PM QUITING ON ME

General Landlording & Rental Properties

PM QUITING ON ME

Investor · La Palma, CA · Member since 2021 · 71 posts · 19 votes

I have a fourplex in Houston, TX and I live in SoCal. I have been going back and forth in legal matters trying to renegotiate our lease rates with my tenants. They are using it as an Airbnb Arbitrage, which is violating the lease agreement. When I purchased this property, the rent includes utilities and it's putting me in a negative every month. Since they don't want to renegotiate, I've decided to evict them.

Suddenly, today, when I tell my PM to put up Eviction Notices on their units, they send me an email giving me 30 days notice that they will end our contract on August 18th because they don't want to be part of the litigations. They're telling me since I have my attorneys helping me with the eviction process, they should be the ones to put up the notices.

What is the best way to go about finding new tenants and who can help me in this process? I have a well-qualified attorney, separate from this case, that is planning to partner up and create a new management company. I want to use her to manage my property but it's not up and running yet.... although she is helping me and giving me advise as I go thru this case, I wanted to get more insights from my fellow investors here in BP.

1. Should I have a RE agent help me find tenants? screen tenants and check their background?

2. Should I hire a new PM in the meantime to just help with finding tenants?

3. Should I try to connect with Harris County Housing Authority to find tenants?

Ahhh!!! Don't know what to do!

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Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes

3y

Aloha,

Why, if you have a PM, are YOU now dealing with Rental Agreements and evictions? Who is named on the Agreements, you or your PM company? If you, the Tenants should have been notified of a "change in Management", and been dealing direct with the PM.

Of course, depending on Local Laws and the terms of your "Management" Agreement, maybe this is acceptable, but ours always state that we are contracted "To Manage" the described premises, so I would probably be firing you too. Sorry, I know that is not what you want to hear.

See this reply in the discussion

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Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
2y
Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Theresa Harris:

You have someone lined up, let them do it.  The fact that your tenants had an airBNB operating out of the rental against the terms of the lease and your current PM didn't do anything doesn't say much. When you found out, you should have told your PM to handle it-that is what you are paying them to do. I can't imagine anything harder than a PM having the owner working with tenants and not keeping the PM in the loop. You've already been doing things for the eviction, I'd just keep doing it.
I've always kept my PM in the loop and had them communicate with the tenants for me the entire time. I've never went behind them and try to talk to the tenant myself. Maybe I didn't explain it right in my original post.... but bottom line, PM just wants their money and don't want to do the hard work. PM helped me with evictions before with tenants refusing to pay maintenance bill, but because this time they don't agree that tenant is breaking the lease, they won't help me this time.

What would you do if in my position? Lease agreements includes utilities with rent, tenants pay rent on time but using it as an STR, putting you in a negative every month, lease states "No Airbnb or VRBO"

I don't understand what about the fact they're doing VRBO/airbnb causes you to be negative?

We have almost 100 units we lease to people who do airbnb. We don't have a problem with it. They pay rent better than most tenants, take care of small work requests (per agreement) and we hold a fat deposit in case of default.
I'm at a negative because all utilities are included. Plus, I'm missing a security deposit from one of the units, and they security amount is less than their rent.

Still confused. The security deposit size or missing has nothing to do with them doing STR. And I understand you might be negative because of high utility costs and having them baked into the rent -- but I'm not sure what them doing STR has to do with that?

I don't see why someone doing STR with their unit would have more utility bills? I don't have a way to measure STR vs. LTR but given STR units are normally only occupied 50-75% (guess) of the time, it would seem they'd use less water? Less AC?

I'd have kept them in and collected rent while I tried to work out this problem. Now you have an empty (or soon to be) property, no management, litigation, and it's 1000's of miles away.  In a market that would make selling very difficult (esp empty).

I hope you get this all worked out.

In more simpler terms, guests from STR don't care about saving electricity or water because they're not paying for it.... same goes for hotel guests, right? LTR guests usually pay their own utilities so they are more prone to saving energy and water.

Usually utilities are included or not based on the design of the property.  Almost all of my properties have a single water meter -- so we just bake it into rent (no way to individually submeter, and I don't feel like doing RUBS, I'd rather raise rent to accommodate it)

When it comes to electricity, it's either individually metered or it's not.  If it's individually metered, it should go in the tenants name.  If it's master metered, then -- like water -- just bake into rent (or try to RUBS)

But if this person was NOT doing STR, they still wouldn't be paying utils as that's not how their lease is. Thus back to my original question which is why do you think the fact they're doing STR means the utils (that they already don't have to pay for due to the lease) are going to be higher?

