Is my property manager ripping me off !!!!!!

General Landlording & Rental Properties
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Is my property manager ripping me off !!!!!!

Account Closed
Rental Property Investor · Tampa, FL · Member since 2018 · 15 posts · 10 votes

Hi Fellow BP’s 

           I have struggled with the following question for the past two years  I’m I getting ripped off by my property manager. I purchased 6 rental properties a few states away three years ago and I have never made any cash flow. Not even enough to take my self to a nice dinner. A little back ground I have 6 single family homes all but one have been remodeled from head to toe. I thought the issue was my property Manager so I switched Property managers and things where great for a few months. I had a call with the PM and he asked how was his company performing and I replied great and told him the issues I was having with my previous PRoperty manager . Then the issues started right after the call.  The properties are paid off except two one payment is 341 and the other is a Heloc 590. The Taxes range from 900 to 1100 for each and insurance is 500 per year per house. I tried to give people the benefit of the doubt, but I can’t figure why I’m not cash flowing is it that I’m doing something wrong, the un luckiest person in the world or getting taken for a ride. Here we are going into June and I-Have replaced 2 ac units 6,000 (replace 5 units in the past yr) pest control 400, electric socket reworked 600 and water heater 925  and roof patch work to name a few. I have requested pictures and receipts but they do not respond.


thank you for your responses in advance. 

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Most Popular Reply

Patricia Steiner
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
5y

Before hiring a PM, have a contractor and/or handyman walk the properties and do an inspection checklist.  The checklists are available online for free.  The condition of the property along with photos establish the starting point - along with the age of the components (AC, roof, water heater).  This provides you with the knowledge and control you need to gauge maintenance and replacement requests.  It's also important to know how PMs make their money; a percentage of the rent will ensure they starve so it comes down to late fees and "upcharging" for maintenance requests.  So did the AC really need replacing or could it have been repaired?  Did they get multiple bids to present to you?  Did they put in a window AC/or portable AC to keep the tenants cool while options were considered versus calling in the first available at the "emergency pricing?"

Landlords/owners see the PM as their path to "passive ownership." The truth is the PM is suppose to manage your properties but you have to manage the PM.  Expect more of yourself first.  Know your properties. Stop now and do an inspection.  And, then expect more of your PM.  You'll be able to gauge very quickly whether you're being taken for a ride or not.  

There are a lot of ways to manage out-of-market/state properties; the PM model may not be the most efficient.

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  • Joshua Adlam
    Property Manager · Tampa, FL · Member since 2021 · 65 posts · 29 votes
    5y

    Curtis, Something doesn't seem right about this story. Could you send me a dm so we can talk this through. I am more than happy to help

    1Reply
  • Joshua Adlam
    Property Manager · Tampa, FL · Member since 2021 · 65 posts · 29 votes
    5y

    If the houses are paid off, rents are at market rate then you should be cash flowing barring any major expenses. If you have done costly renovations on the property then these will definitely set you back. My rule of thumb for renovations is that I want to make the money back in 5 years from the rental. Given more details I can help you run the numbers and find out what is up with the deals

    4Reply
  • Account Closed
    OP
    Rental Property Investor · Tampa, FL · Member since 2018 · 15 posts · 10 votes
    5y

    @Joshua Adlam

    Thank you for the response. One has has a loan for 342 and another a Heloc for 590. there’s always a AC replacement or some expensive repair even after I performed 30 to 40 rehabs on the homes except one. When I ask for receipts of the repairs the PM disappears or provides a generic receipt in the portal with no amp any name or overhead.

    The rented are

    1. 675

    2. 625

    3. 925

    4. 925

    5. 850

    6. 800

    1Reply
  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Account Closed

    How are you finding these PMs? Is it from referrals? Have you reviewed their reports and cross referenced bank accounts? Tell them that any repairs over $X ($250?) need to be confirmed by you first.

    When was the last time you visited the properties? I would check to make sure the work has been completed that you paid for and find out what the actual condition is of your properties.

    $925 for a hot water heater is crazy. Lowes.com has a 40 gallon electric hot water heater for $379 (~$400 with tax). That is $525 worth of "fees". It would have cost less to have your attorney install it. I would start confirming any expenses over that set amount and then start getting additional bids for work while you look for another PM that you find via referral (from another local investor).

    1Reply
  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    “all but one have been remodeled from head to toe.” This line caught my attention. What is your definition of head to toe? What is the company that did the renovations definition of that? Did you see the homes before and after with your own eyes or only photos/video?

