Turnkey Nightmare: Property Manager Ignored My Warning About a Missing A/C…

Memphis, Tennessee
Out of State Investing
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Turnkey Nightmare: Property Manager Ignored My Warning About a Missing A/C…

Thomas Beard
Member since 2023 · 14 posts · 4 votes

I’m looking for guidance from more experienced investors on how to handle this situation.

About a year ago I purchased three turnkey rental properties in Memphis through an out-of-state turnkey company. Initially everything seemed great. The purchase process was smooth, the properties rented quickly, and the company had strong reviews and presented themselves as a professional team that handled everything.

However, once the properties were under management, things slowly started to unravel.

I began noticing frequent errors in the property management accounting. I found myself reviewing every transaction carefully and contacting them regularly to correct mistakes. I understand the concept of “managing the manager,” but the number of issues felt excessive. My point of contact was also very difficult to deal with there was never any ownership of mistakes, only excuses.

Around the middle of the year the management company switched to new software, and it was clear my point of contact didn’t know how to use it. That created even more confusion.

At one point I was on the phone with the managing partner for something unrelated and respectfully shared some of my concerns. It seemed like they were heard at the time.

Then things took a turn.

About a year after buying my first property, I received an email offering a $175 annual property inspection. I agreed. When the report came back, it wasn’t really a report just a collection of photos.

While reviewing the photos, I noticed something strange: I didn’t see an A/C condenser anywhere.

I’ve never visited the property in person, but I had a good idea of where it should be based on previous photos. It wasn’t there.

I emailed my point of contact and told her I believed the condenser might have been stolen. I also asked for someone to go back out and confirm whether it was actually there.

Her response was basically:

  • The inspector didn’t say it was missing.
  • The tenant hadn’t reported any issue.

She also told me that the company was no longer doing the HVAC inspection and filter program I had originally signed up for when I bought the property.

Not satisfied, I called the managing partner directly and explained the situation. His response was essentially:

“It’s April in Memphis. If the tenant didn’t have an A/C condenser, we would know about it.”

Since I live nowhere near Memphis, I was relying on their expertise. I let it go.

Fast forward one year later.

My previous point of contact had been fired, and I was assigned a new one. I agreed to another annual inspection.

This time the report clearly stated:

The A/C condenser is missing.

At this point I was furious.

I immediately contacted the property manager and asked them to file a police report so we could submit an insurance claim. Their response was that too much time had passed to file the report or an insurance claim.

In my view, the only reason time passed is because the issue was ignored after I brought it to their attention the year before.

After escalating the issue, the management company said they would cover some of the replacement cost, but that the condenser itself is ultimately the owner’s responsibility.

Meanwhile, the managing partner who said he would call me still hasn’t.

From my perspective this seems pretty straightforward:

  • The inspector failed to identify the missing condenser.
  • My point of contact dismissed my concern when I flagged it.
  • The managing partner dismissed it as well.
  • Their negligence prevented a timely police report and insurance claim.

Because of that, I believe the management company should cover the full cost of replacement beyond my insurance deductible.

At this point I’m honestly feeling defeated and considering terminating the relationship entirely.

My questions for the community:

  1. Am I being unreasonable expecting them to cover the full replacement cost?
  2. Has anyone dealt with something similar with a turnkey provider?
  3. What leverage do I realistically have here?
  4. Would you push harder, pursue legal action, or just move on and change property managers?

Any advice would be greatly appreciated.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6mo

U can file a police complaint anytime.. thats BS about to much time.

u cant expect the PM to pay anything for the condenser it was stolen. which is common in many areas of the deep south and if you dont have it caged when you replace it put a cage around it.

One of the identifying factors when buyer these type of homes in these type of rental areas is cage on condenser and bars on windows and doors.. this will tell you the type of neighborhood your buying in. purchasing 3 homes with out going there is pretty wild in my mind. U want to get a feel of the streets not jsut the front of the house

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  • Mark S.Pro Member
    Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
    6mo

    Fire them

    4Reply
    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Mark S. 

      That’s definitely something I’m considering.

      At the moment I’m trying to figure out whether this was just a failure by a specific employee (who I was told has since been fired) or if it reflects a larger issue with the company’s systems and oversight.

      Before making a decision, I want to understand what they’re willing to do to make the situation right and whether they’re taking responsibility for how this was handled. If not, then changing management may ultimately be the right move.

      0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6mo

    U can file a police complaint anytime.. thats BS about to much time.

    u cant expect the PM to pay anything for the condenser it was stolen. which is common in many areas of the deep south and if you dont have it caged when you replace it put a cage around it.

    One of the identifying factors when buyer these type of homes in these type of rental areas is cage on condenser and bars on windows and doors.. this will tell you the type of neighborhood your buying in. purchasing 3 homes with out going there is pretty wild in my mind. U want to get a feel of the streets not jsut the front of the house

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    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Jay Hinrichs 

      I think the part that might be getting missed is that my concern isn’t simply that the condenser was stolen. I understand that unfortunately happens in some markets.

      My issue is that the condenser was already missing at the time of the inspection and it wasn’t noted in the report. I was the one who noticed it and brought it to the property management company’s attention in writing and over the phone, and I escalated it to the managing partner.

      If the issue had been addressed when I first reported it, I would have had the opportunity to file an insurance claim at that time. Because nothing was done and the situation was essentially ignored, that window to handle it properly with insurance was taken away.

      Also just to clarify, I don’t have a problem with the area itself. I understand the realities of investing in different markets and the risks that can come with that. My concern is strictly about how this specific issue was handled after it was identified.

      0Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      6mo
      Quote from @Thomas Beard:

      @Jay Hinrichs 

      I think the part that might be getting missed is that my concern isn’t simply that the condenser was stolen. I understand that unfortunately happens in some markets.

      My issue is that the condenser was already missing at the time of the inspection and it wasn’t noted in the report. I was the one who noticed it and brought it to the property management company’s attention in writing and over the phone, and I escalated it to the managing partner.

      If the issue had been addressed when I first reported it, I would have had the opportunity to file an insurance claim at that time. Because nothing was done and the situation was essentially ignored, that window to handle it properly with insurance was taken away.

      Also just to clarify, I don’t have a problem with the area itself. I understand the realities of investing in different markets and the risks that can come with that. My concern is strictly about how this specific issue was handled after it was identified.

      I dont personally think you lost your window to file a claim.. you file a claim when you are first made aware of the situation.  U dont rely on PM to inform insurance.. file the claim but if you do expect your insurance to either get cancelled or jump up in price.. Most folks that have their condensers go missing never file complaints.. Its just part of doing business in that part of the world unfortunately.. And one of the key indicators of where to buy and not buy.. Caged units windows barred front door barred those are hard pass in my mind.  For the out of state investor .. locals can handle it as they are for the most part on it.  NO PM can be at your property every day every month etc etc.. Even if you do quarterly inspections it might get stolen the next day after the inspection..  ALSO I agree with the PM in that part of the world the tenant is going to be complaining like crazy if they have no AC.

