You Know What Sucks About Property Management? Sometimes everything…

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LocksmithFor several years I swore that I would never do property management. Horror stories abound – crazy tenants, lousy landlords, low pay, attorneys mucking things up, special/stupid Department of Real Estate rules, accounting nightmares. All that (and more). Ever heard anyone say something good about property management?

Yeah, me neither.

Yet we went off and did it any way. Why? Well, at the time it seemed like a good idea. We wanted to be able to offer our investor clients that needed property management true full service. It always felt weird to help an investor buy a home, knowing they were going to rent it out and that they needed a property manager and just saying, “Thanks for using our brokerage, good luck with that property management thing!”

That, plus with the rash of folks out there loosing their homes and needing to move into rentals it seemed like adding an additional income stream to the brokerage made good business sense.

So almost a year ago to the day we stumbled into a great guy (ahem, Jason Geroux) with property management experience and we took the plunge.

We set up all the requisite bank accounts. Stole Made forms. Wrote a bigger check to our Errors & Omissions insurance carrier. Talked to the CPA who looked like he wanted to kill us for even thinking about it. Fortunately, he rocks too and was/is a tremendous help. All that stuff and presto, we were in the property management business!

Wheee!

And you know what? It really didn’t suck all that much. We had great tenants, and great property owners. I thought to myself, “Self, what’s up with all these horror stories?”

Enter today. (Well, technically yesterday given that it’s 1:48am right now.)

Today sucked. Big time.

We’ve got a tenant who is having trouble paying their rent. I won’t get into all the gory details but suffice it to say we’ve postponed things, bent over backwards, they are trying, we are trying, the property owner is trying yet shit is still spiraling down the drain. The courts got involved and the good old Constable lock-out was supposed to happen in just a few hours. This is where the law knocks on the door and tells the tenant to step into the driveway while a locksmith changes the locks.

Not a pleasant experience for anyone involved.

Lots of time on the phone today with a very upset tenant, a remarkably together property owner, attorneys, constables – it just wasn’t fun. At all. I’ve found the suckage so many talk about whenever property management comes up in conversations (and yes, Realtors have no life and actually talk about things like property management over beers. Pathetic isn’t it?)

Fortunately, the tenant managed to come up with just enough funds to hold off the constable and locksmith for a couple more weeks. I’ve got a bad feeling we’ll be right back into the same spiraling pile o’ feces soon enough. But maybe not. Who knows.

All I do know is I feel horrible for almost tossing someone to the curb. But at some point, that’s what has to be done. Trust me, it’s not like the rent is due on the 1st and we start eviction proceedings on the 5th. We’re talking months behind. None-the-less, Jay and Jason feel like evil Spawn of the Devil. Maybe we’re lucky that we haven’t come this close to an eviction in the past year. Maybe we’ve just got mad skills at screening tenants and the statistics finally caught up with us.

Whatever. It’s a given that sooner or later (and I’m still betting sooner with this particular one) someone will have to be evicted. And it’s going to suck. For them, for us, for everyone involved. I suppose it’s a fact of life when it comes to property management.

But I don’t have to like it.

 

Photo Credit: Will Scullin on Flickr. CC Licensed.

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About the Author
Jay Thompson

I'm a real estate broker in Phoenix, Arizona and the publisher of the Phoenix Real Estate Guy blog. I tend to drive too fast and scream at the University of Texas and Denver Broncos football teams. My two kids are smarter than most adults I know and my wife is simply amazing.

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Comments

  1. Joe Lane says:

    Jay,

    For what it is worth, we have managed our own rentals for the past 20+ years and have never had to evict anyone and have not gone to court, ever!

    In our local market, we have had up to 23 tenants we’ve managed, but currently only have 7. It’s all about tenant selection and then when things look like they are headed south, terminating the relationship. Now that your tenant has paid up, you gotta end this thing. Don’t be a nice guy, you nice guy! [grins]

    Hate to be a bad ass, but we offer zero grace on rent payment. We offer very nice rentals to our tenants and respond immediately to problems. All we ask is they do their part.

    Feel free to call or email anytime if you have questions. Joe :)

  2. Sounds a lot like my story! When you do things right, nobody pays attention, but when things go wrong, and not because of you, you become the “bad guy.”

  3. Jay wrote: “it’s not like the rent is due on the 1st and we start eviction proceedings on the 5th.” If I can make a suggestion … this is EXACTLY what a property manager needs to do … every time, every month with every tenant. 1. It shows that you are a serious professional and expect the rent paid on time. And 2. The sooner you remove a troubled tenant, the less painful it is for everyone in the long run.

  4. Artur says:

    All I can say is, ‘you’re freaking out just about that?’ I’ve had rental properties well over a decade and the short stories I could write about some of the experiences could make for some interesting reading if not an independent movie or maybe a reality show. Hey, I’m getting some good ideas here.