I'm not trying to argue here as you can do whatever you want with your property.  I'm just curious. I have about 100 units leased to a handful of STR operators and I've found that it works quite well for me (vs. LTR tenants). Less turn over. They take care of small repairs. They're more "stuck" to the property due to the sunk costs they've put in. They pay a small premium. The units are always kept up, etc.
1 Reply
Julie Chai
OP
Investor · La Palma, CA · Member since 2021 · 71 posts · 19 votes
2y
Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Theresa Harris:

You have someone lined up, let them do it.  The fact that your tenants had an airBNB operating out of the rental against the terms of the lease and your current PM didn't do anything doesn't say much. When you found out, you should have told your PM to handle it-that is what you are paying them to do. I can't imagine anything harder than a PM having the owner working with tenants and not keeping the PM in the loop. You've already been doing things for the eviction, I'd just keep doing it.
I've always kept my PM in the loop and had them communicate with the tenants for me the entire time. I've never went behind them and try to talk to the tenant myself. Maybe I didn't explain it right in my original post.... but bottom line, PM just wants their money and don't want to do the hard work. PM helped me with evictions before with tenants refusing to pay maintenance bill, but because this time they don't agree that tenant is breaking the lease, they won't help me this time.

What would you do if in my position? Lease agreements includes utilities with rent, tenants pay rent on time but using it as an STR, putting you in a negative every month, lease states "No Airbnb or VRBO"

I don't understand what about the fact they're doing VRBO/airbnb causes you to be negative?

We have almost 100 units we lease to people who do airbnb. We don't have a problem with it. They pay rent better than most tenants, take care of small work requests (per agreement) and we hold a fat deposit in case of default.
I'm at a negative because all utilities are included. Plus, I'm missing a security deposit from one of the units, and they security amount is less than their rent.

Still confused. The security deposit size or missing has nothing to do with them doing STR. And I understand you might be negative because of high utility costs and having them baked into the rent -- but I'm not sure what them doing STR has to do with that?

I don't see why someone doing STR with their unit would have more utility bills? I don't have a way to measure STR vs. LTR but given STR units are normally only occupied 50-75% (guess) of the time, it would seem they'd use less water? Less AC?

I'd have kept them in and collected rent while I tried to work out this problem. Now you have an empty (or soon to be) property, no management, litigation, and it's 1000's of miles away.  In a market that would make selling very difficult (esp empty).

I hope you get this all worked out.

In more simpler terms, guests from STR don't care about saving electricity or water because they're not paying for it.... same goes for hotel guests, right? LTR guests usually pay their own utilities so they are more prone to saving energy and water.

Usually utilities are included or not based on the design of the property.  Almost all of my properties have a single water meter -- so we just bake it into rent (no way to individually submeter, and I don't feel like doing RUBS, I'd rather raise rent to accommodate it)

When it comes to electricity, it's either individually metered or it's not.  If it's individually metered, it should go in the tenants name.  If it's master metered, then -- like water -- just bake into rent (or try to RUBS)

But if this person was NOT doing STR, they still wouldn't be paying utils as that's not how their lease is. Thus back to my original question which is why do you think the fact they're doing STR means the utils (that they already don't have to pay for due to the lease) are going to be higher?

I'm not trying to argue here as you can do whatever you want with your property.  I'm just curious. I have about 100 units leased to a handful of STR operators and I've found that it works quite well for me (vs. LTR tenants). Less turn over. They take care of small repairs. They're more "stuck" to the property due to the sunk costs they've put in. They pay a small premium. The units are always kept up, etc.

Cody, at first I thought it was a good deal but with high rent including utitilies, but after getting the bills, it just wasn't making sense. I purchased this fourplex with the seller claiming it was corporate renting out for their traveling employees. After taking out the property management fee, I'll be ok, maybe making a few hundred a month or breaking even when utilities are high. Do you manage your 100 units yourselves or do you use a PM? If using PM, and your STR still profits, that is good.
0 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
2y
Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Theresa Harris:

You have someone lined up, let them do it.  The fact that your tenants had an airBNB operating out of the rental against the terms of the lease and your current PM didn't do anything doesn't say much. When you found out, you should have told your PM to handle it-that is what you are paying them to do. I can't imagine anything harder than a PM having the owner working with tenants and not keeping the PM in the loop. You've already been doing things for the eviction, I'd just keep doing it.
I've always kept my PM in the loop and had them communicate with the tenants for me the entire time. I've never went behind them and try to talk to the tenant myself. Maybe I didn't explain it right in my original post.... but bottom line, PM just wants their money and don't want to do the hard work. PM helped me with evictions before with tenants refusing to pay maintenance bill, but because this time they don't agree that tenant is breaking the lease, they won't help me this time.

What would you do if in my position? Lease agreements includes utilities with rent, tenants pay rent on time but using it as an STR, putting you in a negative every month, lease states "No Airbnb or VRBO"

I don't understand what about the fact they're doing VRBO/airbnb causes you to be negative?

We have almost 100 units we lease to people who do airbnb. We don't have a problem with it. They pay rent better than most tenants, take care of small work requests (per agreement) and we hold a fat deposit in case of default.
I'm at a negative because all utilities are included. Plus, I'm missing a security deposit from one of the units, and they security amount is less than their rent.

Still confused. The security deposit size or missing has nothing to do with them doing STR. And I understand you might be negative because of high utility costs and having them baked into the rent -- but I'm not sure what them doing STR has to do with that?

I don't see why someone doing STR with their unit would have more utility bills? I don't have a way to measure STR vs. LTR but given STR units are normally only occupied 50-75% (guess) of the time, it would seem they'd use less water? Less AC?