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      1Reply
    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Jay Hinrichs totally understand and appreciate your input. If that is the case then it really just comes down to ignorant property management. They are claiming you can't file a claim and you can't make a police report which is plainly false information. Now what becomes concerning to me then is that if they don't have the expertise to figure that out. How can I trust them to do anything else correctly. 

      0Reply
  • Michael S.
    Huntsville, AL · Member since 2018 · 577 posts · 864 votes
    6mo

    @Thomas Beard - here's what I'd do - take it for what it's worth, and I'm not a lawyer, so no legal advice has been given (I guess we have to make that disclaimer???).

    -NEVER buy a property without seeing it yourself unless a trusted business partner with skin in the game has seen it, or you are financially secure to absorb a total loss if you were completely wrong about it.  

    -Fire the manager - if they lied about the condenser, imagine what else they lied about. Or keep the manager, and wait until you get served with a lawsuit from a tenant for something else the property manager never told you about or neglected to address. You (or your LLC) is ultimately liable.

    -Make sure you have at least 2 million in liability coverage for your LLC or your personal umbrella now before you find out something else has gone wrong that you're not aware of.  

    -Spend a couple hundred dollars for a teleconference with a real estate attorney in Memphis to clarify what the laws are there - then file a small claims suit against the property manager for breach of contract regarding the HVAC if feasible per the attorney if you desire to pursue this avenue.  Or just replace the condenser and move on.   

    -I have no desire to keep rentals in a neighborhood where HVAC theft occurs like this - consider selling your properties into a 1031 and then invest in a location you know well and/or is local.

    Good luck - use this as a significant learning experience moving forward.     

    4Reply
    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Michael S. 

      I appreciate the thoughtful response and the advice. I may end up pursuing legal counsel, or at the very least getting some professional advice on my options.

      What’s been frustrating about this situation is that the inspection missed the fact that the condenser was missing, and the property management company also failed to catch it even after I specifically raised the issue. Because of that delay, I lost the opportunity to file an insurance claim within the proper window.

      From my perspective, that’s where the responsibility question comes in. If the issue had been identified and communicated when it should have been, insurance likely would have covered it. Instead, that opportunity disappeared.

      I’m also holding this company to a higher standard because they are a large sponsor of BiggerPockets and present themselves as a professional, investor-focused turnkey provider. I would expect a company with that level of visibility in the investing community to handle situations like this differently.

      At this point I’m still hoping they’ll step up and make it right, but I appreciate the perspective and may look into legal advice if needed.

      0Reply
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    6mo

    @Thomas Beard  You may believe you have a management issue, but I am fairly confident the problem is primarily the real estate itself. Have you evaluated how these properties would perform if they were sold in today’s market, including how they might hold up during home inspections?

    As for management, if the neighborhood is what I suspect, the reality is that the day-to-day operations are likely being handled by the least experienced and least qualified personnel imaginable because that's all this real estate can justify absorbing from a cost perspective.

    [email protected]
    6Reply
    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Stuart Udis  That’s a really interesting point. When you say the real estate itself might be the bigger issue, are you referring more to the neighborhood fundamentals, tenant profile, or the resale/inspection risk you mentioned? I’d appreciate hearing you expand on that a bit. And if you have an my advice on what I should do moving forward. That would be appreciated 

      0Reply
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    6mo

    That is exactly the issue. The real estate itself is more demanding to manage, while also relying on lower-skilled personnel to handle the day-to-day managerial operations. That combination is a losing proposition and unless there are very compelling reasons why the properties will achieve meaningful appreciation within a short timeframe I am fairly certain the issues will only worsen between capex and opex demands. The reason why meaningful appreciation helps is it allows for opex and cap ex to be absorbed easier and rent growth and improvement in tenant base will mean better management options. 

    If you do not believe that's a realistic outcome, I would evaluate selling because these types of properties are rarely sustainable absent meaningful appreciation.

    [email protected]
    3Reply
    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Stuart Udis I find this is be valuable input and something I have not heard or considered. As an ignorant novice I  believed I was entrusting my investment to an expert in real estate that knew the ins and outs of the area, as well as the laws and processes. In reality it seems like these companies hire low skilled low paid employees because there isn't enough profit to justify anything more than that. 

      to be honest it all feels a little deceptive to me. 

      0Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    6mo

    If it were mine I would have this repaired so the system is up and running (so the renters are not without HVAC) because if the renters are disgruntled--doing a turn is very costly.

    This will remove the discomfort of the renter which is smart to keep in mind also.

    Good Luck!

    0Reply
    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Scott Mac absolutely, there is no question It will be repaired immediately 

      0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    6mo

    Do not buy in these type of areas. Let me guess none of the 3 are really cash flowing positive EOY either after all the running costs, repairs, etc. assuming you have them mortgaged? The returns in these areas are all on paper and the bad tenants/neighbors just destroy any cashflow. 

    P.S. I would never make an insurance claim for something tiny like a AC compressor. Your insurance rates on all properties will likely go up once you have a claim and negate any money received. I do $10k deductibles so the insurance is for major emergencies such as lawsuits or major damage such as a fire. You save a ton in premiums this way also. 

    1Reply
    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Henry Lazerow thanks for the input, up until now they have been cash flow positive eoy but in my opinion not enough to be worth the headache. 

      this is an hvac condenser unit not just a compressor. It will likely cost thousands to replace. 

      0Reply
  • Thomas Beard
    OP
    Member since 2023 · 14 posts · 4 votes
    6mo
    I appreciate all the feedback and perspectives. I understand that buying out of state and working with turnkey providers comes with risks, and that’s a separate conversation worth having. However, the main question I’m trying to get clarity on from the community is this: The outside condenser unit was stolen, but the issue is that the property management company, inspector, and managing partner were all made aware that the unit was missing shortly after the inspection. Despite this, no police report was filed and no insurance claim was initiated at that time. Because of that delay, I’ve now been told it is too late for me to file a police report or submit an insurance claim. In other words, the opportunity to have insurance potentially cover the loss was effectively taken away. So the core question I’m looking for input on is: In a situation where a property management company and their team were notified of a missing condenser but failed to take the necessary steps to document the theft or file a report in a timely manner resulting in the owner losing the ability to pursue an insurance claim should the management company bear responsibility for the replacement cost? I’m really trying to understand how others in the community would approach accountability in this specific scenario.
    0Reply
  • Thomas Beard
    OP
    Member since 2023 · 14 posts · 4 votes
    6mo

    Additinally, A lot of the comments are saying buying out of state and buying in these Memphis neighborhoods through turnkey providers is a bad idea.

    That raises a genuine question for me though. The company I worked with is one of the most (if not THE most) well-known turnkey operators. They have very strong Google reviews, a large presence in the investor community, and they’re even a large sponsor of BiggerPockets.

    If these turnkey models in these neighborhoods are widely known to be problematic, why do these companies still maintain such strong reviews and reputations? And why aren’t they getting consistently called out in places like BiggerPockets if the issues are this common?

