Tuesday, June 05, 2007

Property Management Blues Part 2

When I returned from Laughlin, I was excited to stop by my post office box. Since it was June 1, I should have a check for May's rent waiting for me. Imagine my surprise when I discovered it was not there.

I was furious. I had been told the tenant paid some rent on the 14th and a bit more on the 21st. That left him still owing $100 plus a bunch of late fees. Even if he hadn't paid in full, some of that money should have made it's way to me by now! Looking at the calendar, there were three full weeks between his first payment and the day I checked the mailbox. There was no excuse for this.

When I got home, I forced myself to wait a couple hours to cool down before composing a fax. Here is what I faxed last Saturday:

Dear PM's name,

I last spoke with you on the phone on Tuesday, May 29th. I asked for an update on the rent situation with my rental at property address. At that time, your computer showed a discrepancy between two different screens with one screen showing the tenant still owed money and another showing he was paid up. You said you would investigate and get back to me before the end of that day with either a phone call or an email. You did neither.

Additionally, I still have not received any rent for May. You told me in a phone call on May 17th, that the tenant paid $550 of the rent on May 14th. In a phone call on May 23rd, you told me you had received another $100 of the rent, bringing the total to $650. As of today, June 1, 2007, I have not received any of that money from management company. It is bad enough when my tenants don’t pay rent on time. I do not need a property management company that also cannot manage to pay on time.

I’ve been using your company for two months now. Let me recap the service I have received in that time:

· The first month’s rent you collected was mailed out in April 10 days late and I did not receive it until the 24th of the month. I was told this was because your accounting department was running behind. You said it was “only” 10 days late. As I am sure you are aware, if a tenant was 10 days late, I could start the eviction process. Why should I hold management company to a different standard?

· Management company has collected at least $650 of rent for May and has not forwarded it on to me. Perhaps even more has been collected, including all the late fees the tenant owes. I don’t know and apparently, neither do you.

· You’ve told me you would investigate these problems and get back to me and you never have.

As I am sure you can see, this is truly horrible service. I would like a written explanation of where the breakdown in your procedures has occurred and what steps are being taken to ensure these problems don’t happen again next month. You can fax this to me at my fax number listed on the first page. Unless I see some improvement in service, I see no reason to continue using management company to manage my rental property. I also want you to send the rent you have collected so far to me by the close of business on Monday.

Thank you,


So what was the response to this fax? Not the requested written response, but a phone call, which I purposely let go to voice mail. And what message was left? All the manager said was "Your check was mailed on the 25th." That's all. No mention of if the tenant finally paid all his rent and late fees, no mention of anything else in my fax. That's pretty crappy, if you ask me.

This morning, the rent check was in my mailbox, but there are still issues. First, although the check was printed on the 25th, the postmark shows it was not actually mailed until almost a week later - on the 30th. Second, the check only was for the first $550 collected. Where's the rest of the money?

From my dealing with the company so far, it is obvious they only print checks once a week on Friday. However, I can think of no explanation for why it takes so long for the checks to be mailed after they have been printed. Nor can I explain the two week delay between them receiving the rent from the tenant and sending it out to me. Perhaps they want to make sure the tenant's check clears. However, my tenant paid me with a money order, so I would expect they would continue paying that way.

I am starting to investigate other management companies.


Starsky said...

Hey Sean,

Was wondering if you still think this venture was worth the hassle? It doesnt help that your out of state either. If it was close, you would be able to handle it yourself.. Also this is only 1 unit, If it was 5+ more units I could see the risk, but for 1?

savvy saver said...

Fire them. I would be so frustrated with them right now.

I would suspect that the tenants sense this underlying lack of organization and use it to their advantage.

Shaun said...

Starsky - yes, it is worth it. I have one point of contact at the management company. I only have to worry about picking up the checks. I do not have to deal with tenants and their excuses, I do not have to send eviction notices or show up in court to evict someone. I do not have to worry about advertising for new tenants. I do not have to worry about background checks or applications. If you think what I am going through with this management company is too much work, don't bother investing in real estate at all. Compared to managing a tenant on your own (which I have also done), this is nothing.

