HELP! Dealing with PM and Tenants that abuse maintenance calls
NEWPORT BEACH, CA · Member since 2018 · 9 posts · 6 votes
HELP! Dealing with PM and Tenants that abuse maintenance calls
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y@Dimitri Wilson most of these look like valid complaints on the surface: lost water, no heat, frozen water pipes, water damage in the bedroom, toilet leaking, etc.
I just took over management of 24 units that the owner was "managing" on his own. He's constantly complaining that he can't afford the vendors I'm sending over but I'm sending them over to deal with water leaking from toilets, water leaking through the roof, frozen pipes, furnaces going out when the temperature is -15, no hot water, sewage backing up into showers and sinks, etc. I'm not just doing this for the tenants; I'm trying to protect his property from further damage!
Would the water leak cause damage to the home? Is there a problem with mice and cockroaches? Did the pipes freeze? Is it an old water heater and furnace that could use new parts or possible replacement?
It sounds like you have an older, lower-class home that needs to be maintained. You can be proactive and fix it up or you can react every time something breaks. Either way, these things don't fix themselves.
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28 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes7y
@Dimitri Wilson most of these look like valid complaints on the surface: lost water, no heat, frozen water pipes, water damage in the bedroom, toilet leaking, etc.
I just took over management of 24 units that the owner was "managing" on his own. He's constantly complaining that he can't afford the vendors I'm sending over but I'm sending them over to deal with water leaking from toilets, water leaking through the roof, frozen pipes, furnaces going out when the temperature is -15, no hot water, sewage backing up into showers and sinks, etc. I'm not just doing this for the tenants; I'm trying to protect his property from further damage!
Would the water leak cause damage to the home? Is there a problem with mice and cockroaches? Did the pipes freeze? Is it an old water heater and furnace that could use new parts or possible replacement?
It sounds like you have an older, lower-class home that needs to be maintained. You can be proactive and fix it up or you can react every time something breaks. Either way, these things don't fix themselves.
The DIY Landlord Book4.7247 Reviews - 7yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Seems like a lot of calls in a short period of time. Why not set up a meeting with a repair person and have them tour the property to let what know needs to get repaired? You can then do it with your repair person and know it is done properly. It still won't help if the stove suddenly dies, but will fix any leaking toilets, ensure furnace is working and filters are changed before it causes more damage.
Looking at a few line items, it is hard because there isn't a full description. It says "change garage door l" If that was change the locks or rekey because the tenants lost the key, that is a charge that the tenants need to pay. Not taken from their deposit, but pay immediately. Also the cleaning-was that a turn over (Sept 14), if so that gets billed to the tenant, not you. It may appear on your bill, but won't have money taken from your account.
the fridge and freezer repairs 2 weeks apart at the same house for $400+ each is odd. It would have been cheaper to buy a new fridge.
- Investor · San Diego, CA · Member since 2016 · 265 posts · 305 votes7yDimitri Wilson When buying older homes like the ones you have (built in 1927 and 1900), it is best to account for higher maintenance & capex. A home inspection report & post-inspection discussion with your inspector can help you develop a feel for the property as an out-of-state investor. Unless a full rehab was recently done on things like electrical, plumbing, HVAC and roof, it’s not unreasonable for 25 - 30% of collected rents to go towards maintenance & capex every month.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
This is my fear of 'going pasive' with an OOS investment.
When I go over to one of my properties, I can both seal up a mice entrance and tighten a couple nuts on a toilet to stop it from leaking. Woohoo.
I have never heard of kitchen sink plumbing or a fridge issue each costing $400+. Swapping out a fridge costs me all of $150 for a used one. An entirely new trap and drain line, basket, risers and valves isn't more than $60 in parts for 'kitchen sink plumbing'.
A bad PM costs much more than the advertised 10% when 4 Maytag men are called over for every little thing. A handyman that can take care of more than 1 issue at a time is clearly needed here.
When I consider a PM, I estimate 14-18ish% once stabilized, but your 30-40% in maintenance alone is very real. The talked about 10% in podcasts is false for most. By a lot.
Sorry you are facing this and thank you for sharing.
- Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes7y
From my experience using a PM company, this is part for the course, especially in older, lower income housing. My PM raked in more money than me. I ended up firing them, and guess what? Maintenance calls dropped to almost NOTHING! Could be because they repaired everything, or could be because many of the "calls" were bogus. Find yourself a handyman that you pay directly and send him over once a month to take care of a punch list. You will find that you save money. With my old PM company, most months, after they collected rent and took out their fees and expenses, I ended up writing them a check!
- Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes7y
I'm looking at your work order list. That's actually not bad over a 6 month period. My list would look like that for ONE MONTH!!!!
- Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes7y
The thing that pops out to me is the consistent rate at which the requests are made.
I self manage and tell my tenants I want them to call and inform me of every little thing - most don't.
Hmm...I suppose anything is possible within such a small data set. Do you have crap properties?
I'd suggest a reserve study. That way you can size up how frequently to expect repairs.
I would also say choosing a PM is about the same as choosing an auto mechanic.
- 7yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
18 repairs for 3 units in 6 months is a little high but I have experienced worse and as others have indicated there are a lot of variables. Have the units been rehabbed? How long since the last rehab? how old are the units? What class area (in general C class and below are harder on the RE than B class and above).
When we have had pest problems we have had to deal with the issue monthly until the problem is controlled. The pests being 2 separate units each requiring a single visit is fortunate. I would not have been shocked to see initially a visit once a month for 3 months to be sure the pest problem is addressed.
I think OOS RE investing is full of exaggerated ROI estimates. Hopefully your ROI estimate had some margin.
Good luck.
- NEWPORT BEACH, CA · Member since 2018 · 9 posts · 6 votes7y
@Ray Harrell Thanks Ray. I believe you because my handyman reported finding non-existent requests when I sent him over to fix work orders setup by the PM. I thought it might have been just a small miscommunication but perhaps there's something more sinister going on. How'd you go about firing your PM? Did you have to pay an penalty for ending the contract early with them?
- NEWPORT BEACH, CA · Member since 2018 · 9 posts · 6 votes7y
@Nathan G. @Nathan G. Thanks Nathan. I agree with you that most of the line items are legitimate, however it's the high costs that really bugs me, knowing most of the non-urgent work items should cost 1/2 as much. If the monthly rents are $600 and each time we get some leaky plumbing and some roaches coming over from next door costing $120 - I don't see how OOS investors can make a profit? Both the duplex and SFH had significant rehab prior to renting, and most of the work orders have been for fairly small issues as we can see. These are older buildings in the 1900s, what kind of preventative maintenance can I do to improve the situation?
- NEWPORT BEACH, CA · Member since 2018 · 9 posts · 6 votes7y
@Steve Vaughan you're totally spot-on for the grossly overpriced USED appliances supplied by the PM. Thank God for Thumbtack I've found some decent handyman that would do his items for 1/4 the price. The problem is, any job order that's below $350 they have free say. I hate to micro manage but seriously is this the only way for OOS investing to work? So much for "passive-income" investing.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes7y
@Dimitri Wilson there's no way to know without seeing the bills, talking to the vendor/tenant/PM and getting all the details. What does a plumber charge in Newport Beach for a routine call? What does it cost to defrost pipes (and why did they freeze in the first place)? Spending $429 for a freezer seems unreasonable but I don't know the details. Most of my homes have a standard fridge and I can replace them for under $600 or put a used one in for under $200. But if yours is larger, newer, stainless, or has ice/water then maybe the cost is justifiable.
Again, we need to know a lot more before we can help you decide.
The DIY Landlord Book4.7247 Reviews - 7yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Dimitri Wilson:
@Nathan G. @Nathan G. Thanks Nathan. I agree with you that most of the line items are legitimate, however it's the high costs that really bugs me, knowing most of the non-urgent work items should cost 1/2 as much. If the monthly rents are $600 and each time we get some leaky plumbing and some roaches coming over from next door costing $120 - I don't see how OOS investors can make a profit? Both the duplex and SFH had significant rehab prior to renting, and most of the work orders have been for fairly small issues as we can see. These are older buildings in the 1900s, what kind of preventative maintenance can I do to improve the situation?
