My inlaws have a 4 unit property that should net around 10K a month.
The PM company tell them EVERY month that between 4 and 7 thousand dollars of maintenance/repair is needed. My inlaws say, "well the building is old". It is form the 1970s. They have been doing this to my inlaws for many many years...the fluctuations of income alerted me to this becaus it makes no sense.
They think I am wrong. But how can I catch them. Should I lost the PM co.pany here...if you google their name and look on Yelp they have terrible reviews and I went to the courthouse and looked their name up to find they have been sued over ten times in the last 8 years.
What is the best way to catch them? It has become a sensitive matter and they get flustered and frustrated...they dont want to deal with it.
Any thoughts?
Fyi, on their website they have accreditations listed, and I called each one, they are not members. The HOA said they would call them and demand they take theirs off and that has happened. They are bot even part of the BBB.
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
6y
As a PM I can tell you this is entirely possible if the building has never been maintained. I had an out of state investor purchase a 6 plex in my market for $300K two years ago. She had a home inspection and it showed she needed to invest at least $100K to bring it up to building code. She did virtually nothing, because she spent all her cash buying the building. She hired the part time agent who didn’t know what they a were doing to manage it. When he got a military deployment he turned it over to a PM who lives and operates two hours away. She went on like this for a year before she hired me. I looked the building up in our city records and found she had an active zoning violation, which I’m guessing is what caused her to call me. I asked her to send me a copy of the home inspection from when she purchased it that outlines significant work needed. One of the units houses a hoarder/cat lady who kept her unscreened window open so all the neighborhood cats could come and go. She had a rotting dead bird on the floor of the bedroom that she had just been walking over. She was literally the only paying tenant, so the owner made us keep her in place. When I went one by one down the repairs the inspection revealed needed fixed a year ago and asked the owner what work she had done, she revealed she hadn’t done any of it. I made the mistake of agreeing to take the building on only after getting her to agree that she had both the funds and the desire to make the necessary repairs to bring the building up to code to a habitable condition. We inspected each unit and prioritized a list of what needed to be done. Even though she agreed to do the work, she fought every step of the way and I had to guilt trip her at times to do basic work - like installing working smoke detectors. We rehabbed the empty units one by one and filled them with paying tenants. She still has one unit vacant and not rent ready because she is unwilling to let us hold back the funds to prep it. We are almost one year in and she gave us notice to not renew because she hasn’t gotten enough rent proceeds this year. She delivered us a dilapidated building half empty, half full of dead beats that her own home inspection said needed significant work that she knew she had not yet addressed. 100% of the potential rents would not have addressed her issues.
I almost forgot to add that a month in we had a tenant abandon and blamed the reason to bed bugs. Not a single tenant mentioned anything about bed bugs when we inspected or talked to them up to this point. The owner told me the previous PM had treated one unit for bed bugs. When I called him for details he said his handyman bought a can of spray at Home Depot and they sprayed the one apartment that had them. The bed bug company said this was the worst case of infestation they had ever seen. That treatment alone was $8K, but they knocked it out. It was mind boggling that the tenants didn’t say anything, but this just goes to show you what tenants in properties owned by slumlords some to expect. They are used to living in terrible conditions and have very low expectations.
My point is that before you jump to the conclusion to throw the PM under the bus, travel to the market and do a physical inspection of the building - inside and out. If there is decades of deferred maintenance the building very well could need significant amounts of the rent to go into repairs.
If you don't trust your property manager fire them. The property management company should be able to send photos, cancelled checks, invoices, quotes, all kinds of documentation showing that there was a repair that was needed and that it was completed.
Thank you guys for a prompt response. They apparently email a break sown permonth with the automatic deposit of the profits ..but I have not seen it...I got my inlaws to request 2 years of records last June but I do t know how to confirm they do the actuall repairs...I discovered they were sued for saying the replaced pipes in a gas line but only really used duct tape if I read the legalese correctly. I cant fire them. And my inlaws dont believe me...
Shouldnt they retain over 90 percent of the profits the majority of the time. The property is in anta Monica.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
@Greg Von Notias Sounds like the PM company has trained your in laws very well. Generally a 4plex from the 70's should not require much maintenance. I don't think you will have a lot of success working with the PM or suing them. If your in laws will listen to you dig out the contract and look at the termination. Most are 30 days.
Log in to the PM company and have a look at the account income and expenditures it should all be there. Verify that what you are being told is genuine. Most PM's do a great job but there are exceptions like in any business.
Come back here and provide the general neighborhood location of the property and perhaps you can get a recommendation for a new PM or a quick tutorial on how to find you next one. All the best!
American Fork, UT · Member since 2017 · 175 posts · 76 votes
6y
@Greg Von Notias this is a bit insane, where is this located?? In our experience, we’ve had some similar property management fraud/deception with Crestcore, in Memphis. They did things that were completely unauthorized and in some cases they billed us for work that was never even done.
