Property Manager Not raising rents as requested
Flipper/Rehabber · Columbia, MO · Member since 2016 · 27 posts · 31 votes
Property Manager Not raising rents as requested
Most Popular Reply
Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
7y@Scott Houin, this can be a tricky situation, especially not knowing the condition and details of your property and tenants.
I am curious, are management fees based on rent collected or expected?
- If collected, then they would have an invested interest to raise rents which makes their decision more validated.
- If expected, there is no invested interested and your frustrations are definitely more validated.
Make sure you understand your management agreement. Here are some considerations:
- Termination Clause: Is there a fee for termination? They just signed a 12-month lease and some terms state you owe the management firm all their fees even if terminated. So you're forking up that 8-10% of AGI to end the relationship. Plus the additional 8-10% you will pay another firm for the rest of this year
- Lease Renewals: Confirm if there is language stating the owner's request for rental increases and the responsibilities the management company must take. If it specifically calls out this situation, they could be in breach of contract.
- Breach of Contract: What notifications must you give the management firm if they breach or are in breach of their contract? This might be your exit without paying fees. However, you'll need to follow contractual terms which might require written notifications and an opportunity to recuperate.
I think the most important suggestion and considers are :
- Besides this, how happy have you been?: Finding a property manager can be difficult, especially if your property is not highly desirable class. If everything has been great up until this, can you get over this mishaps?
- Can you negotiate?: Consider a conversation with the broker and state that you have been happy with their service, if true, but this really bothers you. If you've been happy, give them the chance to correct it. While not ideal it ever occurred, perhaps they waive their renewal fees so you recuperate some of the lost revenue.
- What will it cost to get a new management firm?: This is not just monetarily, but time and stress. If this is the first hiccup, be reasonable and realistic that you might strike out on another 2-3 PM's before you find another great firm. Plus the time it takes to find a new property manager. Trust me, we work with landlords and finding the perfect property manager can take time! Interviews, comparing rates, reviewing their agreements, etc. That time adds up.
- How much it'll cost for new management?: I indicated earlier in this post that you might be on the hook for termination fees. Plus potential legal fees if that gets messy! Or legal fees for reviewing the new PM management agreements.
If their service has not been bad and this is their first mishaps, be reasonable and give them the opportunity to correct it. Plus it might show their true colors; good or bad. Even if you do decide to get a new property management company, it might make more financial sense to wait for the current management agreement to end so you avoid the termination fees.
If the frustration is so severe that you don't mind paying all the extra fees and costs associated with it, then find a new one and move on. Make sure this 'situation' is addressed in your interviews and, more importantly, called out clearly in the new management agreement to better protect yourself.
96 Replies
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Aaron Hunt:
@Jay Hinrichs
I don’t even really raise on my Class As, except in case of vacancy.
The appreciation and zero headache tenant is key for me. I have a rockstar PM team, and they are always confused when I say I’ll take care of minor stuff. Yet, they love working with me. They make my life incredibly easier being a very remote landlord, and I make their life easier by not being Scrooge to our tenants.
An extra $1200/yr in my pocket isn’t gonna do squat, when that same person is paying down my mortgages at $4k/yr and the property is appreciating at 6-10%/year.
I bought 12 200k SFR s in Mississippi post Katrina for the go zone tax bene's that worked very well at the time. they were zero cash flow but all brand new A class.. I never raised rents and virtually never did maintenance when tenant moved out very little work as those folks lived like A class tenants do clean and neat. some dog issues but that's OK.. I also had the builder put in scored concrete floors in all but bedrooms that helps.. I never rasied rents.. and frankly the rents never went up or down even when people left over the course of 12 or so years owning them.. I has since sold them all as I liquidated all my rentals.. And being A class 4 of them were sold to tenants without having to touch them or pay ANY fee's.. its a great way to exit rentals.. Recapture not so much fun.. but at the time it saved me close to a million dollars in income tax. so I made the money on these on the front end.. and just sold them off for what I had in them .
