the process appropriately.
PHEW. Sorry for the long response. I hope that it was helpful in some form. Feel free to reach out to me personally for any further discussion, and good luck!
- 10ySunny D.Pleasanton, CA · Member since 2015 · 246 posts · 115 votesOP
Thanks all for the quick responses. I made a few mistakes as I felt guilty that I was not around to help so was more than accommodating for additional perks (pest service contract, allowed reimbursement for spoil food when refrigerator has issues, professional carpet cleaning at lease renewal and a few more). And unfortunately did not have the investor mindset that every dollar counts and as long as rent was more than my costs to keep the place did not push back hard.
Tenant sends rent on time and is otherwise good other than the extra time I need to deal with their requests, hence wanted a property management company. I used home warranty and though I felt had to spend a extra 500-700$ to deal with extra requests per year, I weighed it against their long term tenancy and had accommodated most of their requests.
Neighborhood is A , Folsom and in a nice location. The lease ends end of Feb. If I tell him that I am not extending lease though I had indicated by email few weeks back that I am willing to extend, will that be a issue. Also all correspondence has been by email than written letters. Should I let the property manager sort this out including letting them know I am not renewing the lease.
Thanks
- Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes10y
Originally posted by @Sunny D.:
Thanks all for the quick responses. I made a few mistakes as I felt guilty that I was not around to help so was more than accommodating for additional perks (pest service contract, allowed reimbursement for spoil food when refrigerator has issues, professional carpet cleaning at lease renewal and a few more). And unfortunately did not have the investor mindset that every dollar counts and as long as rent was more than my costs to keep the place did not push back hard.
Tenant sends rent on time and is otherwise good other than the extra time I need to deal with their requests, hence wanted a property management company. I used home warranty and though I felt had to spend a extra 500-700$ to deal with extra requests per year, I weighed it against their long term tenancy and had accommodated most of their requests.
Neighborhood is A , Folsom and in a nice location. The lease ends end of Feb. If I tell him that I am not extending lease though I had indicated by email few weeks back that I am willing to extend, will that be a issue. Also all correspondence has been by email than written letters. Should I let the property manager sort this out including letting them know I am not renewing the lease.
Thanks
If the rent is below market currently. Increase the rent to market or however much you are allowed too. The issue might take care of itself. If its already close to market, then don't renew.
- 10yChristian HansenPro MemberRental Property Investor · Cary, NC · Member since 2014 · 120 posts · 89 votes
Hi, @Sunny D.
This is a common issue, some tenants are "problem tenants" often they pay rent on time but are constant headache producers, they feel entitled to all kinds of stuff because they paid. They complain about maintenance issues and then are never available to schedule the repair and always find something to complain about afterwards.
I always use the lease and what it allows us to do, that is almost always an inspection with proper notice. Tell PM to do that, fix what you legally have to fix and don't renew the lease and collect all the documentation just in case. If they want to sue you, you can't really stop them. I find many like to waive that flag because it gets people nervous and can get them some attention. At the end of the day if the PM. has done their job, the tenant will lose in court or more likely realize beforehand they don't have a case. Not sure about Cali but typically it costs something to file a suit which often that deters them when they realize it's not free.
Don't let them stress you out, move on and up!
- Real Estate Professional · Palm Coast, FL · Member since 2016 · 19 posts · 8 votes10y
What a great discussion...another reason it is good to be a member of DP. It is always good to check state laws as we live in a litigious society and, to be honest, you just can not be to careful. I have a article that will be in the Feb. issue of Florida Rising called "How Not to Be Sued" will be happy to pass on some tips to any one interested
Sandy
- Fair Oaks, CA · Member since 2014 · 34 posts · 12 votes10ySunny, You can Enter the property to do an inspection even if the tenant is not home, as long as you write at least a 24hour notice. You might also want to email them and text them the notice as well. In Dale Carnegie "How to win friends and influence people" it's about taking the softer approach to in-turn get what you want. Start out by thanking them for there concerns and criticisms by making you aware then genuinely telling them what makes them a good tenant and characteristics you admire, after that tell them why this arrangement will be mutually beneficial. The PM has systems in place to make collecting rent and taking maintenance requests easier and more efficient. I would also fix any maintenance issues prior to the property management taking over. If you clench your fists and come out swinging, they will do the same.
- Roseville, CA · Member since 2014 · 50 posts · 55 votes10y
Sunny,
Make sure to take a hard look at where the rent on your place is vs the market right now. Folsom is ALWAYS a hot market, the presence of great schools, Intel and the 50 business corridor makes it one of the most sought after zip codes in the area. A lease end in February is pretty good timing as well to get a nice home in nice neighborhood on the market for a Spring lease.
I don't want to minimize the potential expenses associated with a turnover, there are going to be costs with cleaning potentially paint, etc, but the product you are offering is very desirable and likely worth more than you think. Don't be afraid to at least look at what you would see in increased rent.
Good luck
- Rental Property Investor · SF Bay Area, CA · Member since 2015 · 206 posts · 156 votes10y
I agree with @John Santero's tip about scheduling a transition meeting. If the tenant is a good long-term tenant (pays on time, etc.) but has a bit of a difficult personality, it may be worth the extra effort to have the meeting. Also, maybe you need a property manager who is capable of handling more difficult personalities (with less rudeness)?
- Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes10y
You have a problem with serving notice of non-renewal - - you've waited too late for a lease expiring on Feb 1,'16. For a long term tenant, you need 60 day notice and you'll need to serve it certified. The lease can lapse into auto renewal. Service notice immediately and set the date as April 1; be sure to discuss with the new PM first.
- 10ySunny D.Pleasanton, CA · Member since 2015 · 246 posts · 115 votesOP
Just a quick update. Thanks for all the info.
We served a 60 day notice and tenant has agreed to vacate. The tenant is cooperating a lot with the property management company since then and is going to schedule a home inspection which they were stalling on.
I hope to increase the rent by $100 based on market trends and offset some of the costs from turnover and using a PM company.
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