I realize this does not help much but it is my belief that it is real tough to be successful OOS with rents below $1K. This is because of the maintenance/cap ex costs and the PM costs. If you were local to the RE, I know you could have addressed these issues for less cost. If you self managed you would hire the handyman yourself or possibly even do some of these repairs yourself.
The issue is that repairs (maintenance/cap ex) on a 3/2 that rents for $3K is not substantially different than the repairs for a 3/2 that rents for $800 for the OOS investor. Addressing these little problems adds up. What this implies is that maintenance/cap ex costs as a percentage of rent is highest in the lowest rent units. I find the 50% rule to be too optimistic for these lower rent locations and that 60% probably should be the lowest percent used (B location, no more than 30 years old or complete rehab (including plumbing, foundation, and electrical) in the last 20 years). Operational costs for the OOS investor is more than for the local investor.
Ideally you used conservative numbers in calculating your expected return and that this one issue is more than covered by conservative estimates elsewhere so that these RE are producing OK return. It is my belief that estimated profit had to be low if starting at a $600/unit rent price point.
Here is a blog on why it is difficult to make money via buy n hold on low cost RE (hint it is the rent to maintenance/cap ex ratio). Also he is not addressing purchase that are low cost because they are purchased way below retail and will result in a decent rent price - he is referring to units with cheap rents such as $600/unit. He is also not addressing the very active local investor that can address many of these issues much cheaper than the more passive investor:
https://www.biggerpockets.com/blog/2015/03/03/why-you-cant-make-money-on-30000-houses/
Good luck
- Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes7y
I posted pictures of their emails where they admitted wrongdoing and double billing on Yelp and Google, and photos of their shoddy work. They eventually contacted me and said they would sue me. I told them you can't sue me for defamation or slander if it's true. Ultimately we just agreed to end it once I showed them the screen shots and photos. Look for a clause in your contract that says they agree to provide a certain level of service, and then find and present evidence where they don't do that. See attachment.
PMs really have owners in a hard place because we grant them access to all our income and we wait on them to do the right thing.
- NEWPORT BEACH, CA · Member since 2018 · 9 posts · 6 votes7y
@Dan Heuschele Fantastic comment and article you shared. I've been on the fence for these properties and you've just validated my worst fears for the imminent CapEx events. I was hoping that appreciation and inflation would help mitigate some of those future costs but that article clearly refuted any of that hope.
Expensive lessons but I'm glad I'm learning them early. Thank you again for the pointers!
- NEWPORT BEACH, CA · Member since 2018 · 9 posts · 6 votes7y
@Ray Harrell Great advice. Although after reading Dan's comment and shared link I realized the problem itself lay not with the PM nor tenants. The numbers were doomed from the beginning due to the type of property I bought and tenant base I chose. As an OOS investor this type of investments won't work period, not unless you're banking on a whole lot of luck that Indianapolis is gonna become the next Silicone Valley. The CapEx reserve alone would take out $250 of cashflow per month, because of the age of the building. Yikes.
- 7yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Dimitri Wilson:
@Dan Heuschele Fantastic comment and article you shared. I've been on the fence for these properties and you've just validated my worst fears for the imminent CapEx events. I was hoping that appreciation and inflation would help mitigate some of those future costs but that article clearly refuted any of that hope.
Expensive lessons but I'm glad I'm learning them early. Thank you again for the pointers!
I do not want to be too discouraging. There are people who seem content with their OOS, low appreciation area, cash flow. I suspect they think they can scale it but it is not easy on low unit count RE.
In my view, it only seems worth the effort on commercial multi-family (large volume units). For example, it I had a 30 unit apartment with on-site competent PM (so fairly passive) that netted $150/unit cash after all expense items, $4500/month total would be OK. Because it would be commercial MF, the value would be based on the NOI. You can increase value in any market by increasing the NOI. A market with zero market appreciation (or appreciates at rate of inflation) can still achieve RE appreciation by lowering expenses and/or increasing revenue. Find a way to have tenants pay for the water they use and many will do a better job conserving water. More efficient HVAC. LED lights in all common areas. Laundry room. Pet rent. Either increase income or decrease expenses results in property appreciation.