Given the White collar tenants the only thing I did was hire a Real estate broker to place the tenant.. and I had a handy man for little things. so did not need PM.. my secretary handled the HOney do calls.. And when I travelled to Madison MS on other business I would do drive bys stop knock on the door say high that kind of thing.. one of the tenants was there the entire 12 years then bought it.. just does not get any better than that.
short of buying on the west coast in 2009 and your property tripled.. LOL that's better of course.. but for mid west rentals I liked that play limited drama .. and made a ton of money on the go zone tax benes.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Thomas S.:
There are two types of income investment property owners. Those that base their investment on maximising income and will automatically increase rents annually, knowing that expenses rise constantly, and are pro active in management.
The second type place the value of their investment completely on owning the property not on the income. For them the goal is primarily to cover the costs and keep management to the bare minimum. The very idea of a tenant turn over is paralyzing and for that reason will avoid anything they think might trigger a move.
Cost of turn over is the excuse, the reason is to avoid having to manage their investment.
Thomas what your missing is the markets that these homes generally in.. this is not Canada.. this is areas that have tons of rentals. And the tenants by and large have lots of options.. and on top of that a vacant home is a major target.. .. your properties I bet don't have those risk factors and therefore your experience and how you manage them can be that way.. when your managing what as I say 90s of these US folks that buy rentals have.. you have other issues that are very real.. and that makes keeping a tenant in the home as long as possible in the long run the most profitable and in the short run.. keeps you from having a major wipe out.
- Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes7y
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
- Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes7y
@Scott Houin Time for them to go.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Nik Moushon:
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
the issue is a busy PM with thousands of units is not going to have the time to have a discussion over 25 dollar rent increase with one owner that has 2 or 4 units with them.. Jims point is if you want that kind of one on one you need a small shop..
- Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes7y
@Scott Houin, sounds like you know the decision you want to make. You've had additional issues with the property manager that upset you. Time to move on.
How you move on is the better question.
First, admit to yourself this is a risk vs. reward situation.
- What if you get a worse PM?
- What if you have to get a more expensive PM?
If it's worse the risk, now consider the actual costs.
- Fire immediately: Termination fees and set up fees for new PM
- End of Contract: New set up fees.
How much value is there for you to fire immediately or wait for contract? Figure out your plan of action before you suggest anything to the management company. Last thing you want is inform them months before that you will not be renewing.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
Originally posted by @Jay Hinrichs:
@James Wise the one man shops are were you risk losing all your RENT :) when they walk off with all the rent proceeds and don't think it does not happen.
Also in the past 10 years with small time SFR rentals being Soup De Jur have to be mindful of competition.. Jay just bought a home on your street and did a 20k remodel on it its spotless and fresh.. and your rental has been lived in for a few years and well you see pictures JIm puts up about how tenants treat their places.. you simply run the risk of your tenants moving into a brand new remodel.. and now you have to do a turn over to compete. I don't know the competition there but its real in many markets.. and tenants at those dollar amounts think of nothing to move they don't have a lot of possessions generally and can move in a matter of hours.. you have to take that all into consideration.
^^^ Exactly. People look on Zillow and see properties renting for more money, but forget that their property has been lived in for years by a tenant. It isn't freshly painted with new flooring and appliances. So they raise rents to "market" rent the tenant says, "well if I am paying market then I might as well shop around for something more updated". Tenant leaves and not only do you have vacancy, but you have light rehab costs to get your property looking as nice as the competition. So your rents go up but it takes you two years to break even on the turnover expense.
As far as this particular situation, it is not good that the property manager acknowledged the rent increase request and didn't follow through. Best case they are disorganized, worst case they are disrespectful. If they had objection to the rent increase, they should have voiced it before communicating no increase. They made a mistake and now they are trying to cover it up by saying, the market can't handle the increase.
I am not going to tell you to fire them, because there is much more that goes into a decision that big. Such as how are they overall besides this mistake? Are there better options in your market? Tough decision, but either way you need a sit down meeting with the owner to clear this up going forward.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Joe Splitrock:
Originally posted by @Jay Hinrichs:
@James Wise the one man shops are were you risk losing all your RENT :) when they walk off with all the rent proceeds and don't think it does not happen.