    I’m not asking that rhetorically I’m honestly trying to understand whether this is a case of me getting unlucky, or if there’s a reason that these companies aren't getting absolutely destroyed in forums and reviews. 

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    6mo

    I think we all think we know which TK company you are referring to so I will venture a guess of REI nation (formerly Memphis invest)

    They have a good reputation because they typically handle things fairly and it is my belief that offering to pay a portion of your cost is pretty fair.  They made a mistake and are trying to keep you happy.  The reality is most investors do not make a clam for the ac condenser being stolen.

    I believe as @Jay Hinrichs indicated you can still make a claim based on when you and/or pm knew it was stolen.   Until recently, you believed it was not stolen due to what the pm told you.   Pm believed it was not stolen because what tenant in Memphis can go through a summer without an AC?  I suspect I may have jumped to the same mistaken conclusion that the AC must be working.

    Now for investing in areas where AC condensers get stolen, you have to recognize expenses/vacancies/delinquent payments will be higher.  Higher maintenance, higher cap ex, higher delinquencies, more unit flip costs.

    The fact that this seems to be your biggest complaint and the pm company offered some compensation for their mistake (I think a more reasonable mistake than you do, how did a tenant make it through a Memphis summer without AC)? is an indication to the turnkey company’s strengths.   It is not easy to pm in those areas.

    Did you look up Memphis crime rate before you purchased?   Challenging market to pm.   Those that are advocating firing the current pm likely are unaware of the challenges.  I think you will be challenged to find better.  The reviews are based on the challenges of the market and their fairness in handling issues  

    I personally would not choose to invest in cities in competition for highest crime rate regardless if there is a good TK company.   A bad TK company could kill a good re investment.   However, the inverse is not true.   A good pm company will be challged with a bad RE investment.


    good luck

    1Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      6mo
      Quote from @Dan H.:

      I think we all think we know which TK company you are referring to so I will venture a guess of REI nation (formerly Memphis invest)

      They have a good reputation because they typically handle things fairly and it is my belief that offering to pay a portion of your cost is pretty fair.  They made a mistake and are trying to keep you happy.  The reality is most investors do not make a clam for the ac condenser being stolen.

      I believe as @Jay Hinrichs indicated you can still make a claim based on when you and/or pm knew it was stolen.   Until recently, you believed it was not stolen due to what the pm told you.   Pm believed it was not stolen because what tenant in Memphis can go through a summer without an AC?  I suspect I may have jumped to the same mistaken conclusion that the AC must be working.

      Now for investing in areas where AC condensers get stolen, you have to recognize expenses/vacancies/delinquent payments will be higher.  Higher maintenance, higher cap ex, higher delinquencies, more unit flip costs.

      The fact that this seems to be your biggest complaint and the pm company offered some compensation for their mistake (I think a more reasonable mistake than you do, how did a tenant make it through a Memphis summer without AC)? is an indication to the turnkey company’s strengths.   It is not easy to pm in those areas.

      Did you look up Memphis crime rate before you purchased?   Challenging market to pm.   Those that are advocating firing the current pm likely are unaware of the challenges.  I think you will be challenged to find better.  The reviews are based on the challenges of the market and their fairness in handling issues  

      I personally would not choose to invest in cities in competition for highest crime rate regardless if there is a good TK company.   A bad TK company could kill a good re investment.   However, the inverse is not true.   A good pm company will be challged with a bad RE investment.


      good luck


      Dan, not to be argumentative, however I really doubt this was REI nation this is not how they operate and they tend to sell the higher value assets in Memphis from my trip there to visit them as a colleague not a client per se  We did the Heros home together And Chris at REI bought the home and did all the rehab before we donated it to a Hero. They have monthly call in's customer service on the PM side is highly important to them.. Keep in mind there are probably half a dozen Turnkey operators at least in the Memphis market. Just sayin.
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    • Dan H.Pro Member
      Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
      6mo
      Quote from @Jay Hinrichs:
      Quote from @Dan H.:

      I think we all think we know which TK company you are referring to so I will venture a guess of REI nation (formerly Memphis invest)

      They have a good reputation because they typically handle things fairly and it is my belief that offering to pay a portion of your cost is pretty fair.  They made a mistake and are trying to keep you happy.  The reality is most investors do not make a clam for the ac condenser being stolen.

      I believe as @Jay Hinrichs indicated you can still make a claim based on when you and/or pm knew it was stolen.   Until recently, you believed it was not stolen due to what the pm told you.   Pm believed it was not stolen because what tenant in Memphis can go through a summer without an AC?  I suspect I may have jumped to the same mistaken conclusion that the AC must be working.

      Now for investing in areas where AC condensers get stolen, you have to recognize expenses/vacancies/delinquent payments will be higher.  Higher maintenance, higher cap ex, higher delinquencies, more unit flip costs.

      The fact that this seems to be your biggest complaint and the pm company offered some compensation for their mistake (I think a more reasonable mistake than you do, how did a tenant make it through a Memphis summer without AC)? is an indication to the turnkey company’s strengths.   It is not easy to pm in those areas.

      Did you look up Memphis crime rate before you purchased?   Challenging market to pm.   Those that are advocating firing the current pm likely are unaware of the challenges.  I think you will be challenged to find better.  The reviews are based on the challenges of the market and their fairness in handling issues  

      I personally would not choose to invest in cities in competition for highest crime rate regardless if there is a good TK company.   A bad TK company could kill a good re investment.   However, the inverse is not true.   A good pm company will be challged with a bad RE investment.


      good luck


      Dan, not to be argumentative, however I really doubt this was REI nation this is not how they operate and they tend to sell the higher value assets in Memphis from my trip there to visit them as a colleague not a client per se  We did the Heros home together And Chris at REI bought the home and did all the rehab before we donated it to a Hero. They have monthly call in's customer service on the PM side is highly important to them.. Keep in mind there are probably half a dozen Turnkey operators at least in the Memphis market. Just sayin.

      REI Nation has a good reputation, but is there another TK company in Memphis with outstanding reviews? Also the proposal to cover some of the costs of the new ac condenser seems reasonable.


      you could be right that it is not REI nation, but I did not find the PM's actions about the missing AC Condenser to be unreasonable. If I had a unit in Memphis, if the ac stopped working I would expect to be informed by the tenant before the summer because how could a tenant go through the Memphis summer without a working AC (but I am spoiled living in San Diego)? Then offering to pay some of the AC costs.

      Accounting errors should not occur, but they do.  Asset manager/owner has to look at the statements monthly.  

      Poor representative was dealt with by getting rid of them.

      It seems this PM is trying to provide good service and taking reasonable actions.


      best wishes

      1Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      6mo
      Quote from @Dan H.:
      Quote from @Jay Hinrichs:
      Quote from @Dan H.:

      I think we all think we know which TK company you are referring to so I will venture a guess of REI nation (formerly Memphis invest)

      They have a good reputation because they typically handle things fairly and it is my belief that offering to pay a portion of your cost is pretty fair.  They made a mistake and are trying to keep you happy.  The reality is most investors do not make a clam for the ac condenser being stolen.

