Property Management Transition

[Kristoffer Bergen]

Hey all.

I live in WA state and have several properties in surrounding Nashville, Tennessee that are managed by a very small property management company. After some recent not sitting well scenarios we want to go with another company OR manage the properties ourselves.

1) Recommendations for management companies that you have had direct experience with?

2) Managing remote when we live in Seattle, good/bad idea?

3) Regardless of 1 + 2 how and what are the steps to transition away from management company?

Thanks, any all advice welcome.

[Nathan Gesner]

Quote from @Kristoffer Bergen:

3) Regardless of 1 + 2 how and what are the steps to transition away from management company?

You need a clear, written understanding of how the transition will take place with your current manager. They should:

1. Notify the tenants of the change 30 days prior to the effective date;

2. Written confirmation that termination of PM services will be 11:59PM on [DATE]. Until termination, PM remains responsible for the properties and tenants in accordance with your PM Agreement;

3. On the effective date, transfer to you (or the new manager):

    - Copies of all tenant documents, including leases, applications, payment history, notes, etc.

    - All spare keys, openers, or codes

    - Security deposits

    - Copy of notification sent to tenants announcing the transition

    - Final statement showing what funds were transferred to you

    - Notice of any outstanding maintenance, unpaid balances, or other issues you should be aware of.

There may be more based on your situation.                       

[Nathan Gesner]

I forgot to provide some tips for finding a new PM.

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

[Tracy Streich]

@Kristoffer Bergen   I have to agree with @Nathan Gesner.  Be very clear with the new PM in what you are expecting and what the shortcomings have been with the current PM.   If you are not clear you may find out they do it the same way!  Self management is always and option but much more difficult if you do not live in the market. 

[Keith Morgan]

I am a Property Manager of PMI Fort Campbell in Clarksville/Montgomery Co, approx 40 miles north of Nashville.

If you choose to self-manage, then you will have some challenges if you are not local. Emergency maintenance, periodic property condition assessments, and keeping up with current market rates. It can be done, but you should think about your goals as an investor. 

If you want to be actively involved in the day to day activities of your rental properties, then self-manage. It will take up some time away from your other daily priorities or future goals being a little more laborious. If you are more comfortable with growing a portfolio, then take the time to find a good portfolio manager that meets your needs, goals, and can build a working relationship with. Hiring a manager will allow you to be hands off the properties you own so you can focus on growth.

Although you have had some issues with prior PMs, you may need to shop around for a while, weighing the pros and cons, ensuring that a PMC can execute on the services that are your biggest concern. Check reviews of past owners & tenants to see what topics have been consistently brought up, whether good or bad.

These are the top 3 in my opinion

1. Protecting your assets through assessments, inspections, tenant screening criteria, and other risk reducing activities that meet your needs

2. Having a reasonable consistent process for rent bumps (market rate), marketing, tenant placement, and rent collection to ensure maximum income while reducing vacancy rate

3. Having a maintenance program that will preserve and improve your assets through scheduled maintenance intervals and making improvements in between occupancy turnover. 

[Kristoffer Bergen]

Thank you all greatly. If anyone has any recommendations for PM in Nashville please let me know.

[Drew Sygit]

@Kristoffer Bergen

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

[Ross Asher]

I have some ideas for you. Sent you a message. 

[Luka Milicevic]

@Kristoffer Bergen

Sending you a PM with a few to interview

[Kristoffer Bergen]

Thank you to everyone! QQ: Is it a bad idea to schedule a time to do a walkthrough of our properties when there are tenants living there? Our current PM is discouraging against us doing that which I feel is a bit off. The reason we want to go into the homes is to see the condition and validate some recent repairs they are claiming are completed but when a new plumber went in he said the house is in rough shape. PM claims it is a liability for us to go in. Thoughts?

[Peter Tverdov]

It's not a liability but I would be personally be a little annoyed by that. Don't micromanage. If you think they're not a fit, end the relationship. 

[Jia Tse]

@Kristoffer Bergen curious if you have settled on a property manager.  I'm looking for a new one as well

[Kar Sun]

Any property management I have come across is never good. Big or small. I prefer to keep my portfolio small and manage everything myself. Based on  my key criteria I also prefer to have local properties.

[Kristoffer Bergen]

Quote from @Jia Tse:

@Kristoffer Bergen curious if you have settled on a property manager.  I'm looking for a new one as well

 We are in the process although today we sent a mail ending our relationship with them. I do appreicate the comment from @Peter Tverdov regarding, "if not a fit move on" and taking action today. Thanks. So in the meantime we will self manage but when we make a call I will let you know. 

[Kristoffer Bergen]

Hey all, how long is reasonable for the property management company to transition after termination? I sent them an email terminating them to which they didn't respond and has been over a week and nothing.  I asked if we could wrap this up in 2 weeks total and this is the response I got. I dont know what I don't know and looking for your advice. 


Email from Property Management - 

------ < email >>

There are several factors here you must consider:

1. You cannot set the terms of a termination. We have to follow our own policy as well as legal guidelines according to TN laws, federal law, and our attorneys recommendations. An owner cannot just decide how/when a unit is turned over.
2. We require a 30 days written notice through the end of the final month and the two weeks begins once that notice is up. This is standard with most PM companies because we understand what the client typically does not about legal notices, proper transition, billing, latent invoices, etc. and on top of those things you have THDA payments & attorneys fees we must make sure are all allocated appropriately before a change.
3. We will have to give notice to tenants as well as their legal rights as to their funds.Do you understand the TN laws around this? Do you have all the appropriate bank accounts and notices set up? The moment we release any funds to you, you are beholden to these just like a company is since you are not having us transfer directly to another management professional.
4. There will likely be balances on your account. Yes, there may be credits as well, but there is also a termination fee with our office for any property on which the management agreement hasn't expired since you are not waiting until the end of those for turnover.
So please rest assured we are not delaying on our end. Our goal is to turn these over to you as soon as possible and we will gladly do so, but you need to understand this isn't a simple situation where an owner makes a request and it happens by the deadline they give. There is much more to this than that and we typically have about 45 days to do so. We will let you know the moment we are finished so you can settle any final invoices (after any credits if applicable), sign the termination agreement, and we will alert you how to receive keys & any releasable documents.

------ < end email >

Any advice would be excellent. Thanks, Kris.