Also in the past 10 years with small time SFR rentals being Soup De Jur have to be mindful of competition.. Jay just bought a home on your street and did a 20k remodel on it its spotless and fresh.. and your rental has been lived in for a few years and well you see pictures JIm puts up about how tenants treat their places.. you simply run the risk of your tenants moving into a brand new remodel.. and now you have to do a turn over to compete. I don't know the competition there but its real in many markets.. and tenants at those dollar amounts think of nothing to move they don't have a lot of possessions generally and can move in a matter of hours.. you have to take that all into consideration.
^^^ Exactly. People look on Zillow and see properties renting for more money, but forget that their property has been lived in for years by a tenant. It isn't freshly painted with new flooring and appliances. So they raise rents to "market" rent the tenant says, "well if I am paying market then I might as well shop around for something more updated". Tenant leaves and not only do you have vacancy, but you have light rehab costs to get your property looking as nice as the competition. So your rents go up but it takes you two years to break even on the turnover expense.
As far as this particular situation, it is not good that the property manager acknowledged the rent increase request and didn't follow through. Best case they are disorganized, worst case they are disrespectful. If they had objection to the rent increase, they should have voiced it before communicating no increase. They made a mistake and now they are trying to cover it up by saying, the market can't handle the increase.
I am not going to tell you to fire them, because there is much more that goes into a decision that big. Such as how are they overall besides this mistake? Are there better options in your market? Tough decision, but either way you need a sit down meeting with the owner to clear this up going forward.
IF and I guess that's a big IF if these are normal C class Ohio rentals.. changing managers will also generally cost U money.. and confusion.. tenants in these assets don't like change once you get them paying leave them alone ..
- Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes7y
C class is hard enough getting everyone to pay their rent, and on time. We have actually lowered rents to keep good tenants, when they have said they are looking elsewhere to save a few bucks. $25 increase isn’t worth it to me to lose a good tenant, unless they have been there a few years and at that point they understand insurance/taxes/utilities increase. And after a few years at same rate, they know they are under paying. But ordinarily, we don’t raise rents either.
- Rental Property Investor · NY · Member since 2018 · 571 posts · 332 votes7y
@Jay Hinrichs very wise comments. thanks for these, i just read through the thread but your comments are very helpful. I know i would have tried to raise rent every year so it was an eye opener!!
- Member since 2019 · 1 post · 0 votes7y
I started in the rental business full-time about three years ago. I had a property manager at the beginning but found out that they were not doing much work at all. I would always get my rent money for my rentals in the middle of the month. And I had to do all the work myself anyways so after the first year I stopped with a property manager and now do my own property management and all is going well. Now I only have three properties so it's not that bad, I am planning on doing more, I will have to see how that goes.
- Member since 2019 · 1 post · 0 votes7y
Aaron ... I agree with you wholeheartedly. I have always said to my tenant, I will never raise the rent. I kept one house for 12 years, same tenant. I have another house for several years, same tenant. People will be loyal and good to you if you do the same to them. My take on rentals is that you are renting to people and to me people come first. I have worked with a tenant they came on hard times and the PM company wanted to evict her, I said no. Let's work with her. She was forever grateful. IT'S ABOUT PEOPLE.
My problem is I cant' raise the rent, because no one leaves !!!! LOL ... yes, and that's a good thing.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Jay Hinrichs:
@James Wise the one man shops are were you risk losing all your RENT :) when they walk off with all the rent proceeds and don't think it does not happen.
Also in the past 10 years with small time SFR rentals being Soup De Jur have to be mindful of competition.. Jay just bought a home on your street and did a 20k remodel on it its spotless and fresh.. and your rental has been lived in for a few years and well you see pictures JIm puts up about how tenants treat their places.. you simply run the risk of your tenants moving into a brand new remodel.. and now you have to do a turn over to compete. I don't know the competition there but its real in many markets.. and tenants at those dollar amounts think of nothing to move they don't have a lot of possessions generally and can move in a matter of hours.. you have to take that all into consideration.