      I believe as @Jay Hinrichs indicated you can still make a claim based on when you and/or pm knew it was stolen.   Until recently, you believed it was not stolen due to what the pm told you.   Pm believed it was not stolen because what tenant in Memphis can go through a summer without an AC?  I suspect I may have jumped to the same mistaken conclusion that the AC must be working.

      Now for investing in areas where AC condensers get stolen, you have to recognize expenses/vacancies/delinquent payments will be higher.  Higher maintenance, higher cap ex, higher delinquencies, more unit flip costs.

      The fact that this seems to be your biggest complaint and the pm company offered some compensation for their mistake (I think a more reasonable mistake than you do, how did a tenant make it through a Memphis summer without AC)? is an indication to the turnkey company’s strengths.   It is not easy to pm in those areas.

      Did you look up Memphis crime rate before you purchased?   Challenging market to pm.   Those that are advocating firing the current pm likely are unaware of the challenges.  I think you will be challenged to find better.  The reviews are based on the challenges of the market and their fairness in handling issues  

      I personally would not choose to invest in cities in competition for highest crime rate regardless if there is a good TK company.   A bad TK company could kill a good re investment.   However, the inverse is not true.   A good pm company will be challged with a bad RE investment.


      good luck


      Dan, not to be argumentative, however I really doubt this was REI nation this is not how they operate and they tend to sell the higher value assets in Memphis from my trip there to visit them as a colleague not a client per se  We did the Heros home together And Chris at REI bought the home and did all the rehab before we donated it to a Hero. They have monthly call in's customer service on the PM side is highly important to them.. Keep in mind there are probably half a dozen Turnkey operators at least in the Memphis market. Just sayin.

      REI Nation has a good reputation, but is there another TK company in Memphis with outstanding reviews? Also the proposal to cover some of the costs of the new ac condenser seems reasonable.


      you could be right that it is not REI nation, but I did not find the PM's actions about the missing AC Condenser to be unreasonable. If I had a unit in Memphis, if the ac stopped working I would expect to be informed by the tenant before the summer because how could a tenant go through the Memphis summer without a working AC (but I am spoiled living in San Diego)? Then offering to pay some of the AC costs.

      Accounting errors should not occur, but they do.  Asset manager/owner has to look at the statements monthly.  

      Poor representative was dealt with by getting rid of them.

      It seems this PM is trying to provide good service and taking reasonable actions.


      best wishes


      I owned rentals in Memphis and Jackson MS and I can categorically tell you if its hot out and there is no AC those tenants will be screaming and or they will just up and move.

      In Jackson landlord must have working central heat and air to qualify for section 8.
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    • Dan H.Pro Member
      Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
      6mo
      Quote from @Jay Hinrichs:
      Quote from @Dan H.:
      Quote from @Jay Hinrichs:
      Quote from @Dan H.:

      I think we all think we know which TK company you are referring to so I will venture a guess of REI nation (formerly Memphis invest)

      They have a good reputation because they typically handle things fairly and it is my belief that offering to pay a portion of your cost is pretty fair.  They made a mistake and are trying to keep you happy.  The reality is most investors do not make a clam for the ac condenser being stolen.

      I believe as @Jay Hinrichs indicated you can still make a claim based on when you and/or pm knew it was stolen.   Until recently, you believed it was not stolen due to what the pm told you.   Pm believed it was not stolen because what tenant in Memphis can go through a summer without an AC?  I suspect I may have jumped to the same mistaken conclusion that the AC must be working.

      Now for investing in areas where AC condensers get stolen, you have to recognize expenses/vacancies/delinquent payments will be higher.  Higher maintenance, higher cap ex, higher delinquencies, more unit flip costs.

      The fact that this seems to be your biggest complaint and the pm company offered some compensation for their mistake (I think a more reasonable mistake than you do, how did a tenant make it through a Memphis summer without AC)? is an indication to the turnkey company’s strengths.   It is not easy to pm in those areas.

      Did you look up Memphis crime rate before you purchased?   Challenging market to pm.   Those that are advocating firing the current pm likely are unaware of the challenges.  I think you will be challenged to find better.  The reviews are based on the challenges of the market and their fairness in handling issues  

      I personally would not choose to invest in cities in competition for highest crime rate regardless if there is a good TK company.   A bad TK company could kill a good re investment.   However, the inverse is not true.   A good pm company will be challged with a bad RE investment.


      good luck


      Dan, not to be argumentative, however I really doubt this was REI nation this is not how they operate and they tend to sell the higher value assets in Memphis from my trip there to visit them as a colleague not a client per se  We did the Heros home together And Chris at REI bought the home and did all the rehab before we donated it to a Hero. They have monthly call in's customer service on the PM side is highly important to them.. Keep in mind there are probably half a dozen Turnkey operators at least in the Memphis market. Just sayin.

      REI Nation has a good reputation, but is there another TK company in Memphis with outstanding reviews? Also the proposal to cover some of the costs of the new ac condenser seems reasonable.


      you could be right that it is not REI nation, but I did not find the PM's actions about the missing AC Condenser to be unreasonable. If I had a unit in Memphis, if the ac stopped working I would expect to be informed by the tenant before the summer because how could a tenant go through the Memphis summer without a working AC (but I am spoiled living in San Diego)? Then offering to pay some of the AC costs.

      Accounting errors should not occur, but they do.  Asset manager/owner has to look at the statements monthly.  

      Poor representative was dealt with by getting rid of them.

      It seems this PM is trying to provide good service and taking reasonable actions.


      best wishes


      I owned rentals in Memphis and Jackson MS and I can categorically tell you if its hot out and there is no AC those tenants will be screaming and or they will just up and move.

      In Jackson landlord must have working central heat and air to qualify for section 8.
      >I owned rentals in Memphis and Jackson MS and I can categorically tell you if its hot out and there is no AC those tenants will be screaming and or they will just up and move.

      I agree and the pm replied about no tenant not going without an ac in April.   Now we are in march and the ac has just recently been verified as stolen. There was a full summer between April and now that the tenant went without AC in Memphis.   It seems crazy.   I think it is reasonable to believe if an ac was not working in Memphis through the summer that it would get reported.   

      in San Diego I have tenants that choose not to run their ac due to the price of energy.   Near the ocean 90 is very hot, but a handful of miles east and they get maybe a dozen days over 100.   Some tenants at 100 degrees choose to not run the ac but our heat typically is dryer and our inland units have good insulation and virtually all have efficient windows (100 outside but maybe 80 inside).  

      I am surprised at tenants in inland San Diego that choose not to run the AC.   I find it crazy that a Memphis tenant could go a summer without running the AC.

      best wishes


      1Reply
    • Chris ClothierBusiness Member
      Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
      6mo

      @Dan H.

      I find these kinds of posts very frustrating for lots of reasons.  I'm not sure which part frustrates me more, though.

      - You're stating that everyone knows the company is REI Nation (which is wrong)

      or

      - @Thomas Beard continues to interact with the post by liking and responding, and yet fails to address your post.  He could have easily corrected it, but didn't, and now I am fighting to keep my family's company from a black eye.

