Out of state investing Property Manager question

3 Replies

For example, say you owned a MFP with many units or an out of state property that you can't or don't check on too frequently and the property manager says there's a vacant unit that they're working on filling but they've secretly rented it out and are pocketing the money from the "empty" rental unit, whats the simplest way to find out whether this sort of thing is occuring?

I doubt this is a likely scenario but I just want piece of mind knowing theres a solution to this should it ever be a possibility.

@Andrew Lawrence

I think you’d know from the utilities. You are paying them if the place is vacant so you could see real quick if someone is living there from the energy spike.

Now I did have a friend who had a tenant who was evicted but she came back later and made good on what she owed him and his PM pocketed the money thinking he would never find out & assume she skipped town. I’ve also heard and very common for PMs to make up fake repairs when they need to generate revenue or over bill for simple jobs or charge you for work that you discover was never done. Especially out of town owners cause they are easy prey since they usually don’t fly into town to double check them.

Originally posted by @Laura Williams :

@Andrew Lawrence

Now I did have a friend who had a tenant who was evicted but she came back later and made good on what she owed him and his PM pocketed the money thinking he would never find out & assume she skipped town. I’ve also heard and very common for PMs to make up fake repairs when they need to generate revenue or over bill for simple jobs or charge you for work that you discover was never done. Especially out of town owners cause they are easy prey since they usually don’t fly into town to double check them.

How did he find out in the end? And solution for the fake charges? I can only assume you have them take a photo of work before and work completed after right? 

@Andrew Lawrence

He found out cause a worker for the PM found out about it and told the property owner but otherwise he never would have known. And as far as repairs you never know. Some things like a new fridge you can know from photos but other repairs can be faked ...most commonly plumbing.

There’s also the grey areas which i have found more common that’s not exactly ‘stealing’ but as bad in my opinion. For example My old PM (I fired) his plumber quoted me once 3k to put a sump pump and French drain in a house that had water getting in the basement and when I flew out to check on it in person I discovered one of the downspouts wasn’t attached and that’s how water was getting in the basement. Another issue I had that’s happened to me and investor friends is PMs paying super high crazy water or utility bills without questions. Like a $700 water bill that should have been $200 ...obviously a leak or issue but they don’t bother to check they just pay it out of your money.....or an electricity bill of 1k on a vacant unit ...happened to my friend who had squatters in there and was baffled they didn’t question the bill or go to the property and check out what was going on.

Once my ex-PM didn't pay the water bill at all on a multifamily so those tenants didn't have any water for a few days . Another time they forgot to pay the gas bill so they didn't have any hot water for a few days. Met another investor whose Pm wasn't paying her HOA dues or mortgage and she was about to loose her property. It had been vacant for several months without a tenant and they didn't tell her.

Another big issue is the PM actually doing a background check on tenants they place. Putting a bad tenant in a place can be thousands of lost money. Some are just too lazy and sorry to verify the tenant and try to cover it up after the fact. Like happened to my friend whose PM tried to lie out of It once we discovered the tenants felon mug shot and arrest record and 3 evictions the first second he was googled. Or there’s then the PMs who are rude and don’t answer the phone when interested tenants want to rent ....especially if they get a minimum fee to manage the property whether or not it’s rented. My friend used one of those and his fully tenanted 34 plex went to only 19 units occupied cause the PM couldn’t be bothered to do her job and fill the vacancies. FYI don’t ever agree to such a contract where the PM gets paid even if the place is vacant.

I could go on and on and on with stories but you get the idea. I know I sound jaded lol. But one thing I’ve learned is to never blindly trust these PMs. You will always need to be on them like a fly on poop. Even a good one could hire someone who is bad and could mess something up and cost you thousands.