By: Revanche

Real Estate Investing #17: Cleaning up the mess

August 20, 2018

Real Estate Investing: Cleaning up the mess My former property manager was a disaster. For the purposes of this post and my crankiness, she’s being renamed from Crappy Old Property Manager to Fiasco. She ran hot and cold: sometimes taking care of business and communicating, sometimes taking days and weeks of emails to get something done.

The rent was usually paid on time, but every so often, we’d run afoul of the HOA rules because the tenants weren’t in compliance now and again. The issues were things I THOUGHT were simple, and wondered why they couldn’t manage to comply but I didn’t take direct action. I’m a bit of novice at this and wasn’t sure of the right course of action.

Normally I wouldn’t do business with someone this inconsistent, I was enjoying being hands off too much in these first years with JuggerBaby and all the house stuff. But no more. It turns out that there was so much wrong under the surface, I’m so glad that I got fed up before the mess got much worse.

There’s an outstanding balance that the tenants haven’t been paying from the HOA morass two years ago and Fiasco claimed the tenants were aware of it every month but wouldn’t pay down more than a fraction of it. Fiasco dismissed it as something that’ll just come out of the security deposit but as I reassess the value of each person I’m paying money to work for me, that’s just not going to cut the mustard. We don’t know what, if anything, we’ll need the security deposit to pay for at the end of these tenants’ stay, but if it’s significant, I don’t want to have wasted it on this bill.

After sending the new manager to talk to the tenants we discovered the many ways Fiasco was a fiasco:

  • The tenants didn’t have separate line items for the rent and the HOA fees, so they didn’t know why their “rent” was fluctuating. I’d balk at paying that too!
  • Fiasco completely ignored the tenants’ questions and concerns. She never answered emails or phone calls, nor did her staff.
  • There were legitimate reasons the tenants couldn’t comply with the HOA rules on certain items but since she just ignored them, I never knew about them.
  • The appliances were slowly dying and again, these reports were ignored.

The new manager and I are working through this mess piece by piece.

We’re working on getting an exemption from the HOA for the rules that we can’t reasonably expect the tenant to comply with – they’re not very agreeable though, wish us luck!

The repair quote for the appliances came in. It’s going to cost more than half the cost of new appliances to repair. Given the age of the current appliances, it didn’t seem worth repairing. Luckily this part of the conversation happened at the end of June so I was able to hit the Fourth of July sales or that would have been a whole lot more. All new appliances cost $1350. Bye bye profit margin.

So that leaves me bitter with Lowes.com for being schmucks. Their own customer service rep assured me that there was no charge for installing any of the appliances that I had purchased, but it turns out that there was a charge for one of them, and despite written proof that I was told there was no charge, they insist there now will be. Feels like quite a bit of a bait and switch but it’s too much trouble to return the appliance and buy from someone else. Time to cultivate some small business suppliers instead, I want an alternative to the big box stores.

This year’s accounting is going to be a mess but I’m glad that I’ve made it a point never to touch the income from the rent over the years. As long as the bleeding stops soon, I won’t be out of pocket this year. Of course, I’m not going to be feeling too good about the return on my investment either.

As a long term investment, it’s was intended to be an income stream after the mortgage is paid off. The monthly costs (mortgage, property tax, insurance, HOA, sewer bill) is currently covered by the rent.

The rent is a little below market rate but because the tenants have been paying on time and dealing with the crappy end of working with Fiasco, we’re going to let things settle down before bringing the rent up a bit.

24 Responses to “Real Estate Investing #17: Cleaning up the mess”

  1. This reinforces my strong desire to never ever be a landlord!

    Have you made a stink about Lowes on twitter yet? I sometimes see that working for people.
    nicoleandmaggie recently posted…RBOMoneyMy Profile

    • Revanche says:

      I definitely used Twitter to complain at them but didn’t get more than the $50 concession from earlier :/ I’m usually more successful but Lowe’s doesn’t care. So now I know for the future not to patronize them.

  2. SP says:

    Way to go on taking these steps and hiring someone competent. It might be a painful year for addressing all this, but it sounds like it will all pay off in the end.

  3. Joe says:

    Ugh, that’s why I manage my own properties. At least, it’ll be my fault if there are problems. I don’t trust property managers at all. They take on too many properties and things are bound to slip through the crack. Property managers only work when the property doesn’t have any problem.

