Five Ways to Protect Yourself from a Bad Property Manager

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We’re not too proud to say we made gigantic mistakes when we hired property managers for our Toronto and Niagara Falls properties. Our biggest errors happened before we even bought the properties, but we continued to make them until one day Dave was reading his name in the paper, calling him “an absentee landlord of a local crack house”, and we were making the discovery that our other property manager was robbing rent money from us.

When we realized what had happened in both situations we really felt stupid. And, financially both situations were painful. In fact, five years later, we’re still dealing with problems that arose because of the bad Niagara Falls property manager.

Mistake Number One: Dave bought (I take no responsibility for what he did with the two Niagara Falls properties) without making sure he could hire a reputable management company. Living two hours away, it was impossible for him to manage the property and he had to hire the only person that would take it on.

Avoid this mistake: Before you buy a property, make sure you are able to hire a good property management firm. There are some properties that good property managers will not manage. And if they won’t manage them, there’s a good chance they are more work then they are worth.

Mistake Number Two: When we hired the property manager for our Toronto property, we focused our research on finding the best priced manager. We glanced at references, made sure the company was registered with the better business bureau and that was about it. We were just anxious to not have to deal with the tenants that were fighting and calling us 20 times a day.

Avoid this mistake: Research your potential property manager obsessively. When you’ve found a firm that you think you’d like to hire, get references and find out what other properties they manage. Drive by those properties and see how well they are maintained. Take a walk around and hope to bump into a tenant. See if the tenant is happy with the property management company. And definitely call a few of the owners of these properties the company manages and find out if they would recommend the company.

Mistake Number Three: Once we hired the property manager in Toronto, we washed our hands of it. Grateful not to be dealing with the tenants fighting, we happily stopped thinking about it.

Avoid this mistake: To start with, frequently contact your property management company. And, once in awhile check in with your tenants. Let the property manager know you are keeping in touch with the tenants and checking the property yourself on occasion. Ensuring the property manager knows you’re involved and that he’s accountable will keep him on his toes.

Mistake Number Four: Ignoring a unit that is always vacant. In Niagara Falls there was one unit we never collected rent for. When Dave checked on it, it seemed someone was living there. Turns out the property manager was letting a buddy crash there for free. This buddy attracted working girls and drugs to the building with a greater frequency than the other tenants. So not only was he freeloading, he was bringing the property down with him.

Avoid this mistake: If there is one unit that always seems to be vacant, check on it. Visit the unit or have someone else visit for you. Confirm that it is vacant. If someone is living there, you want to find out why you aren’t getting rent for it. And if it is really vacant, you need to see it yourself to find out why and fix the problem.

Mistake Number Five: While we never did prove it, we’re certain that the same manager that robbed rent money from us (See our story on what happened) also charged us for repairs to the property that never were done. Anything to scam a few extra bucks from the unsuspecting owners.

Avoid this mistake: If you are being charged for snow removal, check the weather history and make sure it actually snowed that day. If you are being charged for repairs, get receipts or photographs of the repairs. One tip that David Lindahl had in his book “Emerging Real Estate Markets” was to have the management company take a picture of the repair with the local newspaper next to it. This way he has proof of the date, and he can see what the repair actually was. It prevents being charged for the same repair twice.

We’ve learned a healthy dose of paranoia goes a long ways. So trust your instincts, but check them too. A few extra phone calls and a few extra steps here and there can save you thousands of dollars a year.

Published April 5, 2008


April 21st, 2008 UPDATE

After we published this article, we received an email from our Nanaimo property manager. He had a great suggestion regarding our advice to check in with your tenants to ensure your property manager is doing what you hired them to do:

I caution all new clients not to contact their tenants direct under any circumstances! I have many tales of woe on this and not one where there was a benefit. The few that disregarded my advice were quick to ask me how to get out of the problems contacting the tenants had created.

The property manager is the middleman and frequently the “no” man. If the tenant has the owner’s contact info they will not take no for an answer. (Then it becomes a “he said, she said” game.) It is amazing what a tenant or an owner thinks the other promised and I have no way to guess the real story which may be somewhere in between. Why open up that can of worms?

I suggest making an appointment to view the home with the three parties in attendance. You get to know each other and the property but keep your comments to the weather. The meeting is warm and fuzzy.

When we received LW’s email, all of the memories of a disgruntled tenant that found Dave’s phone number through information came rushing back to us. Being in B.C. and three hours behind Ontario’s time zone where the tenant lived, we found ourselves getting really unpleasant 5am wake up calls on many mornings. We really like LW’s suggestion, and believe that a meeting with all three parties in attendance would keep the property manager in the middle, where they should be, while providing an owner with the necessary reassurance that the property manager is doing the job they’ve been hired to do.

So thank you LW for your great feedback. Keep it coming!

 

Julie Broad