      As for the questions being asked and mostly not answered: 

      1. No, it is not reasonable to expect your management company to pay full replacement costs for the AC.  I'm not 100% sure of the disconnect, but it is virtually impossible for a property to be occupied for a year in Memphis without an AC, so it is unlikely that your first inspection pointed to a missing AC.  It is, however, entirely your fault for accepting a bunch of pictures as an inspection and the answers on that inspection you were given without pushing back hard.  The tone of deference was set early, and it sounds like they knew you didn't care whether they answered your questions properly or provided good service.  

      2. Yes, plenty of people buy properties because the marketing says "turnkey" without any idea whether that means the product or service aligns with their expectations.  Plenty of companies will provide the least amount of service for the highest price you are willing to pay.

      3. You have no real leverage here to pursue anything legal.  It was very poor service. You paid for an inspection and should not have been satisfied with the lack of answers, but that is not going to rise to the level of a legal case.  

      4.  Why in the world does an investor have to ask if they should fire a property management company or not?  It is very simple.  Are they providing you a service you like, trust, and want more of?  Or not?  If a company is not providing you with the quality of service or communication you expect, shame on them.  If you give them a second chance and they fail, and you still stay with them, shame on you.  You certainly shouldn't continue on the same path and expect a different result.

      Everything else is just readers and posters making assumptions, and who knows if they are right or wrong.  Are the properties in good or bad locations?  Nobody knows because the poster hasn't listed them.  Is the company a good company or not?  No one knows because the poster won't name the company he does business with.  They've certainly failed according to this post, but they may not even know the post exists, and the owners may be completely unaware of how bad the service is.  Or, as we've seen many times, there could be another side to the story.

      Dan, I know you didn't mean your posts as a negative, but listing that we all know this is REI Nation, especially when you are wrong, is harmful to my company. I assumed I knew the company, too, and my first assumption was wrong. No matter how you slice it, this is poor service being covered up with the offer to cover some costs and no real accountability, based on what the poster has listed. He does not want to name the company, for whatever reason.

      Either way, these posts become exhausting because nothing is solved.  No one is being held to a "higher account" like he noted just because they advertise with BP.  There is no public service being addressed, and readers walk away thinking this is "just turnkey".  These posts become circular: bash the investor for making poor decisions, bash the investment without knowledge of the details, bash the city without knowing where the properties are located, and share stories about how they should have invested.

      If my company hadn't been mentioned, I wouldn't have posted on it because these posts rarely actually help without better detail.  

      Podcast Guest on Show #224
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    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Chris Clothier 

      First, let me be clear: THIS IS NOT REI NATION. I apologize for not addressing that earlier. I've been laid up in bed sick.

      The AC issue is not up for debate it was clearly missing last year in April. (There was refrigerator placed in the way so it was hard to tell) I brought it up with my property manager, and when I wasn’t satisfied with the response, I escalated it to the managing partner. Both parties made me feel like I didn’t know what I was talking about. I trusted their expertise, and that was a mistake. Even before I realized the AC was missing, I asked another manager whether an AC cage was necessary, and I was told it wasn’t.

      The property management company has repeatedly provided inaccurate or misleading information, which has caused ongoing frustration and confusion.

      1Reply
    • Chris ClothierBusiness Member
      Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
      6mo
      Quote from @Thomas Beard:

      @Chris Clothier 

      First, let me be clear: THIS IS NOT REI NATION. I apologize for not addressing that earlier. I've been laid up in bed sick.

      The AC issue is not up for debate it was clearly missing last year in April. (There was refrigerator placed in the way so it was hard to tell) I brought it up with my property manager, and when I wasn’t satisfied with the response, I escalated it to the managing partner. Both parties made me feel like I didn’t know what I was talking about. I trusted their expertise, and that was a mistake. Even before I realized the AC was missing, I asked another manager whether an AC cage was necessary, and I was told it wasn’t.

      The property management company has repeatedly provided inaccurate or misleading information, which has caused ongoing frustration and confusion.

      Hope you're feeling better soon.  I can't help you with the issues without knowing the details of the properties.  Whether there are two sides to a story or not (or more), how you experience your investment is legitimate, and hopefully, I wasn't minimizing that.  You have a right to ask questions and expect better answers.

       Listen to @Steve K. and book a trip to Memphis asap.  You want to see your properties first hand.  It is hard to make a plan of action without knowing exactly where you stand and that is an immediate action you need to take.  I have no idea how to reconcile an AC that has been missing for a year while your property has been occupied.  Given that you are convinced that is accurate, I have no idea what other surprises you might find.  I would not coordinate with the manager.  Just get to Memphis and alert them a day or two before that you want to inspect the properties.  They will push back.  At that point, go anyway and let them know they can come with you or not.  There are also plenty of other pros here on BP who will give you their opinions based on accurate details, such as the properties' addresses. 

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    • Don KonipolBusiness Member
      Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
      6mo
      Quote from @Thomas Beard:

      @Chris Clothier 

      First, let me be clear: THIS IS NOT REI NATION. I apologize for not addressing that earlier. I've been laid up in bed sick.

      The AC issue is not up for debate it was clearly missing last year in April. (There was refrigerator placed in the way so it was hard to tell) I brought it up with my property manager, and when I wasn’t satisfied with the response, I escalated it to the managing partner. Both parties made me feel like I didn’t know what I was talking about. I trusted their expertise, and that was a mistake. Even before I realized the AC was missing, I asked another manager whether an AC cage was necessary, and I was told it wasn’t.

      The property management company has repeatedly provided inaccurate or misleading information, which has caused ongoing frustration and confusion.


      Problem is you've got a PROPERTY MANAGEMENT COMPANY, not an ASSET MANAGEMENT COMPANY. Despite what some "turnkey" companies advertise, an investor needs to closely manage the property manager. If an investor wants a PASSIVE investment, then they need to invest in a syndicated offering, pool, fund, or REIT. Then the investor will have an asset manager managing the property manager, and a portfolio manager making crucial decisions.

      What happens in investing is that a real estate investment co wants to deliver returns to passive investors which in reality are not sustainable. So, the following methods are used, all leading to higher risk and hence lower weighted average returns than the potential ROI justifies

      1. Leaves out an essential part of the infrastructure necessary for truly passive investment, for example as provided by my analysis above eliminating the asset manager that is required and relying on the property manager to do two jobs for one fee.

      2. Advertises a level of cash flow income not sustainable based on the higher expenses associated with class c real estate. 

      3. Uses cap rates only appropriate for a higher class of property in order to mislead the investor concerning resale valuation.

      4. Puts forth assumptions for rent increases way in excess of what is probable for the subject asset

      5. Not including full depreciation expense to cover the inevitable necessity of replacing building components in the future. Sometimes stating nonsense that you’ll sell just before major replacements are necessary as if buyers are stupid enough not to take 20 year old roofs, out dated kitchens, or obsolete high cost HVAC units into account when making an offer. 