My preference, however, are markets that have a strong history of appreciation. If I were to go OOS, it would not be to a no appreciation market. That is my preference, many investors make a different choice including the low appreciation markets.
Good luck
- Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes7y
@Dimitri Wilson as others have said, these out of state investments sound great in paper but for a variety of reasons they are inherently problematic.
My one venture in OOS investment had a quick ending when my PM went out on three service calls for the same problem and couldn’t diagnose even the problem. At that point I realized the chances of this being a profitable venture was small. Fortunately I invested smart so I lost very little, but it was a learning experience.
- Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes7y
@Dimitri Wilson This could just be a bad stretch of luck or the PM and tenant that are a problem. Unfortunately only being 8 months in and being remote you do not know much right now for sure.
I've been there as an out of state investor and it is a helpless feeling knowing that your PM and tenants control the success or failure of your property performance than you do. I never got used to that feeling so I ended up selling.
One thing I do not think that is stressed enough is that good rental areas attract good tenant (obvious), but they also attract the better property managers which is more important when you are investing remotely. Think about it, higher rents for a service where you get paid based on the rent roll and an easier tenant class to handle are just some of the reasons better managers don't choose to deal with all of the issues that come with low income tenants.
- Indianapolis, IN · Member since 2014 · 206 posts · 127 votes7y
@Dimitri Wilson - I hate this for you but what a fantastic thread! Coming to your final realization of type of property and tenant can take years for some investors. My property management company does't make money on maintenance. We just pass it through directly, however, it's still a struggle to find fair pricing. What I feel is fair pricing may not be the same for you and vice versa.
- Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes7y
My 2 cents get someone in there to look at the property and see if there is anything wrong with it. It could be they did a half way job on the rehab and/or on the work and that is why you keep getting this. The manager could also either be terrible or just using bad people for these jobs (i.e. their better ones are overloaded).
I will tell youthat lower income tenants do tend to both be harder on the property and call more for certain things. A number of these seem like ongoing issues that are grouped together like the water issues, the heat and the mice .I will also note that this is mostly winter and winter in the midwest is terrible. frozen pipes, heat issues, mice are par for the course in the winter months. Its just part of the costs.
Some of the things you can do:
1) Call the person on the ground itself i.e. the person in your manager's team that talks ot the tenant. Sometimes its just the tenant and sometimes its something that needs addressing. A guy or girl making just ok wages is not going to want to make tough calls for you in many cases. I have had everything in the book. For example, the water issue could be because your tenant keeps putting things down the sink that should not be there, think tampons, toilet paper etc etc. Someone needs to talk to them in that case.
2) Call an outside person if you can't get things right with the property manager. Find a good pest control person, find a good plumber etc. They will tell you what is up with the property before your manager might. They will also allow you to only pay for what is done unlike a property manager that will just bill you and take it out of rents.
3) If all that fails, you could call the tenant. I would say its a last resort because once you do they will call you with everything and try and play you against the manager if they can. However, if the manager is not doing their job it can be necessary and if they know the tenant will complain to you they will typically accept that they can't just let things go. it will also show you what a hard job being a property manager is.
- 7yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
You've had your handyman go in ahead of the PM's guy and he didn't find anything to fix? I'd talk to the tenant and find out what's up. Worse case, they are real issues and you can have your tenant call YOUR handyman directly rather than the PM. It is one call for the tenant and you have someone you trust to look at the problem...plus you then know if there really is a problem.
- Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes7y
"No Heat - We Believe.. " = $226
What is it, no heat, or a $226 opinion?
$400+ freezer repair for two separate units?
These bills would drive me crazy, id need to see it for myself.
- Investor · Santa Barbara, CA · Member since 2018 · 19 posts · 5 votes7y
@Dimitri Wilson Could we get some further background of what you’ve done to the property before the rental phase? Why did you choose this particular property (location, schools, price of property, etc) and what did you do to rehab after you purchased?
It’s hard to tell if you’re being taken advantage of as an OOS investor, or if the property is just older and is beginning to show normal wear and tear.
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