Oh absolutely. I've written many posts on Big Property Management company vs Small one man shop. One of the many risks with the one man shop is theft like you mention. Beyond that a more common risk is that they simply close up shop one day. Property Management only makes money when you scale it to a huge monster like I've done. So all the one man shops are either newbies, Realtors who aren't making enough money in their sales businesses or those who've failed out of the sales business. Couple that with the fact that they are getting beat down daily by overbearing owners it can be a recipe for disaster. However a super hands on owner like this isn't going to listen to anyone. They've gotta go through a few one man shops before they come around or work out their systems & develop their own mini management company so to speak.
To be honest I get a nice chunk of business selling properties for super hands on guys who've used large Management companies like mine didn't like the lack of control & thought they could do it better on their own via one man Realtors that they could beat down until they've had to replace them with another fresh face ready for the savagery. Owner goes on this merry go round for a few years until they come back to me & I sell them. Lol I probably bring in $200k-$300k per year off of this alone.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Scott Houin:
I'm don't want to manage the properties myself that I know for sure. I also agree that they probably have a better grasp on the market overall. However, just because I want to be passive doesn't mean I don't want to be communicated with. This is not a situation where i called them up once and asked them to raise rates. I actually reached out to them initially asking their thoughts on us raising rates.(over 6 months ago) They didn't mention any concern about vacancy or market rates. At that point i confirmed with them that we will be raising rates. They responded with "Sure no problem we will do that" I also sent them a reminder email 1 month before each lease renewal.
MORE INFO: This isn't the only issue we have had with them. We have had several issue with accounting and there numbers not adding up. They have made some unauthorized repairs which have cost me more then what was needed. They also have my property marketed incorrectly online. They have even paid me as much as 2 weeks late then per contract.
I would prefer my investments to be mostly passive, but i also don't want to be taken advantage of. I don't own a lot of properties so maybe that's why. Is it totally unreasonable of me to expect communication on these issues? Is this normal behavior from PM's and something I will just have to deal with or should I expect more from them?
It's hard to say with the limited amount of info.
Accounting issue - These things do happen. Is this a frequent thing or was it a 1 off that was corrected?
Late Disbursement - This is a pretty big deal. That is something that shouldn't be happening. What is their payment schedule? IE when do they disburse as per the contract?
Rent increase - You've got 4 tenants who have all renewed. If you did all that sounds like maybe they dropped the ball or again maybe they didn't & they thought it'd be a bad move for you. They make more money if you have a turnover. You make more money if there isn't a turnover. From that alone it doesn't look like they are out to get you. I will say this 4 units that all have multi year tenants right now isn't a bad position to be in. I wouldn't be loosing sleep over this. I assure you that there will be bigger problems in your rental business than this. Really tough to say if you'll end up happier or worse off with the next company. You do seem to be more concerned with the small stuff than you should be. To be very successful in this business you need to be a big picture guy. Small picture guys stress to much over nickles. Too many variables in the industry for small picture guys.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Michinori Kaneko:
@Jay Hinrichs very wise comments. thanks for these, i just read through the thread but your comments are very helpful. I know i would have tried to raise rent every year so it was an eye opener!!
Peaple have gotta watch out for who you're taking advice from around here man. Guys like Jay & myself we've been in the game, dealt with 1,000's of situations. Then you've got other folks coming on here like
- FIRE THE PM
- BURN THEM AT THE STAKE
- YOUR THE OWNER YOU MAKE THE RULES
Dude ya'll need to chill out. Some of you are living on fantasy island. This is real life not the latest book you've read about how to manage your property manager. It's a tough business & you aren't getting anywhere without being able to adapt to less than perfect situations. If you are a person who is freaking out about pennies this business is going to eat you alive. You've gotta be a big picture guy. You can't just go around loosing your mind & thinking every Property Management company is out to get you.........They aren't. Way to much anti Property Manager mumbo jumbo on these forums. Not a good mantra for success if you ask me, but hey what do I know all I've done is build a $50M portfolio from scratch.