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  • Rod HanksBusiness Member
    Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
    6mo

    @Thomas Beard 

    You’re not being unreasonable. If you flagged the missing condenser a year ago, the manager should have sent someone out to confirm. That’s a simple check, and dismissing it is where they dropped the ball.

    That said, most PM agreements still put repairs on the owner, so they may lean on that. Your best argument is that their failure to verify it prevented a timely police report and insurance claim.

    Personally I’d push them to cover more of the replacement, but I’d also start looking for a new property manager. The bigger red flag here is the pattern of accounting issues and lack of accountability.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6mo

    When did the A/C disappear?  If it was there when you bought it, did the tenant take it?  Why didn't the tenant report it missing?  I'd hop on a plane and visit all of the rentals. Bring a copy of photos from when you bought it and the inspection at that point.

    Talk to the top person and have documentation of your conversations so you can show them the timeline and ask what they are going to do about the problem point blank.  If they won't do anything, tell them you want to be let out of your contract with them with no penalty.

    Call the police non-emergency line and ask them.  They will tell you if it is too late or not.

    1Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    6mo
    Quote from @Thomas Beard:

    I’m looking for guidance from more experienced investors on how to handle this situation.

    About a year ago I purchased three turnkey rental properties in Memphis through an out-of-state turnkey company. Initially everything seemed great. The purchase process was smooth, the properties rented quickly, and the company had strong reviews and presented themselves as a professional team that handled everything.

    However, once the properties were under management, things slowly started to unravel.

    I began noticing frequent errors in the property management accounting. I found myself reviewing every transaction carefully and contacting them regularly to correct mistakes. I understand the concept of “managing the manager,” but the number of issues felt excessive. My point of contact was also very difficult to deal with there was never any ownership of mistakes, only excuses.

    Around the middle of the year the management company switched to new software, and it was clear my point of contact didn’t know how to use it. That created even more confusion.

    At one point I was on the phone with the managing partner for something unrelated and respectfully shared some of my concerns. It seemed like they were heard at the time.

    Then things took a turn.

    About a year after buying my first property, I received an email offering a $175 annual property inspection. I agreed. When the report came back, it wasn’t really a report just a collection of photos.

    While reviewing the photos, I noticed something strange: I didn’t see an A/C condenser anywhere.

    I’ve never visited the property in person, but I had a good idea of where it should be based on previous photos. It wasn’t there.

    I emailed my point of contact and told her I believed the condenser might have been stolen. I also asked for someone to go back out and confirm whether it was actually there.

    Her response was basically:

    • The inspector didn’t say it was missing.
    • The tenant hadn’t reported any issue.

    She also told me that the company was no longer doing the HVAC inspection and filter program I had originally signed up for when I bought the property.

    Not satisfied, I called the managing partner directly and explained the situation. His response was essentially:

    “It’s April in Memphis. If the tenant didn’t have an A/C condenser, we would know about it.”

    Since I live nowhere near Memphis, I was relying on their expertise. I let it go.

    Fast forward one year later.

    My previous point of contact had been fired, and I was assigned a new one. I agreed to another annual inspection.

    This time the report clearly stated:

    The A/C condenser is missing.

    At this point I was furious.

    I immediately contacted the property manager and asked them to file a police report so we could submit an insurance claim. Their response was that too much time had passed to file the report or an insurance claim.

    In my view, the only reason time passed is because the issue was ignored after I brought it to their attention the year before.

    After escalating the issue, the management company said they would cover some of the replacement cost, but that the condenser itself is ultimately the owner’s responsibility.

    Meanwhile, the managing partner who said he would call me still hasn’t.

    From my perspective this seems pretty straightforward:

    • The inspector failed to identify the missing condenser.
    • My point of contact dismissed my concern when I flagged it.
    • The managing partner dismissed it as well.
    • Their negligence prevented a timely police report and insurance claim.

    Because of that, I believe the management company should cover the full cost of replacement beyond my insurance deductible.

    At this point I’m honestly feeling defeated and considering terminating the relationship entirely.

    My questions for the community:

    1. Am I being unreasonable expecting them to cover the full replacement cost?
    2. Has anyone dealt with something similar with a turnkey provider?
    3. What leverage do I realistically have here?
    4. Would you push harder, pursue legal action, or just move on and change property managers?

    Any advice would be greatly appreciated.

    What’s the cost of replacing the condenser and what is the amount of your insurance deductible? 

    Also, how can it be “too late” to file a police report or make a claim? Nobody knows when it was stolen.  

    The basis of your proposed claim against the PM is that by not acknowledging the missing condenser earlier, you lost your opportunity to (1) file a police report and (2) file an insurance claim and get reimbursed.  But, the only date that matters is the day the PM went out to the property and discovered the condenser stolen.  The fact that you didn’t see a condenser in photos you looked at is mere conjecture.

    I’m trying to get my head around PM stating that it’s too late to file police report, make insurance claim.  Could this be a totally unmotivated employee of the PM not wanting any additional “paperwork” or hassle?  In the usual PM company there will be an owner and or manager that (hopefully) cares a lot about the business; then in the bigger firms there will be general managers who hopefully are at least somewhat competent and motivated; finally there will be front line customer service employees who will range from experienced and competent to people generally unemployable anywhere else, heavily into alcohol and drugs, with numerous personal problems, who will say anything to lessen their work and hoping to get to 5 o’clock without putting g forth any further effort.  

    Many moons ago a good friend of mine started a property management company as an outgrowth of his contracting business.  In the space of 4 months he went thru six operating mangers.  Here were the reasons for each firing

    1. Booked in for 5 days but never showed up.  Was busy acting in porno films
    2. Got involved with a tenant, left his wife and moved to a new state with his tenant/girlfriend
    3. Was so severely beaten by her husband that she couldn’t come to work,  Refused to press charges and remained living with her husband
    4. Decided they needed a new career
    5. All 4 property managers reporting to him quit at the same time 
    6. Was caught smoking weed with the contractors he was supposed to be supervising when a tenant called to report they he and the contractors had been in the back yard for the last 5 hours smoking weed with no work being done. 

    I KNOW there an excellent PMs out there - I had a few myself working for me.  But, I had to be highly selective; and even with that the majority of PMs I hired ranged from mediocre to terrible.  
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  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    6mo

    Focusing back on the insurance claim for the stolen property, Don raised a good point. What is your deductible?  In the event you filed a claim, how would this impact your insurance premium once the claim appears on your loss run reporting? It rarely makes financial sense to pursue an insurance claim for items such as a stolen condenser as the financial consequences are often more costly than paying for the replacement. 

    I would chalk it up to the cost of doing business in a lower tier neighborhood where extraordinary amounts of money must be spent on physical observation management of the real estate given the associated risks. 

    [email protected]
    0Reply
    • Julie Garner
      Member since 2023 · 69 posts · 44 votes
      6mo
      Quote from @Stuart Udis:

      I would chalk it up to the cost of doing business in a lower tier neighborhood where extraordinary amounts of money must be spent on physical observation management of the real estate given the associated risks. 

