My wife and I have owned a property on which we've lost money on for the last 6 years or so. It started out as our primary residence in 2007 and stayed that way until we moved out of state in 2009. When we moved, the value of the house had fallen so much we decided to lease it out.I started leasing it out for $875 to get some money coming in the door. That price was totally set by me with no input from the PM. When I'd ask them what I should rent it out at, they provided little to no guidance. At that rate, we ended up losing $300 a month or so after PM fees of $87.5, HOA dues of $140, and an increased tax rate that goes from 4% for primary residence to 6% for secondary homes.
We've had issues with the PM in the past. Example- once we randomly received some handwritten letter from the tenant asking us to let them out of the lease. No heads up from the PM, just some random request from the tenant to move out. We ended up letting them, but it was a little frustrating.
Another time the rent didn't come in so I called the PM up and they're like "oh, the tenant moved out. Didn't you get the letter?" It turns out they mailed it to an address we'd lived at like 4 years ago in spite of literally every other letter from them being sent via e-mail. When I went to look at their website to see what the listing looked like- nothing. I listed the thing myself on Zillow/craigslist/trulia. I tried to raise the rent during this time to $1,100 while slowly reducing it a month at a time. I had some pretty good interest at $900, but for one reason or another, it ended up back at $875.
I refinanced the property which dropped our losses down to $165 a month. We moved back closer to the house so it's drain on us has been on my mind increasingly. I called the PM back in December since the tenant's lease is up at the end of January to see what the tenant was going to do. The PM said they'd call and find out. Didn't hear back.
I called them back the first week of January and asked about maybe seeing if we could raise the rent to $900 a month, with my unspoken goal of getting it up to around $950 or so next year. They said they'd already mailed out the renewal letter and that it was too late. I'm thinking this is ridiculous. Why wouldn't they ask me what I wanted to lease the place for before mailing it out? It's been at the same price for over 5 years now.
Just doing some research today, units identical to mine leased out for around $895-$1075
In any event, with a recent reassessment, my losses will drop to around $125 a month. I'm closer to the house now that I can take a more active role in managing the place. If I get rid of the PM, my losses will drop to around $38 a month.
My problem is this- I have no idea who the tenant is. If I terminate the PM, do they have to send me all the tenant's contact information, contract, etc.? My goal is for this thing to be cash flow positive in a few years. I've been lucky in that maintenance has been minimal over the last 5 years, but I need some positive cash flow in case of something going wrong.
Yes. Fire them. Manage the property yourself. You are already doing most of the work anyways!
@Jackie Chiles You should have a copy of the lease with their names, and you know where they reside. That's enough information to notify the tenants of the change in management. Ask the PM for all documents and contact information related to the tenants. Be sure to also ask for the security deposit they are holding (and have an escrow account set up to receive it).
I agree with @Jeremy Tillotson that you should read your management agreement to know what you may be up against in firing the management company. But don't let it deter you from taking that action if it's warranted. You may be in for a fight if you're only doing it to save PM fees, but if you have a legitimate reason for firing the PM, you may be able to get out clean from the management agreement.
I had the unfortunate pleasure of firing a PM just yesterday (who I just found out is a member of BP), and here I am at 4 in the morning writing transition notices to my tenants. It was the last thing I wanted to do, but it had to be done. Your road ahead won't be easy, but it will be worth it once you get the hang of it.
Good luck to you!
I would fire them. But before I did that, I'd go friendly, and in person, to get a copy of the leases and all other info I could gather. Like mentioned earlier, know the fees you may owe them in your contract with them. Fire them with specific instructions on what to do with the security deposits. Keep emails or a journal that you could use in court if you ever had to
If you decide it is best to part ways with the PM just write an email explaining you wish to terminate the agreement effective immediately (or perhaps 30 days from now as 30 day notice is common in PM contracts) & ask for all the contact info.
I'm sure they will have no problem supplying you with all the contact info & leases that they have for this tenant.
I finally got my parents to fire theirs at the end of the year. We went around to all their places and they introduced themselves while I totaled up all the deferred maintenance and repairs they had be charged for and told were done but hadn't been. One person had been without a shower that was supposedly fixed and paid for a year ago. Turns out the manager's idea of fixing it was to just tear the shower stall out and leave it bare. Somehow a refrigerator had been moved out to another property the tenant told them when they bought a bigger side by side but there was no notice to my parents and it didn't go to any of their units. PM does not answer calls now but they did finally get the contracts and a bunch of keys (only one working) in their mailbox one morning. Looks like they are out about $500 in rent for last year that the PM said was not paid but the tenants have docs on. Over all PM was a lying @[email protected]%$ slumlord at best if not an outright theif.
I agree, it sounds like you need to find a better PM but as someone mentioned, you need to review the management agreement to make sure you aren't going to owe them anything additional.
As a PM myself I pride myself on maintaining consistent contact with the owner as I basically work for them. They will get a copy of every lease we sign as well as have access to the background/credit check we run for the tenant. I will give the owner my opinion on the rent value of the property so neither of us have to deal with the frustrations of a vacant house for months. If the normal methods of renting aren't working, the owner and I will discuss a change in game plan and figure out why we are not able to get the property rented.
Check your PM agreement, ours includes a 30 day out that the owner can cancel the contract if they are not satisfied. The PM should absolutely provide you the tenant's information if you cancel their contract. If they won't you can either stop by the house or have someone in the area post a notice on the door. I recently needed to contact a tenant of a property of mine in NC, one that I have been managing from afar. I found someone on Craigslist who was glad to make a quick $20 for printing out a one page document, taping it to the door, and then emailing me a picture. Think he was a college kid, $20 goes a long way for someone like that. You could always utilize something like that to get in touch with the tenant if the PM refuses to give you the tenant's info.
Long story short it sounds like you should cut ties with this PM, wish you luck and let us know how it goes! I am curious to hear how the conversation goes with this PM if/when you cut them off.
You should fire them. Bad PM companies like this one is the reason I started my PM business.
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