Do me this favor...explain in detail how it is they are able to do this.is it that they just claim they are doing repairs but actually do nothing? Like what I read in the legal case with the leaking gas pipe?
I need to explain to my inlaws how it is that they are actually doing it....so how is it that corrupt PMs do their crimes?
I need to get enough of a irrefutable momentum driven reason that they should terminate them and go with a company that's highly rated
I mentioned before on ther Yelp for instance the first review says you will have to sue these people to get any money back. My inlaws cant see the problem for what it is.
They should get 80 to over 90 percent of the profit per month....this month they got less then 50 percent...for the past two months NOTHINg claiming roof repairs.
It makes me want to go back in the records and find out when they last did a major roof repair. Go take photos of the current roof and make sure it's all brand new.
Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
6y
It’s hard since you’re not only dealing with a questionable PM, but an emotional response from family members.
Here, most investors set aside 8-10% per year for repairs, with an understanding that it should typically be less than that. Sure things break, but it should be the exception, not the rule.
It sounds like they don’t want the hassle of fighting it... so that is your first battle. Maybe explaining how much they could/should be making if they had someone to look over the property. Would you be willing to go to the property every 3 months to check it out and work with the PM?
It seems like the PM is part of the issue, but the first issue is the family wanting to fix/explore the issue.
Good luck! That’ll definitely be harder than fixing/firing the PM!
Rental Property Investor · Shakopee, MN · Member since 2015 · 985 posts · 374 votes
6y
This needs to be resolved asap. The longer this drags out the harder it will be to change. Get an itemized list of all repairs made and better yet go take a look at these repairs. If they are hesitant to allow you to see these records or the repairs in person than there is something wrong. And if they have not been doing these repairs, but are charging for them a lawyer needs to be contacted. That is way too much money going out the door for repairs each month.
That is insane. Are you or your in-laws nearby? If so, go and inspect the home with the list of repairs and talk to the tenants to see if they did any repairs. You could also tell them you want to be present for any repairs. Really though, I'd find another PM that you can trust. I have 1970s homes and there is no way I have that much in repairs over an entire year.
Rental Property Investor · Brighton, CO · Member since 2015 · 37 posts · 36 votes
6y
@Greg Von Notias there are many unethical property management companies out there, taking advantage of naive investors. I started a PM business this year after trying multiple companies and being frustrated with the poor quality and suspicious about the excessive charges.
The best thing you can do is look for another property management company to replace them. Once under better management you can determine if there is any recourse against the old company, but unless you have good documentation, it’s better to cut your losses and move on to someone that will help them make money. I wanted to go after the former companies that I felt ripped me off, it didn’t think I had enough documentation to prove it. I do know of other owners that had documentation and were able to get large settlements.
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
6y
As a PM I can tell you this is entirely possible if the building has never been maintained. I had an out of state investor purchase a 6 plex in my market for $300K two years ago. She had a home inspection and it showed she needed to invest at least $100K to bring it up to building code. She did virtually nothing, because she spent all her cash buying the building. She hired the part time agent who didn’t know what they a were doing to manage it. When he got a military deployment he turned it over to a PM who lives and operates two hours away. She went on like this for a year before she hired me. I looked the building up in our city records and found she had an active zoning violation, which I’m guessing is what caused her to call me. I asked her to send me a copy of the home inspection from when she purchased it that outlines significant work needed. One of the units houses a hoarder/cat lady who kept her unscreened window open so all the neighborhood cats could come and go. She had a rotting dead bird on the floor of the bedroom that she had just been walking over. She was literally the only paying tenant, so the owner made us keep her in place. When I went one by one down the repairs the inspection revealed needed fixed a year ago and asked the owner what work she had done, she revealed she hadn’t done any of it. I made the mistake of agreeing to take the building on only after getting her to agree that she had both the funds and the desire to make the necessary repairs to bring the building up to code to a habitable condition. We inspected each unit and prioritized a list of what needed to be done. Even though she agreed to do the work, she fought every step of the way and I had to guilt trip her at times to do basic work - like installing working smoke detectors. We rehabbed the empty units one by one and filled them with paying tenants. She still has one unit vacant and not rent ready because she is unwilling to let us hold back the funds to prep it. We are almost one year in and she gave us notice to not renew because she hasn’t gotten enough rent proceeds this year. She delivered us a dilapidated building half empty, half full of dead beats that her own home inspection said needed significant work that she knew she had not yet addressed. 100% of the potential rents would not have addressed her issues.
I almost forgot to add that a month in we had a tenant abandon and blamed the reason to bed bugs. Not a single tenant mentioned anything about bed bugs when we inspected or talked to them up to this point. The owner told me the previous PM had treated one unit for bed bugs. When I called him for details he said his handyman bought a can of spray at Home Depot and they sprayed the one apartment that had them. The bed bug company said this was the worst case of infestation they had ever seen. That treatment alone was $8K, but they knocked it out. It was mind boggling that the tenants didn’t say anything, but this just goes to show you what tenants in properties owned by slumlords some to expect. They are used to living in terrible conditions and have very low expectations.
