Time to find a new PM

Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes

Dear BP,
I inherited a PM when I bought my turnkey rental last year. Since the beginning, there was not any conversation or update initiated by the PM and I always had to track him down after I noticed an issue. My tenant had missed payments for a couple of months and I had to find out myself when there was no payment sent to my bank. Long story short, I am really not confident about my PM and would like to know what happens if I want to hire a new PM in the middle of the contract and/or in the process of evicting my tenant. This being my 2nd long-distance rental and I had totally no idea how to approach it. Your feedback and advice are greatly appreciated.

Thank you for taking the time reading my post.

Andy

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

Based on what you've shared, I'm going to disagree with everyone else on here. They all recommend you review the terms of your contract but why should you be obligated to fulfill the terms of your contract when the property manager is clearly not holding up his end of the bargain?

I would start by searching for a new property manager. If you send me a PM I will give you a short list of how to research and find someone professional.

while you are searching for a new property manager, start documenting every way that your current property manager has failed to protect you and your interests or honor the agreement. once the new property manager is located, give your current property manager notice of his failure to properly manage the home and communicate. let him know you want to terminate your contract in 30 days with no penalty or fees. Give the property manager 7 business days to acknowledge receipt and confirm the termination date. Once confirmation is received in writing, start the process of transferring everything over to the new property manager.

if your current manager refuses to let you out of the contract, contact the governing state board and inquire about filing he complained. In my experience, they will typically take a verbal complaint and then contact the property manager to hear his side of the story. If you have even a slight chance of winning the argument, that call from the board will likely put the fear of God in the property manager and he will cut you loose rather than face an investigation from the state.

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Cassi Justiz
Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
6y
I would check and see what kind of PM contract you have. Some property managers have clauses in there that make it exceptionally difficult to end the contract if there is a tenant in place.
You may want to consult an attorney that is in the same area as your rental property to review your contract and see what your options are.
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Account Closed
None · Member since 2018 · 125 posts · 46 votes
6y
@Andy Chen I would agree with @Cassi Justiz and double check the terms of your contact, but I’d definitely pursue finding a new PM. A bad PM will cost you in the long run. I’d suggest checking out David Greene’s book Long Distance Real Estate Investing, he has great interview questions and tips for finding a PM out of state which I’ve used myself!
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Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
Thank you @Cassi Justiz and @Kristin Caras for your valuable inputs!
Yes, I should definitely check the PM contract first. Thank you for reminding me I need to be responsible for my part of the contract first and then seek what is the best outcome for everyone.

May I also ask if the PM contract usually ends when the tenant moves out? I assume if I want to switch PM I need to let them know before they put in any effort to find a new tenant for me just to be fair. When is a good time to communicate with your PM about switching to someone else? Wait until the end of a lease?

Thank you!
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Cassi Justiz
Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
6y
@Andy Chen, The contract that I have with my PM for my out of state property has a clause on it that after the first year then the agreement between owner and PM goes month to month. Either can cancel with a 30 day written notice, but if a tenant is in place then PM is owed all fees that they would have collected for the full term of the tenant's placement.
So I would say the best time to cancel will be at the end of a lease. You can give them notice as soon as you want, but just make that notice effective on the tenant's move out date.
1 Reply
Natalie Z.
San Diego, CA · Member since 2017 · 9 posts · 2 votes
6y
I actually just posted something similar, mind if I hijack? I have to give 30 days notice in writing to end the PM after the initial 12 months. Im was also wondering about the lease changes, notifying the tenant of the changes and new payment info, how and where to hold deposit etc.
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Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Cassi Justiz Thank you so much for sharing the specific clause. So useful! I will make sure it will be included in my next PM contract.

@Natalie Z. Thank you for raising other important matters (lease changes, notifying the tenant of the changes and new payment info, how and where to hold deposit, etc) that come after the switch! I definitely need to learn about those, too! I will follow your thread for more information, too!
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Gray Hall
Real Estate Broker · Denver, CO · Member since 2017 · 54 posts · 30 votes
6y
@Andy Chen

As others mentioned, see what the terms of the contract you signed say. Our contract only requires a 30 day notice for owners to terminate if they aren't happy. I have seen other PM agreements have a termination fee if there is a tenant in place (usually equal to management fees that would have been due through the end of a tenant's lease).
If you are not able to terminate with 30 day notice, do give them a heads up at least 60 days prior to your tenant's lease end date. They should reach out regarding renewal/re-lease, but if they don't that would be an appropriate time.
Have you discussed what happened to lead to this scenario? You could also discuss switching property managers within the same company if that is an option. I don't have full context for your scenario, but in a perfect world you wouldn't have to go through the hassle of switching PMs.