And by the way, it's S-h-a-u-n.

Starsky said...

Hey Sean/Shaun,
Hopefully this gets posted & you wont scrub this last comment on this issue..

If you decide to post the TRUE profit/loss numbers thus far for this deal It should be real eye opener to new investors.. Especially those thinking that they will be making nice cashflow by using a Property Manager for only 1 property & then expecting said company to jump through hoops over your 1 unit portfolio you blessed them with to manage.
Good luck

Shaun said...

I have always posted my actual numbers here. If you call asking a management company to do their job in a timely manner "jumping through hoops," so be it. You have a lower expectation of service than I do. As for only having one property, you have to start somewhere. If you recall, I was in the process of buying a second property and that deal fell through. I still plan on buying more properties in the Tulsa area. It is only a matter of time and of finding the right ones.

You clearly do not believe anything I say. I've told you in the past, I publish 99.9% of the comments left here. Moderation is turned on only to stop spam and non-relevant discussions. You seem to think I am selectively publishing only the positive comments. This is not true. Even if I turned off moderation however, as the blog owner, I still have the ability to delete comments. Therefore, since you do not believe anything I say, you will not believe me when I tell you I have not deleted comments. This is a no-win situation for me because there is no way I can prove I do not delete comments. Given that, I will not attempt to.

Since you don't believe anything I write, I see no reason for you to continue reading this blog and suggest you stop. Your comments are no longer welcome.

And for the other readers, I think Starsky perfectly illustrates how what one person might consider "risky" is not considered risky by another. There is no "one size fits all" in real estate investing. There are many ways to make money. There are many different risk tolerance levels. There are many different ways to invest. No one can say "Do it my way or you will fail" or "Mine is the only correct way to invest." With this blog, I am showing you how I do things and the results. Copy me or don't. See what I've done and modify it to suit your needs. Or see what I've done and do exactly the opposite. All I am trying to do is show my actions and their results. What you do with that information is up to you.

Doug O said...

Shaun, sorry to hear the problems... Although, as those who have invested in real estate know, finding a good property manager for out of state investments is probably 75% of the battle... Sometimes you get lucky, sometimes you need to go through 2 or 3 before you find one that works.. It's true that using a manager is far easier than managing units yourself - you don't have to deal with the 3am phone calls, or the hassles of when things break... It really is a nice peace of mind when you have a property that will cashflow with a manager...
That aside, this manager definitely does not seem to be up to par here... I wouldn't wait around for them to straighten themselves out - start looking for a new PM NOW!! The sooner you find someone, the better...
Also, it would serve you well to mention that you are an investor and are actively looking to increase your portfolio in the locale - sometimes this will serve as that little extra motivation to get a new PM to go the extra mile to make you happy (if they think they'll be able to manage your future purchases)...
It's no secret that it is sometimes difficult to get good service from a PM when you only have 1 unit, but that's all part of the game...
Anyone who criticizes you or points fingers obviously has never invested in real estate before.. Otherwise they would know that it is not an easy road in the early stages!! But once you can overcome the nuisances and get into larger properties, it definitely becomes easier, as the larger PM companies are eager to service you and your properties at that point... (not EASY, just easier).

Shaun said...

Doug - Thanks for the tip (once again)! I think I need to take you to lunch sometime!

Doug O said...

Hey, it's like you said above that you are just posting what you are doing, and people can choose to copy you or not...
I wish I had the ability to read something like this 5 years ago when I started investing in real estate... It's always great to see where someone else made a mistake, no matter how minor, so that you can look out for that as you travel down the same road...
There are some things that almost everyone will do, regardless, but that's all part of the learning curve...
A lot of people think owning real estate is easy - you just buy something that looks good on paper and sit back and collect the checks... That is rarely the case!! There is almost always some degree of involvement...
Don't let bashers get you down or tell you that you were stupid to do this or that, I'm sure that those of us who invest have all made most of the same mistakes already and learned from them... You're just helping people who haven't yet made them (hopefully) learn about it before it happens..
Some people continue to perservere and invest for a lifetime, others beat a hasty retreat for the exit and look for another way to get rich quick...

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