- Rental Property Investor · NY · Member since 2018 · 571 posts · 332 votes7y
@James Wise agreed. when i initially read those first few comments I was like yeah I see the point, but then when i read Jay's comment about suffering vacancy over $25 a month... well that's only $300 in a year... not to mention there are costs that you incur even while the property is vacant. After reading that, I texted my PM and asked if one of the property that is vacant is too high in listed rent. Might as well have cashflow over vacant property with "potential" higher rent!
- Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
the issue is a busy PM with thousands of units is not going to have the time to have a discussion over 25 dollar rent increase with one owner that has 2 or 4 units with them.. Jims point is if you want that kind of one on one you need a small shop..
I get the busy PM side. This being a small change and not really worth the effort. But that doesnt excuse that a professional company who, as one of their task that they get paid for, is to follow through on the requests made by the owner. It shouldnt matter how small or large of a request it is or if its a waste of time or not. Its their obligation to do what the owner has requested. Now if they want to make contact with the owner and try to show them that its a waste of time, both for the PM and the owner, then by all means they should do that. But if the owner insists that they do that rent increase do they not have a contractual obligation to do so? This is what I can't understand is why they would flat out not do what was asked of them and is in the contract to do so (unless there something in the contract that say otherwise of course). Its just bad business to refuse to do what the owner has request and not follow through with any type of response as to why they shouldn't or wont.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Nik Moushon:
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
the issue is a busy PM with thousands of units is not going to have the time to have a discussion over 25 dollar rent increase with one owner that has 2 or 4 units with them.. Jims point is if you want that kind of one on one you need a small shop..
I get the busy PM side. This being a small change and not really worth the effort. But that doesnt excuse that a professional company who, as one of their task that they get paid for, is to follow through on the requests made by the owner. It shouldnt matter how small or large of a request it is or if its a waste of time or not. Its their obligation to do what the owner has requested. Now if they want to make contact with the owner and try to show them that its a waste of time, both for the PM and the owner, then by all means they should do that. But if the owner insists that they do that rent increase do they not have a contractual obligation to do so? This is what I can't understand is why they would flat out not do what was asked of them and is in the contract to do so (unless there something in the contract that say otherwise of course). Its just bad business to refuse to do what the owner has request and not follow through with any type of response as to why they shouldn't or wont.
Actually the vast majority of property management contracts specifically state that the Property Manager & not the owner has the say over the rent that is to be charged.......This is what I am saying. Too many people don't know this stuff & are rushing to harsh & unproductive judgments before they really understand the business we are talking about.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Michinori Kaneko:
@James Wise agreed. when i initially read those first few comments I was like yeah I see the point, but then when i read Jay's comment about suffering vacancy over $25 a month... well that's only $300 in a year... not to mention there are costs that you incur even while the property is vacant. After reading that, I texted my PM and asked if one of the property that is vacant is too high in listed rent. Might as well have cashflow over vacant property with "potential" higher rent!
I like it....You sound like you've got a good head on your shoulders.
- Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes7y
Originally posted by @James Wise:
Originally posted by @Nik Moushon:
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
the issue is a busy PM with thousands of units is not going to have the time to have a discussion over 25 dollar rent increase with one owner that has 2 or 4 units with them.. Jims point is if you want that kind of one on one you need a small shop..
I get the busy PM side. This being a small change and not really worth the effort. But that doesnt excuse that a professional company who, as one of their task that they get paid for, is to follow through on the requests made by the owner. It shouldnt matter how small or large of a request it is or if its a waste of time or not. Its their obligation to do what the owner has requested. Now if they want to make contact with the owner and try to show them that its a waste of time, both for the PM and the owner, then by all means they should do that. But if the owner insists that they do that rent increase do they not have a contractual obligation to do so? This is what I can't understand is why they would flat out not do what was asked of them and is in the contract to do so (unless there something in the contract that say otherwise of course). Its just bad business to refuse to do what the owner has request and not follow through with any type of response as to why they shouldn't or wont.
