What difficulties might surface when switching property managers?

Question

Let's say you already have a couple deals down in your portfolio, but decide later on to switch property managers, what kind of obstacles might this transition bring up?

Maria Bakaj · Answer

@Kajohn Chen Make sure that the cutover responsibilities and ownership of activities are clearly defined for the property manager rolling off and the property rolling on.  For example if the property is recently vacant, who is in charge of arranging the cleaners and making any necessary repairs.  If you are doing this with existing tenants make sure they are aware of the change and know the exact cutover date and the new property manager's contact info.

If this is a property manager for a large building, there will be a large learning curve-not just with the property but with all the tenants and their personalities.

If this is a property manager for individual investments you may need to pay for a few things you already have depending on the setup of your agreement.  For example, we already had existing staged photos but with our new property manager they took new professional photos un-staged and we could not opt out of it.

Al D. · Answer

@Kajohn Chen Check your contract with the existing agent to make sure you won’t owe them any fees for some period of time after letting them go.  I’ve seen contracts that have this provision.  It is a fair expectation, in my view - so, even if the next PM may have it, it’s fine.

But: Personally, I’ve entered into such contracts only if/when that section was amended to read something along the lines of “...unless terminated for cause.”  If the future PM won’t budge on such stipulation, it’s a warning sign to me (but does not necessarily make them a bad operator - they may just stick to “Our lawyer told us not to change anything” explanation/excuse.  I just have my own quirks - due to prior bad experiences - so, such a small amendment/stipulation should not be a big deal for their “lawyer.”)

Other than that, I expect the oncoming PM to get in touch with the outgoing one - once they’ve been told by me that I am letting them go - to make sure that nothing falls through any gaps during the transition, including advising the tenants about whom to call in an emergency after a specific date.

Kajohn Chen · Answer

Thank you, @Maria Bakaj. I can see how an investor should pay extra attention to these little details at least during the transition. Making sure the tenants are informed of the event is also a good idea.