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Andy Chen did you buy through a turnkey company? What’s the name of that company? Where is this property located ?
1 Reply
Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Gray Hall Hi Gray, I like the 30 or 60 day notice practice. I will review my contract and see what my exit clause is. :)

You also raised a good point about whether or not have I discussed what happened. It's part of my fault I am passive-aggressive and also would like to avoid a confrontation if possible. I have nicely asked the PM on several occasions to be more proactive about updating me with the tenant when they fell behind on payments or when I did not receive my owner's draw on time.

I started to feel like they either don't care that much or just too busy in general. The gentleman I dealt with is the head of a small team and if the boss is acting like these I doubt switching to others will help. With the tenant being late for a month of rent I am now being more direct about how I would like my PM to communicate with the tenant but again I need to ask them every couple of days to give me update myself.

For good or bad it is a great learning experience on my young investing journey. I hope what happened to me can be beneficial to other investors about vetting their PM, too.

Most importantly, I am super grateful to find out how responsive BP family is.
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Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Caleb Heimsoth Hi Caleb, I bought it through a company that I now think is a broker for the turnkey companies and operators. I now realize Turnkey companies come in different shapes and sizes and, to me, it is better to interview the turnkey company itself and find out how they carry themselves directly. I also think my PM was the one that sold the property. It's located in Jackson, Mississippi. Forgive me for not sharing their name publically.

@Tom Ristau Hi Tom, I will check out the app you suggested. It sounds like it supports 3-way communication? Do you suggest communicating with tenants directly? Thank you!

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
Originally posted by @Andy Chen:
@Gray Hall Hi Gray, I like the 30 or 60 day notice practice. I will review my contract and see what my exit clause is. :)

You also raised a good point about whether or not have I discussed what happened. It's part of my fault I am passive-aggressive and also would like to avoid a confrontation if possible. I have nicely asked the PM on several occasions to be more proactive about updating me with the tenant when they fell behind on payments or when I did not receive my owner's draw on time.

I started to feel like they either don't care that much or just too busy in general. The gentleman I dealt with is the head of a small team and if the boss is acting like these I doubt switching to others will help. With the tenant being late for a month of rent I am now being more direct about how I would like my PM to communicate with the tenant but again I need to ask them every couple of days to give me update myself.

For good or bad it is a great learning experience on my young investing journey. I hope what happened to me can be beneficial to other investors about vetting their PM, too.

Most importantly, I am super grateful to find out how responsive BP family is.

If you bought through a marketer, it doesn’t surprise me that you’re having issues. Have you considered selling?
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Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Caleb Heimsoth "If you bought through a marketer, it doesn’t surprise me that you’re having issues." So true, so true. Glad I learned it early. And I hope to hold on to it so my daughters and her kids can benefit from it. :)
1 Reply
Account Closed
Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
6y
You don't have the temperament for out of state C class investing my dude. Do yourself a favor and shoot for lower returns in the A or B+ class. Check out Oklahoma City you can get a new construction A class for under 175k. That will be something your daughters can actually enjoy instead of a run down meth lab by the time they inherit it.
3 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
6y
@Andy Chenille I wish you luck with it. This probably won’t be the last PM you fire. Just FYI.
2 Reply
Gray Hall
Real Estate Broker · Denver, CO · Member since 2017 · 54 posts · 30 votes
6y
@Andy Chen I'd recommend setting up a call to express your concerns and what you expect going forward. Give them a shot to turn it around. The "boss" may just need to delegate to someone else on the team to be your main point of contact. As a PM who has been in this scenario before, they would appreciate your honesty and appreciate being given a chance to correct it.
It would also be good to understand the eviction laws in the state the home is located in and understand their process for how they handle evictions.
1 Reply
Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Account Closed Hi Michael, Yes, You are right! I had to learn the hard way. I look forward to getting slammed with more problems so I may learn how to better handle them on my journey, or learn to quit completely. LOL

@Caleb Heimsoth Thank you and I am sure I need all the luck I can get.

"This probably won’t be the last PM you fire."