  5. Jamey Prezzi says:

    We handle a lot of rentals too however I have a few guys and gals who manage individual units and I refer that part out to them…….. my broker doesn’t allow us to (property management), happy that don’t allow that!

    All the best to you!

  6. Cheryl’s got it right.

  7. CJ how do you approach the property owner that wants to put off eviction, waiting and hoping the tenant comes through?

  8. Your PM agreement should outline your late fee & eviction policy or at least have a place for the owner to acknowledge that they have read and approve it.

  9. Jay -

    Mark me as another who agrees with Cheryl above. We’ve had rentals and tenants in the past, and it’s rare to find the tenant who is only late “this once” but then will be back on track. Habits are habits, and people are who they are.

    The investor-owner is hoping the tenant comes through because they don’t want to go through the pain in the butt effort of fixing the place up (again) and finding a new tenant. Better to offer them sound advice, like we do at every other juncture in the real estate process, that a bad tenant is worse than no tenant. They’re wearing & tearing the home without paying rent!

    -Chris

    • Donnamarie says:

      Actually, sometimes responsible people have bad things happen to them and they are late “just this once”. I’ve owned my own home for 30 years, but rented an apartment previous. Due to a surgery, I needed to ask for a grace period. When we bought our first home, we didn’t have much left after the down payment. Unfortunately, my husband had health issues and was off work for about 7 months recuperating. We needed to ask for a grace period from our mortgage lender. In both instances, we paid what we could and caught up the rest as soon as we could. Sometimes crap happens to responsible people too.

  10. Chris Apple says:

    Jay,

    I know this can be a tough situation and I wouldn’t want to be in your shoes either.
    On paper it seems straight-forward -

    - contract says rent is due by the 5th
    - if not paid by the 5th your out

    but when it’s an actual family that you have to throw out it can be hard to separate emotions from business. I feel for ya & good luck with the tenant.

  11. Joe Lane says:

    Chris Butterworth wrote:

    “…it’s rare to find the tenant who is only late “this once” but then will be back on track. Habits are habits, and people are who they are…”

    Amen to that!

  12. Jay, sometimes the property owners have to learn the hard way too. A while back, we had an owner beg us to halt an eviction 2 days before the sheriff’s lockout date… we said Okayfine, that is your decision. Well, guess what. We’re now right back in the same place again, except the owner now has double the attorney fees and double the lost rent. Sigh. Big sigh.

  13. @Sheri – we have all that in our PM agreement. Wouldn’t dream of not having it. Ultimately though, it’s the property owners decision, not ours, on whether to proceed with the eviction process. I think Cheryl nailed it, some owners have to learn the hard way. We can (and do) advise them to evict, but they don’t have to take that advice…

  14. That’s true, Jay. We do make it very clear with owners when we first meet with them that we are very strict with our policies. If they have been managing on their own and haven’t been strict and/or are emotionally involved with their tenants, it can be a problem.

  15. BawldGuy says:

    Feel your pain, Jay, but Sister Teresa would eventually develop immunity to deadbeats.

    It’s been since the 80′s and Dad’s been gone over two years, but I’ve still not forgiven him for makin’ me head up a property management division for our clients. :)

    I developed the good/bad cop approach. My assistant was Mary Sunshine while I was Darth BawldGuy. Not for everyone, but it worked like a Swiss watch for eight years. Rent not paid by the 5th? I showed up. I left with the rent, or had handed over the dreaded pay or quit form. Word got around quickly: Deal with Ms. Sunshine.

    I don’t miss those years. In fact, I have a deeply felt mistrust for folks who think pro management is a great career path. :)

  16. Mario Romero says:

    Same reason I do rentals as well. Most investors in our market buy properties and need someone to manage it. Have been doing it for 2 years and would take it back if I could. Problem after problem with renters. If it were not for the great leads rentals generate I would stop it right away.

    M. Romero

  17. You’ve dashed my dreams of managing an Airstream Park in Anywhere, USA. What will I do with all these purple spandex pants?

  18. Mike Taylor says:

    Jay, your timing couldn’t be worse for a PM horror story for me. We are just getting things rolling on our own PM operation for all the reasons you stated in the start of your post. I hope our experience is different, but something tells me it won’t be:)

  19. Gay Potter says:

    YUP! that is what happens! Completely agree with Cheryl! I have only been to court to evict someone once in 22 years of real estate property management. I keep it small, ONLY MY OWN! You may be saying that to yourself later! Good luck!

  20. Uggh I feel for you Jay. Property Management sucks. I do my own property management on my rentals, but I won’t touch other people’s rentals with a ten foot pole. I am extremely firm with late payments. I charge $25 PER DAY late charge. If they are more than 7 days late, I go over and stick a big For Rent sign in the front yard. Even though I can’t legally rent the place until I go through the eviction process, just seeing a For Rent sign in front of the house usually motivates people to pay up.

