At the beginning of the month I reached out to my management company to see if they had a renewal plan for our current tenants (They are set to renew/move out at the start of May). I received a response the next day that they had already sent them a renewal offer of:
12 Months @ $1599 - which is no increase in rent
18 Months @ $1599
or Month to Month @ $1629.
I followed up and mentioned that I wanted to increase rent about $50 (~3%) minimum. If they were to move out I'd then like to increase rent a considerably amount more since the market rent in this area has grown.
I sent a follow up on the 7th to no response and today received a response as well as a signed renewal agreement that included no rental increase for 12 months.
My question is this: Is it still possible to increase the rent now that they have signed a renewal agreement and should I still try to do so? Also, how do you deal with the management company who ignored my requests until it was to late? They have been starting to lack in the response time area lately but otherwise have made this a hands off passive income property.
Once the contract is in place, I don't see how you could change it (though I'm no expert)
I know if my PM ghosted me for more than 48 hours (or any vendor) I would FIRE them unceremoniously. You must manage your manager, otherwise they will run things how they want. The rent increase is $50 for you, but only $5 for them so their incentive to go get that increase is zilch. That said, if you keep your foot in their *** 24/7 then they will have a different incentive ;)
EXPECT WHAT YOU ACCEPT
when you don't get an answer back for 7 days, you must make it painful for them. O, you can expect this behavior to continue.
You are bound to the lease as signed. You will likely have to give a significant increase next year to bring the tenants to market. You may have a turn over or you may not. Your PM took it upon themselves to shaft you for their benefit.
For the time being your first step is to give notice to your PM terminating their contract. Today if possible but tomorrow will suffice. Any PM that does not reach out to their client prior to offering a tenant a lease is running wild. You definatly do not want them on your team if they are of the opinion that they are in charge and not you.
Thank you both for your insight. This is our first rental property so we are new to what all to expect/demand from a property management. I understand what you are saying about holding them accountable and expecting what you accept.
My only concern about firing them right now is that we don't have infrastructure in place for someone to take over. I could do it in the interim but what all does that require? I could get an umbrella policy quick enough but I don't have an LLC set up. What happens to the lease agreement? They are listed as our representative on the current lease, so would that become void? Do I need to make an addendum or something that has me taking over as the landlord? We don't have any contract set up with the management company so we aren't bound to anything with them. Its more of, how to make the transition in the middle of a lease.
Thanks again for the input!
John since you're new it might not be in your best interest to fire them. what I really think you should do is invest some of your time managing your relationship with the property manager.
If you fire them, you're going to have to hope the next one is better. Instead, practice getting better on the one you have now.
A weekly phone call/email is nothing, and it lets them know you're staying on top of them. I would also tell them that this situation that just occurred (you proactively strategizing on rent prices before renewal, and them subsequently ignoring you) is never ever ever going to happen again. Also, before you do switch to a different PM you should take the time to vet and interview a few others. Don't take a blind switch, make a calculated strategic move.
Your house is occupied and paying, that's 90% of the game. Don't let my rantings make you think things are that bad, it's just the way I talk LOL
@John Milius I always love reading the posts where the PM is the devil, they don't know what they are doing, you should fire them asap, etc....sad. If people just took the time to read with clarity and not jump to conclusions. John, you stated that by the time you contacted the PM they had already sent out a renewal offer to the tenants. you then followed up asking to change what had already been sent out which is not the way it works. I certainly believe PM's should be getting rent increases every year but that's just me. In this case if you wanted a specific rent increase you should have said so far in advance of the renewal. The PM did not "shaft" you, they did their job and got you the most important thing, a renewing tenant who will stay and keep paying. Them not being responsive is another problem and should absolutely be addressed with the broker/owner of the company.
From your comments you definitely do not need to be managing this yourself but think twice before letting others convince you that the PM is the root of all your problems.
To answer your questions:
Leases run with the land meaning the same lease stays in effect no matter whose name is listed as the landlord between management transfers or even a sale. The lease doesn't terminate when someone new takes over.
Having an umbrella insurance policy has zero bearing on managing property. Hell, the PM probably doesn't have an umbrella.
Having an LLC setup has zero bearing as well although you should NEVER own property in your personal name in my opinion.
Anyway good luck.
"The PM did not "shaft" you, they did their job"
A PMs first responsibility is to represent their client. By not contacting their client in advance of offering a new lease to a tenant they overstepped their authority, they shafted their client. It is not their job to determine want is in a tenants lease agreement especially in regards to rental rates. They may advise, they may not initiate without authorisation of their client. There is no other way to view the actions on the part of this PM other than taking care of themselves. This is inexcusable on the part of the PM.
Thanks all for your input. I've reached out to the broker and let them know that in the future I am to be contacted prior to any financial decisions/ price increases. I've also addressed the lack of response.
Like I mentioned, I'm new to the whole rental property thing as this wasn't originally intended for this purpose (I used to live there and moved out of state for awhile). However, it is cash flowing and would like to keep it that way :). Also, I'm hoping to obtain some more properties in the future as I learn more about this community and will definitely do better in interviewing property managers in the future!
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