I live in California and own some properties in Texas. I hear a lot of people talking up out of state investments. I'm sure it works for many folks, but I'll give a counter-point here.
I have a highly vetted, and highly recommended property manager for a property in Katy, Texas. I got the email below from him on March 26th, 21 days after the rent due date (rent is officially late after the 5th). I would say his answer sounds reasonable, but there is no way I would wait 21 days myself to verify whether the tenant had left the apartment. They also had called and emailed the tenant and not gotten any response, so they had a heads-up that something was wrong.
My obvious point is this: a property manager will not care nearly as much as an owner about maximizing the rent and ensuring minimal rent losses from from move-outs and skipped tenants. Lesson learned: put in writing ahead of time to my property managers that I want to be notified whenever a tenant is more than 5-days late on rent. Or, get in writing their policy for how they handle late payments, and if I don't agree then request an alternative that meets my needs.
Here is the email from my soon to be former property manager:
As you know, the tenants did not pay the rent for March on or before March 3rd. On Monday March 5th, they were mailed the Statutory Demand Notice For Non Payment Of Rent. We waited the required three days, with no rent received, prior sending them to the Eviction Attorney to File For Eviction. The Attorney mailed the Notice on March 20th, that he was Filing an Eviction for Non- Payment of Rent. Once we were notified the attorney sent his notice, we scheduled an inspection for today 3/26/18 to verify if the tenant was still in possession. The Tenant had Skipped. The Attorney was notified of the skipped tenant and waived his fees as he didn’t have to appear in court.
We have been using this method for Filing Evictions for about two years and have found it to be very successful in getting past due rent collected. We seldom have to evict tenants anymore. In fact , we have not had an eviction since last summer. What normally happens is the tenant comes to the office very quickly with Certified Funds when they receive the Attorney’s Letter.
The tenant that skipped on their lease for your property already have their delinquent history reported to Experian – we automatically upload tenant ledgers to Experian every night. Any delinquent rent show on the tenants Credit Reports. Tenants that pay on time get Positive Reviews on their credit reports.
In addition, these tenants will be sent to a collection agency if they do not pay the balance due which includes the past due and remaining rent due on their lease.
Please contact me should you have any additional questions. Thank you so much."
Of course this is frustrating - but doesn't seem that unreasonable for a PM. No service provider for anything will ever treat your stuff as you would. If they checked on every property or spooled up the attorneys at the earliest possible second every time you'd spend more in fees than you would for the occasional delay you described.
What's the plan if you fire these guys? Are you sure there are better options out there?
This doesn't seem so bad compared to lots of PM horror stories on here. Learning of a skip 20 days after a hands-on PM (you) would is just an apathy cost of OOS investing. Next apathy fee will come in the form of a slower turnover than you would do if in your backyard.
PMs run 14-18% per year counting apathy fees, fill fees and higher costs of work done. Know that going in so you can account for it in your rental analysis!
@Steve Vaughan Good Point! I did my underwriting at the actual property management fee of 8% plus 5% for vacancies. Moving forward I like the idea of adding some "apathy" percentage points the management cost. I think an additional 5% cost is reasonable.
@Ori Skloot , yes, you learned a lesson. But, who's to say that even after you "put in writing ahead of time to my property managers that I want to be notified whenever a tenant is more than 5-days late on rent. Or, get in writing their policy for how they handle late payments, and if I don't agree then request an alternative that meets my needs", that your current PM won't still be the best person for the job? Remember, it was you who needed the lesson!
And after all, you'll still need a local-to-the-property PM, so your thread title is pointless. Cheers...
@Ori Skloot I am curious to know which Property Manager you had this experience with. Can you Direct Message me and let me know?
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