  21. Dave Kinkade says:

    Property management can (and will) bring out your darkest suspicions of humanity. It can be an ugly job but you just have to pinch your nose and deal with the bad things that come up sometimes. We managers aren’t the bad guys; we are simply the guys in the middle that the Landlord and Tenant hired to hold one another to the contract they signed. That’s it. End of story.

  22. property management is not an easy job. You need a tough skin & street smarts to do it well.

  23. Can you be a Landlord? That is essentially what you will be when you have real estate properties to rent out to prospective tenants. Before you leap into the world of collecting rents and dealing with renters’ issues, you have to know that going into this you will need patience and understanding. Here are some tips that you might know in purchasing rental properties.
    1.Consider small improvements that will allow you to increase rents.
    2.Know what tenants have been promised.
    3.Know exactly what you’re getting in to.
    4.Understand the setup of the utilities in rental properties
    5.Look for extra features that will allow you to charge more rent.
    6.Do your homework on rental properties.
    7.Look for rental properties in student areas.
    8.Learn how to attract good tenants.
    9.Find out what you need to know to be a landlord.
    10.Be clear and firm with your expectations of tenants.
    11.Learn what the reputation of a rental property is.
    12.Let people know a rental property is under new management.
    13.Consider hiring a property manager.

  24. R. Baber says:

    For 3 years I was a property manager. I had moved into small town where I had no contacts and I needed a way to get my name out there. There was only one other PM in town and in 6 months I had created a reputation as the “go-to girl” in the area for rentals.
    It wasn’t easy and I learned three things –
    1) Choose to take on only the best homes. The better the house, the better the tenant. If you take on a rotten shack that’s your fault when all you get is bums to rent it. I earned the reputation of having high-end houses and I got top dollar from renters who never missed paying the rent.
    2) find a good rental search company to check credit, criminal backgrounds, employment and references and don’t ignore their recommendations if they say pass on a renter.
    3)understand that when an owner interviews you to take on their rental, you are also interviewing them. A PM/Owner relationship can last years and you don’t want to be stuck with an owner who doesn’t take your advice or won’t follow rental laws or wants a “discount” on your management fee. You don’t have to take their property even if it is the best house in town.
    There are more things I learned (believe me), but these are probably the top 3. I gained some good listings and buyers through my years of PM and while I don’t regret it, I have no need or desire to go back to it. If anyone would like to pick my brain on rental issues, I’d be more than happy to answer any questions you may have.

  25. Doug Francis says:

    I have a couple of good property management companies to refer people to… so I know that I am providing the best service possible. It is a great answer and I feel blessed to have them in my cadre of service providers.

    I’m a real estate agent. I’m not nuts!

  26. Danny Nappi says:

    No matter how well you are in screening tenants you will run into having to evict tenants eventually. Most days in property management run smoothly then there are days that make you wonder why you ever got into property management.

  27. Chris says:

    Being a landlord for 1 property is bad enough… managing multiple properties must be a headache. I guess it all depends on who is occupying the homes, but we all know there’s a few bad apples in the bunch almost every time.

  28. I’ve avoided adding property management to my brokerage up until this point for all the reasons stated in the comments above. Addedd accounting expenses, tenants and landlords, higher E&O rates etc.

    Having said that, I think it’s something I’ll need to add sometime in 2011.

    @R Baber I’ve heard the same comments about choosing to represent only the best homes to attract better tenants from local property managers. I’ll be following that advice whenever I can.

  29. Homestead PM says:

    I stumbled upon your blog after doing a search property management sucks!. I do PM, everything seems to be going fine untill 3 of the 6 houses I pm are late on the rent. Thinking about hiring someone to handle the day to day task. This job can be depressing sometimes. I have found that drinking coffee makes me optimistic and helps. lol
    Good Luck Everyone!

    The Homestead PM Guy.

  30. Months behind = inevitable eviction as you stated. The truth is it doesn’t serve the tenant do drag things out any more than the landlord. I’ve had to evict tenants before, and I don’t feel so bad about it when I consider the expenses that the landlord carries to keep and maintain a property. But it is a hassle. However, it sounds like your property management operation has been relatively painless overall which means you have been doing a good job for your clients.
    I have found that the best defense against these hassles are getting great tenants which is easily accomplished by making sure that apartments are in good condition with any possible amenities provided, which is why I recommend to all landlords they make whatever investment necessary to keep their property in good order. Otherwise it is called slumlording, which is never any fun and missed rent payments are always a part of that equation.

  31. Really a nice post to go through. Thanks for making such a nice post and sharing this valuable information with us.

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