    Locally I see brokers/managers tell investors “Fully renovated” or other such vague terms. Over the past 20 years I have come to learn those words are meaningless by themselves. Not long ago I looked at a posting someone put here on BP that someone said “fully renovated” (or similar) and you could clearly see the gutter was rolling over, the windows were old, paint was peeling and that was from a single shot of the front of the home. I think the porch/step was also falling apart.

    So, remodeled from head to toe are very large words and I bet if you ask 10 people here what that means you will get 10 different answers. And you used the word remodel which may mean something different to some vs renovate.

    Was this only cosmetic or systems/plumbing/electrical too? Was the larger items expected by you at the time of purchase? Meaning, did you know that the remodel from head to toe didn’t include 2 AC units on their last legs or an older HWT?

    To me there are several issues here. There is the remodel from head to toe (and what that meant) and the work the new manager says needs to be done.

    The second issue is the non-communication from your PM. Can’t say if they are ripping you off financially but we can say (assuming your story is the full story) they owe you photos/communication. What does your management agreement say about maintenance? Are they allowed to just do 6K of work w/o your approval? That is nuts. Our agreements clearly list a dollar amount when we seek approval (outside of emergencies). Photos should be provided up front, not something you are chasing. What cities are these homes in, maybe someone here can help you find a better PM.

    Your reports should be spelling out where the cashflow is going, but maybe you are not getting your reports.

    With the limited info we have it sounds like you are extending trust to a company that doesn’t deserve your trust.

    As for HWT prices, I agree the price you paid seems high assuming a normal swap out and the cheapest available tank was available. That said, locally we have struggled to source the cheapest $400 gas HWT as everyone has been out of stock forcing us to buy upgraded models. And if any work needs to be done on the inside because the tank you are replacing with is a different size the costs can get higher. Not willing to say they ripped you off with their price, but more info and photos are needed for sure.

    If they fail to communicate, ask around for a new manager. Good ones exist.

    3Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    5y

    If you request information or photos from your PM and they don't respond then I would find another PM by default and leave proper reviews about them on Yelp, Google, Yellow Pages, etc. 

    5Reply
  • Marco Petersen
    Pittsburgh, PA · Member since 2016 · 11 posts · 9 votes
    5y

    Bad PM! Get em outttttt nowwwwww!!!!!!!! 

    This should not be happening, so sorry to hear these stories... going to the city and meeting with a few is the way i do our out of state investments.... really weeds out the characters who have a good presentation but no real follow through as your sounds.

    2Reply
  • Patricia Steiner
    Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
    5y

    Before hiring a PM, have a contractor and/or handyman walk the properties and do an inspection checklist.  The checklists are available online for free.  The condition of the property along with photos establish the starting point - along with the age of the components (AC, roof, water heater).  This provides you with the knowledge and control you need to gauge maintenance and replacement requests.  It's also important to know how PMs make their money; a percentage of the rent will ensure they starve so it comes down to late fees and "upcharging" for maintenance requests.  So did the AC really need replacing or could it have been repaired?  Did they get multiple bids to present to you?  Did they put in a window AC/or portable AC to keep the tenants cool while options were considered versus calling in the first available at the "emergency pricing?"

    Landlords/owners see the PM as their path to "passive ownership." The truth is the PM is suppose to manage your properties but you have to manage the PM.  Expect more of yourself first.  Know your properties. Stop now and do an inspection.  And, then expect more of your PM.  You'll be able to gauge very quickly whether you're being taken for a ride or not.  

    There are a lot of ways to manage out-of-market/state properties; the PM model may not be the most efficient.

    6Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    5y

    If you have 6 properties and NONE of them are cash flowing for you, there is something wrong.... but it could be lots of factors.

    You seem to have a LOT of repairs...... the places are either severely neglected/have tons of deferred upkeep you inherited from the last owner and you didn't account for that when you decided to buy them as an investment....or these "renovations" were not really renovations...... or you are getting ripped off with unnecessary repairs at unreasonable prices.

    You either bought 6 POS properties where the numbers don't work or you didnt run them right, or you are getting ripped off

    When was the last time you actually saw these places in person? If it were me, Id be making a "house call" to every one of them with PM in tow

    3Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    Have you been to the properties?  I agree with Patricia and others.  Now might also be a good time to talk to the PM again and mentioned that you'd been happy with their performance, but recently there have been an unusual number of problems.  You could also talk about selling the properties and buying something closer to where you live that you can self manage.  Repeated repairs every month sends up red flags.