I will keep your advice in mind and get better at hiring a good PM from now on. You are just full of investing wisdom, my friend.
1 Reply
Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Gray Hall I hear you, and I know it is exactly what I need to do. I am responsible for the outcome myself by avoiding and not communicating openly with the PM. Thank you.
1 Reply
Calvin OzanickBusiness Member
Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes
6y
Obviously as it has been mentioned numerous times, it depends on how your PM contract is written and worded. I would contact an attorney as well. In general, it could be relatively easy, and as far as you are concerned, the next step is to be sure you are on the same page with the tenants. You will need to make sure to post proper notice and get them up to speed assuming the legal lets you fire the manager. A smooth transition plan is the most important piece of putting a new manager in place with new tenants. Best of luck and I hope you can find someone who is able to best handle your needs.
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6y
Based on what you've shared, I'm going to disagree with everyone else on here. They all recommend you review the terms of your contract but why should you be obligated to fulfill the terms of your contract when the property manager is clearly not holding up his end of the bargain?
I would start by searching for a new property manager. If you send me a PM I will give you a short list of how to research and find someone professional.
while you are searching for a new property manager, start documenting every way that your current property manager has failed to protect you and your interests or honor the agreement. once the new property manager is located, give your current property manager notice of his failure to properly manage the home and communicate. let him know you want to terminate your contract in 30 days with no penalty or fees. Give the property manager 7 business days to acknowledge receipt and confirm the termination date. Once confirmation is received in writing, start the process of transferring everything over to the new property manager.
if your current manager refuses to let you out of the contract, contact the governing state board and inquire about filing he complained. In my experience, they will typically take a verbal complaint and then contact the property manager to hear his side of the story. If you have even a slight chance of winning the argument, that call from the board will likely put the fear of God in the property manager and he will cut you loose rather than face an investigation from the state.
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Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Calvin Ozanick Hi Calvin, thank you for chiming in. I truly value and appreciate what my PM brings to the table. I do not want to look over my PM's shoulders and micromanage, at all. I am simply just frustrated of the lack of communication. May I ask your honest opinion from the PM's point of view? I hope I don't sound like a nagging client who is expecting too much from the PM. But please set me straight if I do.
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Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
6y
@Andy Chen you should start by asking them for their eviction policy. They should have a detailed inter company policy on how late payments are handled.
It should have dates as well. So by a certain date you should know what part of the process they are on.
Secondly, there should be a centralized data base where all of your info is stored. You should have all of your leases, late fee notices, and any other info needed in that portal.
I would start with those two items. What your are asking about should be an automated system in their company.
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
6y
I've fired all the original PMs I started out with on my turnkeys. It's totally your right to fire that PM and get a new one. To clarify- is the tenant going through the eviction process right now? If so, I would let that PM finish that out and then get rid of them so a new {and hopefully better} PM can place your next tenant. When I've done it, the new PM did all the coordinating with the old PM to get the keys and all that. I never had to be local in the area during the process.
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Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Matthew Irish-Jones
Thank you for sharing, Matthew! I checked and found out I do have access to the lease from the online portal. I will follow up with them on their eviction policy.

@Ali Boone
Hi Ali! I really your suggestion about letting the PM finish with the tenant and replace them altogether. I am thinking about doing the same. There were positive signs that the tenant was trying to catch up but I did let the PM know if my tenant is late again I would like them to start the eviction process. With only 3 months left on the original lease, I will be able to either: 1) ask them to leave without renewing the contract and replace my PM or 2) evict my tenant and replace my PM. Does that sound right to you?
It is also a comfort to know a good PM will be handle all the coordinating and transition. Thank you.

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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
6y
Originally posted by @Andy Chen:
@Ali Boone
Hi Ali! I really your suggestion about letting the PM finish with the tenant and replace them altogether. I am thinking about doing the same. There were positive signs that the tenant was trying to catch up but I did let the PM know if my tenant is late again I would like them to start the eviction process. With only 3 months left on the original lease, I will be able to either: 1) ask them to leave without renewing the contract and replace my PM or 2) evict my tenant and replace my PM. Does that sound right to you?
It is also a comfort to know a good PM will be handle all the coordinating and transition. Thank you.

I can't really say myself which is the better option... it depends on a) the numbers (how short are they, are they paying anything, etc.) and b) what the eviction process is for your state. If it's a complicated and expensive process, avoiding it would be preferred if possible. But if it's easy and cheap and straightforward, might as well. But I'd want to know a lot more about what's going on with the tenants in order to make that decision (are they raunchy people anyways who are a headache? I'd be more fiesty. Is it an adorable little grandma who's trying her dangest to do the best she can? I'd be much more forgiving. Things like that.) Either way, replace the PM. You could replace them now prior to starting an eviction process! They could take over managing the problem tenant, and then head up the eviction process if necessary. Either way, sounds like you'll want a new one to place tenants. Don't let the old bad one place new tenants.

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Andy Chen
OP
Rental Property Investor · Los Angeles, CA · Member since 2019 · 33 posts · 11 votes
6y
@Ali Boone
Thank you so much, Ali. Really solid suggestions!
I would love to get to know more about my tenants if I am managing the property myself. The reason why we pay PM is so we can free up more time investing, right? That's why I am hoping I am not just paying my PM to collect rent every month and never communicate with my tenants (and myself). The first time my tenant was behind I had to find out by noticing a Lawyer fee on my monthly report for the evection process!? I hope it was not too much to expect my PM to notify me ahead of time. I will definitely weight the pros and cons of proceeding with the eviction process (and start looking for new PM) as you suggested!

I really appreciate you for listening, advising, and taking your time sympathizing with me. It's great to have the BP family to lean on.
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