I'd have kept them in and collected rent while I tried to work out this problem. Now you have an empty (or soon to be) property, no management, litigation, and it's 1000's of miles away.  In a market that would make selling very difficult (esp empty).

I hope you get this all worked out.

In more simpler terms, guests from STR don't care about saving electricity or water because they're not paying for it.... same goes for hotel guests, right? LTR guests usually pay their own utilities so they are more prone to saving energy and water.

omg, this will be my last comment on the matter. You ignored what I said. Your lease was for an LTR (so you thought) so why wasn't it setup where they pay utils? Tenants paying utils or not typically depends on the unit type and building. And no, STR *guests* typically don't pay utils, but the people leasing the unit from them do. Also, I still argue that total usage form a unit leased to an arbitrager will use less as the unit isn't occupied 24/7. And a guest is less likely to do laundry on site, less likely to cook. The person managing the arbitrage will be doing frequent cleanings and small repairs, etc.

Make your own decisions but I think there is another issue at play here that you're not letting on.
1 Reply
Julie Chai
OP
Investor · La Palma, CA · Member since 2021 · 71 posts · 19 votes
2y
Cody, I took over this lease from the seller when I purchased the property. That was my mistake #1. They drafted the lease to include the utilities to the arbitrager, not me. I had no choice but to take it as it is.
0 Reply
Melanie ThomasBusiness Member
Real Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 489 votes
2y
Ditch the tenants, find a good PM to help you out and let them handle it. If you have made the decision to hire/work with a PM, stand back and let them do their job with no interference. Start your search for a new PM on the NARPM website using the PM locator tool. Good luck and happy investing! https://www.narpm.org/find/property-managers/
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Account Closed
Realtor · Member since 2023 · 1 post · 0 votes
2y
Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Cody L.:

Quote from @Julie Chai:

Quote from @Theresa Harris:

You have someone lined up, let them do it.  The fact that your tenants had an airBNB operating out of the rental against the terms of the lease and your current PM didn't do anything doesn't say much. When you found out, you should have told your PM to handle it-that is what you are paying them to do. I can't imagine anything harder than a PM having the owner working with tenants and not keeping the PM in the loop. You've already been doing things for the eviction, I'd just keep doing it.
I've always kept my PM in the loop and had them communicate with the tenants for me the entire time. I've never went behind them and try to talk to the tenant myself. Maybe I didn't explain it right in my original post.... but bottom line, PM just wants their money and don't want to do the hard work. PM helped me with evictions before with tenants refusing to pay maintenance bill, but because this time they don't agree that tenant is breaking the lease, they won't help me this time.

What would you do if in my position? Lease agreements includes utilities with rent, tenants pay rent on time but using it as an STR, putting you in a negative every month, lease states "No Airbnb or VRBO"

I don't understand what about the fact they're doing VRBO/airbnb causes you to be negative?

We have almost 100 units we lease to people who do airbnb. We don't have a problem with it. They pay rent better than most tenants, take care of small work requests (per agreement) and we hold a fat deposit in case of default.
I'm at a negative because all utilities are included. Plus, I'm missing a security deposit from one of the units, and they security amount is less than their rent.

Still confused. The security deposit size or missing has nothing to do with them doing STR. And I understand you might be negative because of high utility costs and having them baked into the rent -- but I'm not sure what them doing STR has to do with that?

I don't see why someone doing STR with their unit would have more utility bills? I don't have a way to measure STR vs. LTR but given STR units are normally only occupied 50-75% (guess) of the time, it would seem they'd use less water? Less AC?

I'd have kept them in and collected rent while I tried to work out this problem. Now you have an empty (or soon to be) property, no management, litigation, and it's 1000's of miles away.  In a market that would make selling very difficult (esp empty).

I hope you get this all worked out.

In more simpler terms, guests from STR don't care about saving electricity or water because they're not paying for it.... same goes for hotel guests, right? LTR guests usually pay their own utilities so they are more prone to saving energy and water.

Usually utilities are included or not based on the design of the property.  Almost all of my properties have a single water meter -- so we just bake it into rent (no way to individually submeter, and I don't feel like doing RUBS, I'd rather raise rent to accommodate it)

When it comes to electricity, it's either individually metered or it's not.  If it's individually metered, it should go in the tenants name.  If it's master metered, then -- like water -- just bake into rent (or try to RUBS)

But if this person was NOT doing STR, they still wouldn't be paying utils as that's not how their lease is. Thus back to my original question which is why do you think the fact they're doing STR means the utils (that they already don't have to pay for due to the lease) are going to be higher?

I'm not trying to argue here as you can do whatever you want with your property.  I'm just curious. I have about 100 units leased to a handful of STR operators and I've found that it works quite well for me (vs. LTR tenants). Less turn over. They take care of small repairs. They're more "stuck" to the property due to the sunk costs they've put in. They pay a small premium. The units are always kept up, etc.
My thoughts exactly. Well said. STR tenants take care property, pay on time, and less turnover.
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