    0Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    5y
    Originally posted by @Charles Carillo:

    @Account Closed

    How are you finding these PMs? Is it from referrals? Have you reviewed their reports and cross referenced bank accounts? Tell them that any repairs over $X ($250?) need to be confirmed by you first.

    When was the last time you visited the properties? I would check to make sure the work has been completed that you paid for and find out what the actual condition is of your properties.

    $925 for a hot water heater is crazy. Lowes.com has a 40 gallon electric hot water heater for $379 (~$400 with tax). That is $525 worth of "fees". I

    Not necessarily; it depends on where the homes are located.

    Back in 2014 I replaced one in my home in Hollywood, FL. All in was around $600. A few months later I had to replace the one in my home in the DC area; picked up the same model from Home Depot and it cost just under $1000 to put it in. Different area, different method of making it work. 

    That said, OP needs to go see the homes stat!

    0Reply
  • Ariel K.
    TX · Member since 2018 · 154 posts · 92 votes
    5y

    You need to read your statements carefully. If they don’t give you statements, receipts, etc, you should run.

    Having a PM does not absolve you from being completely active in your business. It’s really important to keep track of everything. I have an apartment that had 3 plumbing issues in the same unit and I told my PM to actually send a plumber out there to look at the issue and not fix it. If you are more active, it will probably help.

    1Reply
  • Toben B.
    Investor · Tulsa, OK · Member since 2008 · 154 posts · 54 votes
    5y

    When I hired a property manager the first year was terrible as they set about fixing all kinds of small things I never had and the tenants never noticed. However after a year the bleeding stopped, the houses were fully fixed up and cash flow was stable. My property manager provides tons of receipts and itemized repairs monthly with my invoices. I had hear horror stories of property managers and did not hire until I found a personal referall. Now I will never go back to managing them myself as I am way too busy.

    If your property manager can't provide receipts then they are missing out on one of their core duties. Time to find a new PM.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Patricia Steiner:

    Before hiring a PM, have a contractor and/or handyman walk the properties and do an inspection checklist.  The checklists are available online for free.  The condition of the property along with photos establish the starting point - along with the age of the components (AC, roof, water heater).  This provides you with the knowledge and control you need to gauge maintenance and replacement requests.  It's also important to know how PMs make their money; a percentage of the rent will ensure they starve so it comes down to late fees and "upcharging" for maintenance requests.  So did the AC really need replacing or could it have been repaired?  Did they get multiple bids to present to you?  Did they put in a window AC/or portable AC to keep the tenants cool while options were considered versus calling in the first available at the "emergency pricing?"

    Landlords/owners see the PM as their path to "passive ownership." The truth is the PM is suppose to manage your properties but you have to manage the PM.  Expect more of yourself first.  Know your properties. Stop now and do an inspection.  And, then expect more of your PM.  You'll be able to gauge very quickly whether you're being taken for a ride or not.  

    There are a lot of ways to manage out-of-market/state properties; the PM model may not be the most efficient.

    in many areas air conditioners are stolen at frightening regularity.. 

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    2Reply
  • Account Closed
    OP
    Rental Property Investor · Tampa, FL · Member since 2018 · 15 posts · 10 votes
    5y

    @Toben B.

    Thank you for the response Toben. They always seem to go MIA or radio silence when I request a receipt. I think at this point I need to bet on my self and find a better way to mange my properties.

    0Reply
  • Account Closed
    OP
    Rental Property Investor · Tampa, FL · Member since 2018 · 15 posts · 10 votes
    5y

    @Jay Hinrichs

    Hi Jay I love your Honest feed back and comments. Do you know where I can find more information on how to manage my out of state properties with out a PM.

    Thank you

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    My friend just went to the dealership for an oil change. Her car has a K&M air filer, which is very distinctive looking. They get cleaned, not replaced. The service manager approaches her during the oil change and says your air filter needs to be changed. He shows her a dirty filter that is not hers! This is a national brand dealership. The point is dishonest people will lie about repairs to make money. It happens in every business (dentist, plumbers, you name it). That is why you need to verify everything and any large repair you should be contracting yourself. 

    Here are the steps I would take:

    1. For the AC units or any large repair, ask the PM or tenant to take photos of the new unit. Ask for photos of the serial number. You should be tracking serial numbers of all HVAC and appliances for all your properties. Ask for before and after photos of any repair.

    2. Tell the PM going forward that any repair over X amount requires multiple bids. Another option is tell them you will contract anything in these amounts yourself. 

    3. Require original receipts from the company performing work and ask the PM to itemize their markup/fee separately. This could be better for taxes, because it pulls their management cost out of the capital expenditure. It also provides transparency to their markup. Tell them, "it is fine you mark it up, but that needs to be transparent". Your PM agreement should have a markup amount specified, so both them and you should be comfortable talking about this.