      ^This^.  Per Neighborhood Scout, Memphis is "Safer than 0% of U.S. cities."  It has more than 6x the national average for violent crime, and is rife with gang activity.  Did you also check the eviction rate before buying? In some areas of Memphis, it's a whopping 32%.

      There's NO CHANCE I would be an absentee owner there, none.  You hired a horrible PM in the first place -- and who offers a comprehensive property check for $175?  Sometimes you get (or don't get in this case) what you pay for.  As for the compressor not being there, if the lousy PM said it was and now it's not, they're just going to claim it got stolen inbetween.

      You're a crime victim in a high crime area.  Surprising that you thought it would be different.  I'd do the minimum necessary to sell the properties to someone who does strictly Section 8 and lives there, cut my losses, and invest somewhere closer with less crime (which in this case would be almost anywhere.)
      3Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    6mo

    There is often a BIG disconnect with owners about what exactly a PMC is responsible for.

    Of course, owners do NOT want to be responsible for anything, which means they want to blame the PMC for everything.

    The ac unit was stolen, NOT the PMCs fault. 
    - If they are offering to cover any portion, consider it a gift!

    What MAY be the PMCs fault:
    1) Not warning you of the probability of theft.
    2) Not being organized enough to know when it was stolen and informing the owner.
    3) Not providing a sample inspection report, so owner knows what to expect

    When did check your insurance policy to see if:
    - The ac unit theft will be covered
    - How much will replacement cost compared to your deductible
    - What's the likelihood a claim will result in higher premiums or policy cancellation?

    How many PMCs do you plan to interview BEFORE terminating this one?
    - What better screening questions will you ask this time?

    [email protected]248-209-6824
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    • Thomas Beard
      OP
      Member since 2023 · 14 posts · 4 votes
      6mo

      @Drew Sygit  At this point my bigger concern is how to trust the management going forward. If I raise a potential issue in writing and it’s dismissed, and later turns out to be accurate, and then I’m given incorrect information about my options it’s hard to know how much confidence to place in the management process.

      0Reply
  • Andrew GlissonBusiness Member
    Property Manager · Memphis · Member since 2026 · 135 posts · 95 votes
    6mo
    Must get a full professional home inspection when buying a Turnkey rental. It’s $400 but money well spent and you’ll know exact build quality. I’m a licensed GC and renovate my own rentals, but I still hire NPI to inspect. I think you’re toast on a refund. Sorry that happened to you. I know how it feels!
    [email protected]832-477-1007
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  • Andrew GlissonBusiness Member
    Property Manager · Memphis · Member since 2026 · 135 posts · 95 votes
    6mo

    By the way for anyone investing in Memphis, we install a tamper switch on our condensers which calls police if the power is cut. Has lowered our theft rate tremendously. Fifteen alarms. We just pass the monthly cost to the resident in their benefit package. Worth a look. 

    [email protected]832-477-1007
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  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    6mo

    I would jump on a plane and go check my properties out, yesterday. Chances are, the missing AC unit is just the tip of the iceberg. 

    5Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    6mo

    1. Yes, you are being 100% unreasonable. We would cover $0. Now, we would have handled this much, much differently but whether the PM listened to you or not the handler would have still been missing by no fault of their own.

    3. You have photographic evidence that it was missing a year prior. Just call the company and see what they have to say about it.

    4. A handler will cost about $2k. Not, sure that would be worth your time or money to pursue legal action.

    [email protected]239-339-3969
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  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    6mo
    Quote from @Thomas Beard:

    I’m looking for guidance from more experienced investors on how to handle this situation.

    About a year ago I purchased three turnkey rental properties in Memphis through an out-of-state turnkey company. Initially everything seemed great. The purchase process was smooth, the properties rented quickly, and the company had strong reviews and presented themselves as a professional team that handled everything.

    However, once the properties were under management, things slowly started to unravel.

    I began noticing frequent errors in the property management accounting. I found myself reviewing every transaction carefully and contacting them regularly to correct mistakes. I understand the concept of “managing the manager,” but the number of issues felt excessive. My point of contact was also very difficult to deal with there was never any ownership of mistakes, only excuses.

    Around the middle of the year the management company switched to new software, and it was clear my point of contact didn’t know how to use it. That created even more confusion.

    At one point I was on the phone with the managing partner for something unrelated and respectfully shared some of my concerns. It seemed like they were heard at the time.

    Then things took a turn.

    About a year after buying my first property, I received an email offering a $175 annual property inspection. I agreed. When the report came back, it wasn’t really a report just a collection of photos.

    While reviewing the photos, I noticed something strange: I didn’t see an A/C condenser anywhere.

    I’ve never visited the property in person, but I had a good idea of where it should be based on previous photos. It wasn’t there.

    I emailed my point of contact and told her I believed the condenser might have been stolen. I also asked for someone to go back out and confirm whether it was actually there.

    Her response was basically:

    • The inspector didn’t say it was missing.
    • The tenant hadn’t reported any issue.

    She also told me that the company was no longer doing the HVAC inspection and filter program I had originally signed up for when I bought the property.

    Not satisfied, I called the managing partner directly and explained the situation. His response was essentially:

    “It’s April in Memphis. If the tenant didn’t have an A/C condenser, we would know about it.”

    Since I live nowhere near Memphis, I was relying on their expertise. I let it go.

    Fast forward one year later.

    My previous point of contact had been fired, and I was assigned a new one. I agreed to another annual inspection.

    This time the report clearly stated:

    The A/C condenser is missing.

    At this point I was furious.

    I immediately contacted the property manager and asked them to file a police report so we could submit an insurance claim. Their response was that too much time had passed to file the report or an insurance claim.

    In my view, the only reason time passed is because the issue was ignored after I brought it to their attention the year before.

    After escalating the issue, the management company said they would cover some of the replacement cost, but that the condenser itself is ultimately the owner’s responsibility.

    Meanwhile, the managing partner who said he would call me still hasn’t.

    From my perspective this seems pretty straightforward:

    • The inspector failed to identify the missing condenser.
    • My point of contact dismissed my concern when I flagged it.
    • The managing partner dismissed it as well.
    • Their negligence prevented a timely police report and insurance claim.

    Because of that, I believe the management company should cover the full cost of replacement beyond my insurance deductible.

    At this point I’m honestly feeling defeated and considering terminating the relationship entirely.

    My questions for the community:

    1. Am I being unreasonable expecting them to cover the full replacement cost?
    2. Has anyone dealt with something similar with a turnkey provider?
    3. What leverage do I realistically have here?
    4. Would you push harder, pursue legal action, or just move on and change property managers?

    Any advice would be greatly appreciated.

