Hi Sunny,
It's tough to enforce rules on a tenant after establishing a standard of flexibility upon them. Although I do believe that flexibility should be given to outstanding tenants only, I have also seen how it can spoil an easy tenant and turn them into a difficult one.
I do believe a decision like this requires a fair amount of judgement, or "valuation" lets say, of your tenant. Please allow me to analyze the multiple components of your situation.
Long Term Tenant: At 4 years, this is a long term tenant, and this may incline you to say "I don't want to ruin the potential for future long term residency with this tenant. Long term tenants, as you know, reduce your turnover rate, therefore reducing your vacancy and re-rental costs. This is all assuming you have a QUALITY tenant. In your situation however, it appears that there are some confounding factors such as...
Management Effort: The reason you sought out property management all together. It seems as though normally, you would self manage this property. If you have an A or B class rental, with the right tenant you could easily mitigate the cost of property management (and just purchase a home warranty if possible). A good tenant would save you that 8%-10% fee and not create a ton of opportunity cost by eating up your time if you were managing it yourself. Sounds like a pretty reasonable approach considering you're about 2.5 hours away by drive. Also, theres the consideration of...
Maintenance Costs: So the tenant calls for a bunch of little things. This causes you annoyance and a bit of money, so you opt to hire a PM. Now, this tenant starts bugging your PM for little things. Your PM, under your agreement, will not need your authorization for repairs under X amount of dollars, and will likely send a handyman over at your expense to handle these little things quite often. Your PM's approach to managing a needy tenant will almost certainly cost you more than you managing it.
It looks like your tenant is a headache, is going to cut into your cash flow via management and maintenance costs, is displeased to be working with a property manager, and averse to re-baselining their standards for landlord accommodation.
Here are some questions that come to mind:
-Has this tenants 4 year stay been beneficial or detrimental to me once all factors have been considered?
-Do I really want this tenant to stay longer?
-How does the rent the tenant is paying compare to the market rent of the property?
-Could I easily fill this property in at an equal rent or greater?
-What asset class is this property? Would it be able to attract a tenant that would be easier to deal with, without having to pay for a property manager?
My personal opinion:
Sacramento rentals are in high demand, and rents have been increasing quickly (I believe one research firm ranking it 2nd nationally in annual rent increase, at something like 18%). If this is a property that can attract a quality tenant fairly quickly (i.e. an A or B class property), I would nix the property management option completely and provide a notice to the tenant that I will not be renewing the lease when it expires in February. I would immediately define an intensive tenant screening process, and use it to select a quality tenant. I like the screening guide provided here on biggerpockets (https://www.biggerpockets.com/renewsblog/2013/01/2...).
When interacting with tenant candidates, I would clearly define standards and communicate that these expectations ensure a higher quality rental experience for my tenants. Biggerpockets podcast #51 explores the "training your tenants" in great detail (https://www.biggerpockets.com/renewsblog/2014/01/0...).
The tricky part is that when marketing this property, you may potentially aggravate your current tenant. This can be a sensitive issue and requires you to consider how you might respond your current tenant's reaction. It may not be an issue at all either! Perhaps a more experienced property manager can weigh in on how to handle this element of the process appropriately.
PHEW. Sorry for the long response. I hope that it was helpful in some form. Feel free to reach out to me personally for any further discussion, and good luck!
