Dealing with the management company

Milwaukee, Wisconsin
Managing Your Property
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Dealing with the management company

Bar Shalom Laniado
Investor · Member since 2021 · 9 posts · 6 votes

Hello everyone,

It's a pleasure to introduce myself to this community. My name is Bar and I'm a real estate investor. Firstly, I would like to express my gratitude for this great community that has given me confidence to invest in real estate in the USA.

I would like to consult with you about a situation I am currently facing. Two months ago, I purchased a Duplex in Milwaukee with the assistance of a professional and experienced individual. This person helped me to purchase the property and introduced me to his friend who runs a company that acts as a mediator between investors and property management companies (he takes a 3% fee from the rent and the actual property management company takes 7%).

The mediator's company carried out a "rent ready" renovation on one of the units for a total of $4000. However, a month later, I received an invoice from the management company (not the mediator) for another "rent ready" renovation on the same unit, which included repairing broken mirrors and holes in the doors. This has raised doubts in my mind about the quality of the renovation carried out by the mediator. If the mediator carried out a rent-ready renovation, how is it possible that they didn't fix the hole in the door?

I have been trying to get details about the first renovation from the mediator for over a month, but they have not provided me with any information. Furthermore, when I ask them for answers, they insist that I sign a contract that releases them from any liability.

In this situation, I would appreciate any help or advice on what to do next. Thank you all!

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Bar Shalom Laniado:

The lack of transparency and communication is a big red flag. A professional would send you the invoice along with a detailed list of work completed and picture or video evidence. Only a crook or an incompetent would hide information.

Find a professional company and fire these chumps.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Bar Shalom Laniado:

    The lack of transparency and communication is a big red flag. A professional would send you the invoice along with a detailed list of work completed and picture or video evidence. Only a crook or an incompetent would hide information.

    Find a professional company and fire these chumps.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    3Reply
  • Account Closed
    Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
    3y

    @Bar Shalom Laniado I agree with Nathan’s assessment completely. I would also suggest posting in the Milwaukee forum asking if there is someone local that can drive by and put eyes on the property. There are usually BP members that are willing to do this for free. (I have done this in my market for others).

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    3y

    You've been scammed. These types or arbitrage deals are a red flag, probably also illegal, because you need to be licensed in order to receive a commission. 7% is cheap (on less than $1000 rent), so they have to find other ways to make money to stay in business. 

    Would I be guessing wrong that you paid less than 100k for the duplex, you have not seen it in person, you have only been provided with zoomed out pictures and there was no professional inspection? I am sorry this happened to you! 

    You do not need a mediator and there are several good PMs in Milwaukee that have been in business for many years and you can check their track record online!

    1Reply
  • Bar Shalom Laniado
    OP
    Investor · Member since 2021 · 9 posts · 6 votes
    3y
    Quote from @Marcus Auerbach:

    You've been scammed. These types or arbitrage deals are a red flag, probably also illegal, because you need to be licensed in order to receive a commission. 7% is cheap (on less than $1000 rent), so they have to find other ways to make money to stay in business. 

    Would I be guessing wrong that you paid less than 100k for the duplex, you have not seen it in person, you have only been provided with zoomed out pictures and there was no professional inspection? I am sorry this happened to you! 

    You do not need a mediator and there are several good PMs in Milwaukee that have been in business for many years and you can check their track record online!

    @Marcus Auerbach Thank you very much.

    The cost of purchase was $97,000 and the total rent is $1650. Prior to the closing, a professional inspection was conducted. However, the mediator company responsible for the renovation did not provide us with a detailed report of what was actually fixed. Instead, they only gave us a report with an opening balance of $4200. What's odd is that obvious issues, such as a hole in the door, were not addressed. When we inquired about the renovations, the mediator company explained that the new tenant had requested additional work. We would like to obtain a detailed report of the first round of renovations so that we can compare it to the inspection we conducted.

    We have requested details of the first renovation that the mediator company completed, but they have yet to send us the information despite more than a month passing. We are concerned about the charges they have applied to our account without providing explanations for the work completed, and we have not transferred money for the work - we only have a negative balance. In light of these concerns, what steps can we take to address this issue while also proceeding with our plan to switch to a different management company.
     

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  • Bar Shalom Laniado
    OP
    Investor · Member since 2021 · 9 posts · 6 votes
    3y

    @Nathan Gesner @Account Closed
    We appreciate all the advice provided so far, and we do plan to transition our property to a more competent management company. However, we would also like to address the current situation with the mediator company. We do not want to leave the company without an explanation for the charges applied to our account, and we are concerned that they will request us to close the negative balance. We are unwilling to pay $4K without any clarification or justification. Therefore, what steps can we take to obtain the necessary information and resolve this issue before transitioning to a new management company?

    We are willing to pay the mediator company for the renovation work if they provide us with an appropriate report detailing the work done. However, at present, they have only given us the cost without any specifics, which makes it difficult for us to justify the charges.