    Hey Thomas, welcome to BP, totally get why you’re frustrated—this situation sounds rough but you’re not being unreasonable at all. Honestly, this is a pretty common headache with out-of-state turnkey stuff, especially when the team on the ground isn’t on top of things. The fact that you flagged the missing A/C a year ago gives you some leverage, but a lot of these companies try to limit liability in their contracts, so it can be tricky to get them to cover everything. I’d push for a fair resolution, but also seriously think about whether this is a team you can trust long-term—sometimes it’s better to cut ties and go with a property manager who actually communicates and owns their mistakes. From my experience investing in Columbus, Ohio after moving from Portland, having a solid, responsive team locally makes all the difference, especially for long-distance rentals. Happy to connect and answer any questions you have!
    [email protected]614-300-7535
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  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    6mo

    Sorry you're going through this. I had an AC condenser unit stolen before my tenant moved in on an OOS property (Midwest). I think thieves saw the For Rent sign in, which indicated a vacancy, and then they climbed a 7 foot fence and lifted the unit out. I filed a police report but I didn't file an insurance claim since it didn't want my rates to go up. I put a cage on the new AC unit. 

    I don't blame my PM because unless they're going to station a 24 hour armed guard outside my property, there's a chance it'll be broken into. I also had an attempted break in with another property - the alarm scared them off.  

    Like the other comments, I find it strange that a tenant wouldn't complain about a missing AC unit with the Memphis heat, if it's been gone for a whole year. 

    I don't think it's worth it to pursue legal action. I'd change PMs since you're clearly unhappy with them. If your PM pays for any part of a new AC unit, that's generous of them.

     Personally I will never buy again in any area where people need to put cages around their AC units, or pockets of high crime. And I'll never buy sight unseen again. I sold one of them and plan to sell the other one. I think it's pretty risky for you to buy three OOS properties without seeing them as a new investor. 

    I agree with the other comments about flying out to see the properties. 

    1Reply
  • Richard F.
    Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
    6mo

    You purchased not one, but three properties in Memphis through an out of state turnkey company. Is that company NOT based, or have Bricks and Mortar in Tennessee? Do they hold a Tennessee Real Estate License? If yes, file a complaint with the Tn Real Estate Commission. Write a succinct letter detailing dates of key points of your story, include copies of photos before/after condenser removed or other documentation of its actual existence; dates and copies of emails or letters sent to the management company and their written responses. Document your other issues as well, including primarily the accounting discrepancies. 

    You state that things "slowly started to unravel". The types of issues you note, frequent accounting errors in particular, what are the details? Transposed numbers? Misapplied charges or payments? There is no excuse for "frequent" errors such as those...that is just a sloppy accounting process. You should have a CPA audit their accounting records for your properties from Day 1, to ensure they are complete and accurate. There should be backup documentation for every single expenditure, and signed contracts for major work or recurring expenses for each property. They should be able to provide a full Journal of income and expenses, as well as year end and year to date income and expenses. Changing software is not your problem, they should be able to provide clear reports through the ending month of the old program, and clean reports YTD for the new program.

    There should be no "managing the Manager". Their normal monthly reporting should be clear and accurate, and you should be reviewing it as soon as you receive it each month, so you can ask questions while facts are fresh with those involved. The Senior Accountant or PM should have caught these type of errors. You should put ANY questions on issues such as these in written form, email or Certified letter depending on the gravity of the particular item.

    The Management Agreement is, to a certain extent, a negotiation. You need to ensure that critical items are included in the scope of responsibilities you are signing up for. There is no "Standard" PM service among different PM Cos. You should be asking about specific processes that are important to you. Tenant screening is the single most important task of a PM...what does that entail? How and where are they marketing rentals such as yours? What is their late fee and process? What are common expenses for evictions? How are service requests handled, and what is the typical timeline?  How are move ins and move outs handled? Pics provided? How are turnover preps carried out? How can you limit spending to a max dollar amount per incident before written permission becomes necessary? Do you have in house maintenance staff, outside contractors, or both? Are they properly licensed and insured? Is the PM Co Bonded and insured? 

    An Annual Inspection, with photos, prior to renewal of a Rental Agreement SHOULD be a standard requirement, but, it's up to you to get it into the contract. What exactly is the PM doing for their fee? They should have a list. To be clear, your fee very likely will be higher for a property that is not in an overall good condition, or has existing difficult Tenants, because those both require much more time from the PM.

    Phone calls are not very effective, and are generally undocumented. E-mail (not texting) is generally your best record of written comms. For a missing condensing unit, I would have sent a letter via Certified, Return Receipt Requested so that you get a hard signature that their office received it. 

    If you have documentation for what you have stated about the AC, the PM's failure to follow up, verify, and file with PD is serious. The other issues are also serious if ongoing as you state. 

    OTOH, purchasing multiple properties without EVER ( your words) having visited them to this day, and absent a Contractor/Company that you had a comfortable and well established relationship with, is a poor decision, given what is at stake. Even if you personally do not know much about construction issues, you should walk the property with a Contractor that you have utmost confidence in, and talk through every element and system. Regardless of the enthusiasm and promises promoting a nearly "passive" investment, that just is not a realistic goal outside of a REIT or similar truly "hands off" vehicle.

    I am retired now, but was an active PM for 30 years. Many Clients were out of State, or Country, Owners. I was always available to them direct by cell at any time, and always responded to emails and vmails from Owners or Tenants within one business day. No excuse not to. 

    You need to determine your priorities and requirements, and find a PM that has the systems in place to meet them. 

    4Reply
  • Thomas Beard
    OP
    Member since 2023 · 14 posts · 4 votes
    6mo
    Update for anyone interested. the pm came back with two replacement options. A used condenser, with a cage and labor for$2315.28 or i can replacement the entire system for $5887.43. That includes a $700 discount on the new system. No discount on the used system.
    0Reply
    • Steve K.
      Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
      6mo
      Quote from @Thomas Beard:
      Update for anyone interested. the pm came back with two replacement options. A used condenser, with a cage and labor for$2315.28 or i can replacement the entire system for $5887.43. That includes a $700 discount on the new system. No discount on the used system.

       Is the used one the exact same one that was there before ;). 

      I'd probably go the used route, and then sell the property and buy in a better location, personally. 

      But if you're not planning to sell the property, I'd go the new route.

      Be careful with buying a used condenser as there may be additional problems with it. I would want to do a ton of due diligence on it before making a buy/ don't buy decision (is it sized right, what condition, how old, what is the history of it (was it stolen? probably because very few people replace working units voluntarily), is there any warranty on it (wouldn't qualify for manufacturer warranty obviously but maybe the installer will warranty it, in which case do your due diligence on them because the warranty is only as good as the company), how expensive is it to operate compared to new, are parts available for it, is refrigerant available to top it off (some have been discontinued/ are no longer available in the US), how long is it expected to last, etc.). Chances are this will be a "buy once, cry once" or "don't buy nice, buy twice" situation if you plan to keep the property. The used one will not last as long as a new one.   

      1Reply
  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    6mo

    @Thomas Beard  The issue here: not so much there was a theft, but that there was not satisfactory communication from the manager to the principal (you).  

    That became a pattern, was not resolved, and ended up in frustration. A couple, two-tree times, you gotta let them go.

    Going forward, regarding contractors, managers, and the like:  Hire slowly, fire quickly.

    1Reply
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