Property Management Firm Not Paying on time.

8 Replies

We happened to buy a house and have been renting it to section 8 tenants. We have had this property for about a year now. We have been using a property management since we have brought this property.

Since Jan2015 they have not been paying on time. The cheques they gave us has bounced on us 3 times. Currently they are holding to 3 months worth payment about 2.5K. Contractually he was supposed to pay March's rent on April 10th, but the cheque he deposited bounced and we have been behind him for last couple of weeks for the payment. 

What should we do to have our money. I don't know if a lawsuit will help and if it would be worth it ( it would not be worth if it costed more than the money I have to get).

Fire him NOW!  He can not handle his financing and has no business handling yours/others.

I happen to own a property management company in Tucson, and we have about 380 units and about 150 owners, so I'm pretty familiar with how the owner disbursements should work. 

It sounds like this PM company is insolvent. There are a ton of small time unlicensed (and some licensed) PMs that don't have any real idea of what they're doing. PM accounting is one of the most difficult and complicated types of bookkeeping out there, and that is one of the number one reasons that you see PM companies fail. Here in Tucson, there was a big PM company that folded last year because it turned out that their accountant or internal bookkeeper or one of the partners had over time stolen several hundred thousand dollars in owner reserves, prepaid rents, tenant security deposits, etc. Lots of owners lost thousands of dollars that they had in owner reserves or prepaid rents that the PM company was holding. 

As far as your situation, I would immediately contact your state's department of real estate, and file a complaint. You should also contact the local Association of Realtors office, if they are members of it, and file a complaint there as well.

This post has been removed.

That doesn't make any sense. There's no reason you should have to wait until April 10 to receive your March draw. It should be paid within a few days of receiving the rent.

Any approved charges, along with the management fee, are deducted directly from the month's rent. And you receive the remainder as your draw. All of that should happen by the 15th of the month, assuming the rent is paid on time.

There's no reason in the world why the check should bounce since they are supposed to be paying you from funds that belong to you in the first place. The only thing that would explain this is a co-mingling of funds situation, which is highly illegal in most states.

Smells like bankruptcy. Fire this PM and try to recover as much as possible, and hire a new one ASAP. 

If you don't fire him, you are just throwing your money away.

Firing the PM immediately goes without saying.  I would document everything and start a small claims court action.  Here you can have an attorney-less court hearing for disputes less than $5k for like a $65 filing fee.  If it's close to the limit in your area, just sue for the small claims limit.  Also, like @Yishi Garrard points out, report them to your state dept of licensing and Realtor's Assoc.

Always manage your own investment if in your backyard at all possible. No one will take care of your investment like you will.  Sorry, @Anu Anil . Had to point out the obvious!

First see if this PM company and person is even licensed in your state where the property being managed resides.

This sounds simple but I have heard of people time and again that says people are not even a PM company and they never checked.

Definitely from what you posted it sounds like something bad is happening. If you have no compliance issues with your  section 8 property then the deposits should be coming in monthly.

People need to be extra careful with residential PM companies. I know some that manage hundreds of units and with infrastructure and reporting make only 60k a year profit. For the amount of work involved that is an ultra low return. Investors try to make a deal with a PM company thinking they are saving bucks. In many cases that broker/agent for residential is living off the 50,100 bucks etc. that property is providing them in monthly fees and then as soon as a regular sale where they can make thousands or more comes along then they hardly give any time to your property. 

As another posted pointed out, this situation is not going to get better.  With everyday you hold out hope to get your money you are going to burn through more and more money.

I would call Section 8 and have them immediately start mailing or depositing your rents to you directly.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.