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  • Richard F.
    Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
    3y

    Aloha,

    I am certainly not familiar with Wisconsin laws, but I cannot comprehend the need for a third party "mediator" in an ongoing relationship. It sounds like a pure ripoff based on your stated details, and I would suggest having a heart to heart with your original "professional and experienced individual", whom you do not actually state is a Licensed RE sales person. Was this a personal friend, or recent acquaintance perhaps from some REI "meetup", or what exactly was your reason for so easily accepting his recommendation?

    What are the qualifications of the mediator's "company" that spent $4K on the first renovation? Licensed contractors? Properly insured including Worker's Comp and General Liability?

    What are the qualifications of the "Management Company"? Same questions...are they duly licensed for your locale? Proper insurance? AND, did they document "before" and "after" the mediator's work? the Management Co work?

    Personally the whole thing sounds fishy, my advice would be take all documentation (including any all agreements and written or emailed communication with the mediator and the management company), photos, contact info for all parties, and documented timeline of events and sit down with a competent attorney to see just what you have gotten into.

    1Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Bar Shalom Laniado:
    Quote from @Marcus Auerbach:

    You've been scammed. These types or arbitrage deals are a red flag, probably also illegal, because you need to be licensed in order to receive a commission. 7% is cheap (on less than $1000 rent), so they have to find other ways to make money to stay in business. 

    Would I be guessing wrong that you paid less than 100k for the duplex, you have not seen it in person, you have only been provided with zoomed out pictures and there was no professional inspection? I am sorry this happened to you! 

    You do not need a mediator and there are several good PMs in Milwaukee that have been in business for many years and you can check their track record online!

    @Marcus Auerbach Thank you very much.

    The cost of purchase was $97,000 and the total rent is $1650. Prior to the closing, a professional inspection was conducted. However, the mediator company responsible for the renovation did not provide us with a detailed report of what was actually fixed. Instead, they only gave us a report with an opening balance of $4200. What's odd is that obvious issues, such as a hole in the door, were not addressed. When we inquired about the renovations, the mediator company explained that the new tenant had requested additional work. We would like to obtain a detailed report of the first round of renovations so that we can compare it to the inspection we conducted.

    We have requested details of the first renovation that the mediator company completed, but they have yet to send us the information despite more than a month passing. We are concerned about the charges they have applied to our account without providing explanations for the work completed, and we have not transferred money for the work - we only have a negative balance. In light of these concerns, what steps can we take to address this issue while also proceeding with our plan to switch to a different management company.
     


     Seems very clear to me that it's time for you to talk with a Real Estate Attorney in this jurisdiction area. 

    From info given here, it very strongly looks to be a scam in the turn-key segment. Which, unfortunately, most marketing "turn-key" are a scam in 1 way or another. There is some great operators in that space, but they are the exception. And many imitators. 

    1Reply
  • Rebecca KnoxBusiness Member
    Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    I don't understand the mediator's role but I agree with Marcus that I've heard of people that act like they are managing a person's property but in reality, it's an actual property management company managing it and all they are doing is marking up their charge---contractors do this as well. 

    Hire a PM directly. I wouldn't pay any invoice that isn't transparent. Here in WI, you can file a complaint with DACTP if you can't find a resolution by trying to work it out directly with the mediator. 

    Captain Save-A-Home LLC
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  • Travis Hill
    Investor · Multiple · Member since 2019 · 175 posts · 150 votes
    3y

    @Bar Shalom Laniado sorry to hear about your experience. I am an out of state investor and I go to great lengths to vet any and all communications with a potential team member. With the technology today you have the ability to have pics, videos, etc all set up in a google drive or a dropbox type app that allows for any and all communication to be verified. Like @Marcus Auerbach and others have stated you gave money to a shady operation. For example, @Marcus Auerbach is very active here on Bigger Pockets, that initially establishes some trust of credibility. I know I could reach out him. Others that have commented also have active accounts here. Vet, vet, vet. Best of luck moving forward.

    1Reply
  • Bar Shalom Laniado
    OP
    Investor · Member since 2021 · 9 posts · 6 votes
    3y

    Thank you guys,

    Yesterday, I attended a real estate investors conference where I had the opportunity to meet the individual who runs the mediator company. During his speech, he emphasized that management companies are not always able to provide extensive details and personal attention to every investor, and that in some cases, they may have to let go of investors who excessively harass them.

    0Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    3y
    Quote from @Bar Shalom Laniado:

    Thank you guys,

    Yesterday, I attended a real estate investors conference where I had the opportunity to meet the individual who runs the mediator company. During his speech, he emphasized that management companies are not always able to provide extensive details and personal attention to every investor, and that in some cases, they may have to let go of investors who excessively harass them.



    What is he suggesting? Just accept it?? 

    Of course an owner should not harass the PMC! Before that becomes necessary, find a better PMC!

    If a PMC manages hundreds or thousands of units (think economy of scale!) extensive details and personal attention should not be necessary! If the PMC has robust systems and automated reporting in place so the owners have visibility what is happening with their assets (and don't need to harass anyone LOL) 


    PS: I would love to know who this mediator is!!

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