    I do question where these properties are located and wonder if location is the real problem. People chase cash flow in low cost areas, but between low rents and rough tenants, these properties can struggle to cash flow. You live in Tampa, which is likely a better market to invest in. Consider moving to local investing, which gives you the advantage of either self managing or putting your own eyes on the property.

    2Reply
  • Brad Katronis
    Member since 2017 · 3 posts · 1 vote
    5y

    Hi Curtis. Sorry about your troubles for your rentals in Florida. 

    Have you considered self-managing? IF you have a good team in place it's really not that difficult - especially since your properties are in great shape. Then you have all the rent go direct to you and you would control pay-outs to vendors. This would give you ultimate control over expenditures. 

    As long as you have a good local leasing agent who can place tenants for a flat fee, and you know a few could handyman etc - it's really not hard.

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    5y

    My largest PM costs are the mediocre tenants, lack of anything preventative and not triaging service calls before sending out the Maytag Man.  

    The advertised 10% is bunk, especially if a tenant is being placed.  Estimate 16% and costs of mediocre tenants. 

    0Reply
  • Linda Wright
    Real Estate Agent · Member since 2018 · 39 posts · 23 votes
    5y

    @Curtis Fuentes

    as a PM myself I always provide receipts to the owners. Some thing is super fishy if they’re not giving you receipts on the repairs. And saying that, I will tell you that $900 is the going rate for someone licensed to have a hot water heater replaced in my area. But if they are not producing receipts for the ACs something is really wrong. Not to mention you should get some sort of warranty and you need to have that information of who replaced it. I would find a new property manager and find out what kind of reports and receipts they provide. I use Buildium in which the owner can go into the portal at any time and look at the receipt for the repair so other property manager should have something similar.

    1Reply
  • Joshua Adlam
    Property Manager · Tampa, FL · Member since 2021 · 65 posts · 29 votes
    5y
    Originally posted by @Account Closed:

    @Joshua Adlam

    Thank you for the response. One has has a loan for 342 and another a Heloc for 590. there’s always a AC replacement or some expensive repair even after I performed 30 to 40 rehabs on the homes except one. When I ask for receipts of the repairs the PM disappears or provides a generic receipt in the portal with no amp any name or overhead.

    The rented are

    1. 675

    2. 625

    3. 925

    4. 925

    5. 850

    6. 800

     I am going to send you a message to discuss further

    0Reply
  • Michael Haynes
    Investor · Tampa, FL · Member since 2016 · 679 posts · 288 votes
    5y

    Hello Curtis Fuentes. You just outlined what is wrong with the idea that a Newbie can buy rental houses anywhere and make it work with a Property Manager. Then, you showed that the idea of being an Absentee Owner is something that you can break your face on. And finally, you like everyone else out there, are looking for a safe place to park their Money and make 20% a year...The thing that I see is that Real Estate is not like Stocks and Futures Investing. It is not liquid and you cannot sit at home and make money on the computer like you can with Stock and Futures trading. They have mentioned on the news a few times recently, that if you had taken the three Stimulus checks from the new Administration and invested them in Dogecoin that you would have been UP a half million dollars. That is what the Markets are offering right now with Momentum Trading and Flipping houses in the right neighborhoods. If you have six almost paid off rental houses, then, plug in your numbers and get out as best as you can at this Top of the Market and just count on Equity Appreciation on the sale of each house. Go out there and do the selling yourself, so, you don't make anymore mistakes. 

    1Reply
  • Aaron Bashore
    Frankfurt, Germany · Member since 2019 · 7 posts · 3 votes
    5y

    @Curtis Fuentes

    Hey Curtis. I had this problem in Memphis TN and Toledo OH so I started using a VA (wakalainvest.com). That turned my 14 properties from cash negative to positive. I think the only way you can make money using PM's with SFH is through appreciation.

    Let me know if you want to know more about how to use a VA for out of state investments.

    0Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    Sounds like a combination of crap property management, and you are just not cut out for the game, great time to be a seller!

    0Reply
  • David B.
    Investor · Worcester County, MA · Member since 2016 · 122 posts · 72 votes
    5y

    ...@Curtis Fuentes.       I think we need more info to understand what's happening here. Based on the rents, it seems like these may be in rougher neighborhoods?  Are these low "C" or "D" areas? Are these A/Cs getting stolen?  Are the tenants turning over frequently? 

    0Reply
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