Actually the vast majority of property management contracts specifically state that the Property Manager & not the owner has the say over the rent that is to be charged.......This is what I am saying. Too many people don't know this stuff & are rushing to harsh & unproductive judgments before they really understand the business we are talking about.
Thank you James. I dont have the experience with PMs so thats why I am asking. Not trying to argue for or against anything here. Just seeking clarification and more knowledge.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Nik Moushon:
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
the issue is a busy PM with thousands of units is not going to have the time to have a discussion over 25 dollar rent increase with one owner that has 2 or 4 units with them.. Jims point is if you want that kind of one on one you need a small shop..
I get the busy PM side. This being a small change and not really worth the effort. But that doesnt excuse that a professional company who, as one of their task that they get paid for, is to follow through on the requests made by the owner. It shouldnt matter how small or large of a request it is or if its a waste of time or not. Its their obligation to do what the owner has requested. Now if they want to make contact with the owner and try to show them that its a waste of time, both for the PM and the owner, then by all means they should do that. But if the owner insists that they do that rent increase do they not have a contractual obligation to do so? This is what I can't understand is why they would flat out not do what was asked of them and is in the contract to do so (unless there something in the contract that say otherwise of course). Its just bad business to refuse to do what the owner has request and not follow through with any type of response as to why they shouldn't or wont.
Nick not sure if you own rentals that are managed by 3rd party manager or not.. but keep in mind virtually anyone of them with any kind of business at all are free to make any decisions on the properties up to a dollar amount ( talking repairs and such) that's usually 300 to 500.. too many little things happen with these houses you can realistically talk to owners about all the little day to day.. you have to just trust they are doing the best for you.. just like getting 3 bids who has the time to marshal 3 bids for a 700 dollar job.. the top PMs that I know make the owner keep 2k in their escrow account.. and allow for 500.00 in unilateral decisions.. once 2k gets lower they have to fill the tank back up.. the PM's that don't require any kind of slush money end up in bad positions when owners refuse to reimburse and they they go down the tubes.. seen it happen a lot of times many times in fact.
- Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
the issue is a busy PM with thousands of units is not going to have the time to have a discussion over 25 dollar rent increase with one owner that has 2 or 4 units with them.. Jims point is if you want that kind of one on one you need a small shop..
I get the busy PM side. This being a small change and not really worth the effort. But that doesnt excuse that a professional company who, as one of their task that they get paid for, is to follow through on the requests made by the owner. It shouldnt matter how small or large of a request it is or if its a waste of time or not. Its their obligation to do what the owner has requested. Now if they want to make contact with the owner and try to show them that its a waste of time, both for the PM and the owner, then by all means they should do that. But if the owner insists that they do that rent increase do they not have a contractual obligation to do so? This is what I can't understand is why they would flat out not do what was asked of them and is in the contract to do so (unless there something in the contract that say otherwise of course). Its just bad business to refuse to do what the owner has request and not follow through with any type of response as to why they shouldn't or wont.
Nick not sure if you own rentals that are managed by 3rd party manager or not.. but keep in mind virtually anyone of them with any kind of business at all are free to make any decisions on the properties up to a dollar amount ( talking repairs and such) that's usually 300 to 500.. too many little things happen with these houses you can realistically talk to owners about all the little day to day.. you have to just trust they are doing the best for you.. just like getting 3 bids who has the time to marshal 3 bids for a 700 dollar job.. the top PMs that I know make the owner keep 2k in their escrow account.. and allow for 500.00 in unilateral decisions.. once 2k gets lower they have to fill the tank back up.. the PM's that don't require any kind of slush money end up in bad positions when owners refuse to reimburse and they they go down the tubes.. seen it happen a lot of times many times in fact.
