February brought huge lessons on this topic for me. Lesson's I'm still beating myself up over, actually. I saw some of the red flags, felt it in my gut, but wasn't brave enough to react as quickly as I should have, which I should have. So I'd like to share these lessons to help you avoid some costly mistakes that I made.
So here's the brief synopsis:
I had a property manager that I trusted who was managing a property of mine for 2 1/2 years. It was all going well until late October last year I get a call from the utilities company saying that they need to switch the utilities back to my name as per the tenant moving out. That was red flag #1. I mean shouldn't the property manager have notified me first? Well, it only went downhill from there.
My cute little rental property
Long story short:
Tenants broke the lease
We had to evict
Tenants left everything for us to clean up
Property had damage
Now the property manager assured me it would be cleaned up quickly and rented out no problem. I went up to visit the property in mid November (mainly to check on the progress) needless to say there was no progress from the photos I originally saw. The place was a still mess. I, myself, spent the day cleaning out the fridge, a fridge that was filled with prepped meals for the next week mind you, a clear sign that they didn't really intend to move out at all. I also moved all their stuff on to the front porch to get hauled away. We originally planned to stay the night and continue the work but the place wasn't even habitable. It was very disappointing.
I then called the property manager and expressed my concerns because I felt he didn't accurately disclose the current condition of the property prior to me arriving. He reassured me it wasn't as bad as it looked and he was coming next week to finish it up, yadda, yadda, yadda. That was Red flag #2 because that was already mid November and I knew there was way too much work to be done in order to have it rented out by December 1st. I trusted him though... shame on me.
Condition the tenants left it in
A fully stocked refrigerator
Toys left everywhere
Basement filled with stuff
My property manager then contacted me a week or so later and said he had found a tenant for December and that she was going to be moving in. They agreed the attic would be finished a little after she moved in (an attic he promised to have done over year ago), and I was assured everything else had been cleaned up. He reassured me she was happy and off to a good start in her new home. Great! I thought. He actually pulled it together! Awesome! That's why I pay for a property manager after all right?!?
The end of December rolls around and the attic isn't done yet. I try to see it. He said he hurt his knee and therefore couldn't finish it yet, but that he will get on it soon. Red flag #3. No progress. Excuses...again.
Unfinished attic project when tenants moved out
Shoddy work in the attic when property manager said he couldn't finish because of his "knee."
January, same thing. We had some firm conversations, set some concrete deadlines, put it into writing. The usual stuff but still no progress like there should have been.
February comes around and the tenant reaches out to me directly. She is irate (understandably so) because she has a long list of things that are not yet done that have been promised to her, including completing the attic (which I too was aware of and frustrated by myself). But much to my surprise, additionally her list included things that I was under the impression had been completed, and that I had been invoiced and paid for. Needless to say I called him up immediately to find out what going on.
Garage still not cleared out
Basement still not cleared out
As anticipated my property manager was very defensive, making excuses and trying to flip it back on me that I simply wasn't being patient enough and these things were "normal" in property management. He then proceeded to try an manipulate me by claiming the tenant was high maintenance and he was questioning how could I not trust him after 2 1/2 years of working together. It was infuriating, but I kept my composure. I have had lots of experience with adults not taking accountability and trying to make their problems your problem. Younger me would have fallen for it. Older me was over it. I put him on notice and gave him one week to make it right, trying yet again to be fair of course.
Like a classic case of "you can't fire me because I quit!" he sent me an email less than a week later saying he would be unable to manage the property anymore "due to his knee."
Honestly, I was completely fine with that. The trust in his competence had long been lost and to tell you the truth, I should have followed my instinct and removed him in December. My gut was correct and trying to guide me, but I ignored it. I also told him in a nice email that he owed me for the "services" I paid for already and that after that I just wanted him to go on with his life in peace. He of course went radio silent after that. Not a surprise at all.
Truth is, I can't even fault him. I can only fault myself. There were red flags starting in October. I already felt it in my gut that I needed to find a new property manager, but there was a little part of me that was afraid. There was the fear of:
1) Will I be able to find someone else at all in a smaller market?
2) Will I be able to trust them?
3) I'm not even sure how to go about finding someone I trust when I thought I trusted this guy for so long...
Photo Credit: Carson Masterson
I share this with you not as a "oh woah is me" or to overshare and make family cringe at me for putting my failures out there to the world. I share this to be honest about the biggest challenge that I still encounter regularly as a female investor: having the confidence in myself and trusting and following my own instincts without needing confirmation from others.