My point is that before you jump to the conclusion to throw the PM under the bus, travel to the market and do a physical inspection of the building - inside and out. If there is decades of deferred maintenance the building very well could need significant amounts of the rent to go into repairs.
What percentage of the profits per year is typical to spend on upkeep and repairs?
They on average 30 to 50 percent per month?
Could any of you do the math for your own properties and figure out what the average range is? And keep in mind they have been doing this for years. I want to have solid explanations for what is typical and is normal. I keep telling my inlaws that by now there should be nothing left to fix.
I very appreciate all of the advice, amd I will let you guys know when I am going to present this thread amd your ideas to them.
Any other tips on how to rightly explain to them that they have been had, taken advantage of, it isnt normal to spend this ammount on a property.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
@Greg Von Notias most LL here budget 5% for maintenance-repairs like leaky toilets, water heaters, and recaulking windows etc. Then there is capex or capital expenditure, another 5-8% spent or paid into a reserve fund for things like repaving a parking lot or a new roof. Those percentages are calculated on gross rents (gross revenue) and would be typical for a building say from the 1960's and newer.
For example I have a 12 unit that was built in 1960. In an average year I spend 2-4k on direct maintenance, I have spent another 20k over 2 years rehabbing units at turnover time to generate higher rent, repairing the roof, and new coin washer and dryer for the shared laundry.
I also have duplexes with a PM in another town but easy driving distance-15 miles from home. I was unable to make money with those because the PM would mark up items purchased for repair and maintenance. In one case we were quoted to replace 2 wall heaters-1600 dollars; we chose to not go ahead. I let the PM go and we chose to self maintain the duplexes as well. I called the same company to replace the 2 wall heaters-the same company for the installation of the same heaters-the total charge was 530 dollars.
Property Manager · Keller, TX · Member since 2011 · 1k+ posts · 1k+ votes
6y
@Greg Von Notias A property manager should be able to document repairs. That does seems like a high monthly repair expense. But you really need to know the property and situation to make a good judgement.
As for the lawsuits. Keep in mind property managers are sued more often than most other professions. Not from the property owners but from the tenants. 90%+ of lawsuits I see against managers from tenants are pure junk.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
6y
any expenditure should be backed up by an invoice... ask to see copies of every invoice. if they are outside vendors call each one. then, take the invoices with large charges and go to the rental and look to see if said repairs were done. if the invoices are inhouse work, ask for time sheets and materials invoices. ask for proof of everything.
your inlaws are being ripped off - this is clear. but the above should help you prove it. good luck
My inlaws have a 4 unit property that should net around 10K a month.
The PM company tell them EVERY month that between 4 and 7 thousand dollars of maintenance/repair is needed. My inlaws say, "well the building is old". It is form the 1970s. They have been doing this to my inlaws for many many years...the fluctuations of income alerted me to this becaus it makes no sense.
They think I am wrong. But how can I catch them. Should I lost the PM co.pany here...if you google their name and look on Yelp they have terrible reviews and I went to the courthouse and looked their name up to find they have been sued over ten times in the last 8 years.
What is the best way to catch them? It has become a sensitive matter and they get flustered and frustrated...they dont want to deal with it.
Any thoughts?
Fyi, on their website they have accreditations listed, and I called each one, they are not members. The HOA said they would call them and demand they take theirs off and that has happened. They are bot even part of the BBB.
Thank you in advance.
1. I would give the PM a written demand for copies of all invoices for the past two years. Not a summary. Not an owner statement. Copies of the actual invoices from the actual vendors, proving what work was done, when it was done, and by whom. If they provide it, I would then hire a home inspector to inspect the property and verify the work. If they refuse, I would go to the next step.
2. Find out who supervises property management companies in your state. There's probably a state association. If you can't find them, call another PM company and they should be able to provide you with the contact information. Explain the situation and request to file a complaint. The Board will likely contact your PM to get their side of the story and that may be enough to motivate them to straighten up. If they don't to your satisfaction, file a formal complaint. If they are ripping you off or running an unauthorized business, the state will shut them down toot-sweet.
3. Start looking for a new property manager. Do it today. It requires some time and effort on your part. Cheaper does not mean you'll make more money. Look for someone that is professional and proven. Verify they are licensed by the state and legit.
You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers
1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.
2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.
3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!
4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.
5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.
6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.
7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?
This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!
I own too many rentals and do not have a lot of spare time. Property Managers mostly make me mad, so I brought property management inside.
That said, you have to micro manage the property manager and understand the problem in its finest details. If you do not, your costs are going to destroy the return on your property.
If you or your parents do not have the time to do this, you should probably think about selling the property....