I dont do use and have never used a PM service and dont plan to anytime in the near future, but never say never. So I was trying to get a more clear picture as to why exactly they did what they did. I wasn't trying to argue against them or support everyone screaming FIRE THEM! Sorry if it came across that way. I knew most PM were allowed to make decisions on small dollar amount repairs and such but not that the same thing applied to the rents. Thanks for taking to to explain.
- Raleigh, NC · Member since 2017 · 347 posts · 94 votes7y
@Jay Hinrichs I agree with raising rents just for the sake of raising them doesn't make much sense with the risk of vacancy. But if your place is $100-200 under market,. Raising it $25 or whatever each year makes sense because either they stay and you don't have the vacancy. Or they leave, and you list it at market rent
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Nik Moushon:
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
Originally posted by @Jay Hinrichs:
Originally posted by @Nik Moushon:
I couldn't agree more with @Jay Hinrichs and @James Wise. The cost isnt nearly worth the effort. Just the phone call to the lawyer is going to cost you what you lost in rents. But lets take the potential loss in rent from turnovers out of the equation for a sec and consider just the fact that the management company purposefully did not follow the owners written request. How do you handle this? Is this something that you go in a have a serious one-on-one with the owner/manager of the company and try and find out why? Because at the end of the day, whether the rent raise is justified or not, whether the owner or the PM end up being right, is irrelevant and the owner gets to decide what should be done with the property not the PM. The PM should be giving advice and suggestions for the owners best interests but regardless of what the owner decides to do they need to follow the owners decision. It might be only $25/m now but what happens when its $100/m or a request for a repair or something else? Is the PM going to do what THEY think should be done or do what the owners says to do?
I'm not trying to argue one way or another here. Its an honest question.
the issue is a busy PM with thousands of units is not going to have the time to have a discussion over 25 dollar rent increase with one owner that has 2 or 4 units with them.. Jims point is if you want that kind of one on one you need a small shop..
I get the busy PM side. This being a small change and not really worth the effort. But that doesnt excuse that a professional company who, as one of their task that they get paid for, is to follow through on the requests made by the owner. It shouldnt matter how small or large of a request it is or if its a waste of time or not. Its their obligation to do what the owner has requested. Now if they want to make contact with the owner and try to show them that its a waste of time, both for the PM and the owner, then by all means they should do that. But if the owner insists that they do that rent increase do they not have a contractual obligation to do so? This is what I can't understand is why they would flat out not do what was asked of them and is in the contract to do so (unless there something in the contract that say otherwise of course). Its just bad business to refuse to do what the owner has request and not follow through with any type of response as to why they shouldn't or wont.
Nick not sure if you own rentals that are managed by 3rd party manager or not.. but keep in mind virtually anyone of them with any kind of business at all are free to make any decisions on the properties up to a dollar amount ( talking repairs and such) that's usually 300 to 500.. too many little things happen with these houses you can realistically talk to owners about all the little day to day.. you have to just trust they are doing the best for you.. just like getting 3 bids who has the time to marshal 3 bids for a 700 dollar job.. the top PMs that I know make the owner keep 2k in their escrow account.. and allow for 500.00 in unilateral decisions.. once 2k gets lower they have to fill the tank back up.. the PM's that don't require any kind of slush money end up in bad positions when owners refuse to reimburse and they they go down the tubes.. seen it happen a lot of times many times in fact.
I dont do use and have never used a PM service and dont plan to anytime in the near future, but never say never. So I was trying to get a more clear picture as to why exactly they did what they did. I wasn't trying to argue against them or support everyone screaming FIRE THEM! Sorry if it came across that way. I knew most PM were allowed to make decisions on small dollar amount repairs and such but not that the same thing applied to the rents. Thanks for taking to to explain.
It's all about learning dawg. All good. I think we've got some pretty educational content out on the web with this conversation.
I wounder if the general Anti PM, Anti Landlord, Anti this or that rhetoric that we see is why we don't have more seasoned Professionals posting on the forums more often.........Thoughts on this Jay?
Join the conversationCreate a free account to reply, vote on answers and follow this thread.