I have read many, many books. I have extensive experience with managing adults and holding them accountable to do quality work. I know what good property management looks like and doesn't. And even then I still pressed the "override button" when my body was physically telling me that something is wrong. In Vicki Robin's book, "Your Money or your Life" she uses the phrase, no shame and no blame. I'm really working on being kind with myself here and just take away from this experience what I can.
Excerpt from: Mastering the Art of Commercial Real Estate Investing: How to Successfully Build Wealth and Grow Passive Income from your Rental Properties by Doug Marshall
So here are my major takeaways from this whole experience:
1) Visit the property often. Even if you have a property manager, it is your property and no one can or should be afraid of you visiting it. If they are, that's a red flag. You need to be in the know at all times and let both the property manager and tenant know you are an involved owner. Make up any excuses if you feel the need to, although you shouldn't. Stop by randomly and say you have to check the battery in the smoke alarm or that the water bill was high this month and you need to inspect in the basement for leaks. Do whatever you need to do to ensure you are aware of what is going on both inside and outside the property. I have already begun to make this change and pop up often. Every time I'm up in Kingston I'll swing by my properties and check in and I won't always announce when I'm coming.
2) If a property manager gets defensive when you are asking them legitimate questions, drop them. You are paying them for a service. You have a right to know answers. A good property manager will appreciate that you are asking and staying on top of things. Remember a legitimate property manager wants your property to run smoothly. The more eyes and ears on a property the tenant feels, the smoother it will run for everyone, including the property manager. Anyone who is threatened by that is trying to hide something, which I now know for a fact.
3) Select a property manager who can set clear boundaries with tenants. One of my mistakes was that my property manager had rented to this couple before at a previous property, spoke highly of them and trusted them. That seemed like a good thing at first but I now realize was not so good in hindsight. I look back and recognize that he didn't have clear boundaries with the tenants and draw the line distinctly between friends and business. I learned later on that he would hire my tenant for side jobs to help him out on the cheap. He also negotiated that my tenant would complete the attic for me if I bought the materials. This of course was a promise that was never fulfilled as you saw earlier. Bottom line is he was too lenient because he was too comfortable with my tenants. That will never be the case again. I want a property manager who does not blur the lines of business by befriending the tenants.
4) Cheaper is usually not better in this area. My first property manager was a one man show. He was a handy man at best, and now I question even how handy he actually was. I am willing to pay slightly more for a legitimate, full service property management team. This means turn overs will be quicker, evictions will be handled swiftly and professionally if need be and that even my bookkeeping will now be included, something I was doing on my own before. All this will only cost me roughly $200 more a year, which is entirely worth it in my opinion.
5) You want a property manager who is bringing repairs to your attention regularly. It may be stressful to constantly have bills pop up here and there but it will save you a lot of deferred maintenance down the road. I now know that not having that for the past two years really, is hitting me hard right now. And right now, I have lots of deferred maintenance that simply must get done before I rent out my unit again.
Deferred maintenance costs you more in the end
6) Your property manager should be able to break down all the costs and expectations well in advance and in writing. If they can't do this, it isn't a legit operation. When interviewing for my new property managers, it made it easy to sift through them. A few were unclear and vague. For me that was a Nope! Next! The one I finally decided to go with was able to break down all costs, answer all my questions, explained what services he marked up and why and how much. He was completely transparent, which I appreciated. He should be making money for his company if he is providing a legitimate and quality service. I have no problem with that. In fact I respect that as an entrepreneur. And once I verified those numbers by calling around to different plumbers and what not, it felt even better to know he was being honest with me.
7) Confirm. Confirm. Confirm. Check references. Call to check equivalent price of services. Pop up randomly. Ask around town about your new property management company. Suss out their reputation. All of this is not to say you shouldn't trust a property manager once you have selected him or her, because you should. Don't micromanage. Let them do what they do, but keep your hand on the pulse. Make sure you know what you think you actually know. I did not do this initially and that was my mistake.
So after being much more selective about my new property manager, I can honestly say already that I see a complete difference in the level of service and professionalism. It will take about a month minimum to clean up my old property manager's mess, but I already see my new property manager working with integrity to get the situation back on track. If that ever should change, if the quality of services should ever go down, or if my gut tells me again something is starting to go wrong, I will be quick to remove him. But right now I am relieved to feel like I can start to trust someone else again.
Finally getting the property cleaned up and back on track!
Hope this helps you out! I do think this experience was vital for me to gain some true wisdom in the area of self confidence. My gut never led me astray, but my belief in myself was lacking. I'm working on that for sure!