    • Revanche says:

      I’m also glad that managing it myself isn’t an option right now – with two FT jobs plus the young JB PLUS the two dogs, I simply can’t see how I would do a good enough job either. I’m not sure that property managers all suck, I’m waiting to see how this one works out.

  4. Josh says:

    I had the same crappy bait & switch from BestBuy when I bought a new dishwasher. I was supposed to have free delivery and installation based on a promotion they were running and/or my status in their RewardZone program… But the delivery guys were total jackasses and anyone I got on the phone would just push back saying they had no idea about the promotion.
    So in the end, I spent 4.5 hours doing the install myself, crawling around on the floor, getting more and more frustrated with every minor setback, because it all should have been taken care of by BestBuy in the first place
    Josh recently posted…My horrible house journey, 2006-presentMy Profile

    • Revanche says:

      Ooooh those punks!! I would have tried to do that myself as well but in this case it wasn’t an option. Grr for your having to waste half a day on that.

  5. We have thought of investing in rental property sometime in the next several years, but the head-ache factor is a definite turn-off. In our case, we would only buy outright, and we wouldn’t have a young child to look after – or day jobs for that matter. Maybe a property manager wouldn’t be necessary for us? Anyway, thanks for being real about the head-ache factor you’re experiencing. It helps others considering it to go in with eyes wide open. I hope things resolve quickly for you now that Fiasco is out of the picture!
    Prudence Debtfree recently posted…Prudence Debtfree’s Debt-Reduction GraphMy Profile

    • Revanche says:

      Without the full time day jobs and small child and two dogs factors, I would feel a lot less stressed by the idea of managing the property myself. But honestly I’m still new to the full hands on management of my own home so I’d still feel uneasy about it. In your cases it could honestly make a lot of sense to manage it yourselves.

  6. We’ve been through several property managers in most of the places we own property. Most of them are terrible! They seem OK to start but then can become less reliable over time. Also, you don’t know if you are going to like them or not until you see them react to a problem situation. When tenant is paying on time and no repairs needed, property manager seems great! We make sure we always have a clause to cancel with 30 days notice and don’t hesitate to make a change when a problem occurs.

    • Revanche says:

      I’ve only had the two property managers now but I hope that it’s going to be an upward trend from here. I don’t love the idea of battling this out long term!

  7. Lowe’s has elicited some very angry reviews from customers over what may (or may not) be gouging for appliance deliverry & installation.

    Renters: I really do wonder sometimes whether investing in rental real estate offers any net benefit over investing in the market.
    Funny about Money recently posted…Woo HOO! Girl’s Guide to Knife Renovation!My Profile

    • Revanche says:

      Honestly I expect that both big box stores stink but my ire is currently directed at Lowes for deception.

      I don’t know if this is really the worthwhile endeavor I hoped it would be but I’m looking at it as a long term trial and diversification.

  8. Man sounds frustrating. Managing the manager is always a concern when dealing with rental properties.

  9. Ugh, bad property managers are the worst. I have never been that happy with either of the two we’ve worked with, for what it’s worth.

    And that nonsense with Lowes is unacceptable. They’re going to lose a customer forever just so they can charge for an installation? WTF?
    Done by Forty recently posted…A Progressive Take on Regressive TaxesMy Profile

  10. Matt says:

    At the end of the day if you are breaking even with the costs VS rental income then the renter is paying down your mortgage and you are building equity. I’m not familiar with the real estate market where you are but if you are covering your costs I would say you are doing ok.

    You have to remember that there is likely increase in property value + equity which means your ROI should be reasonable.

    Either way, it sounds like you’re figuring the property management issues out.

    • Revanche says:

      It really needs to do more than cover our costs otherwise it will have been a huge wasted opportunity cost where I should have invested that cash instead. The equity has to grow a whole lot more to cover costs over the long term, though it’s finally grown enough to cover our initial outlay. We’ll keep plugging away.

  11. Shelley says:

    Hi – Just found your comment on my blog (Mary’s Birthday) from back in May or June…I have a whole stack of comments I didn’t know where there! I feel an idiot, but am so happy that people have been talking to me after all!

    I’ve had rental properties for nearly 30 years now and I feel there should be some regulation of property management. I had one send me rental payment and the check bounced. Turns out she had mixed the rents and the tenants’ deposits and I’m not sure what all went on. She closed the business when her husband died, soon after this, so perhaps she was dealing with too much on her own. I’ve tried working with individual managers, but never again, they are too unreliable. That said companies aren’t necessarily better. One company back in the 1990s – who did everything by post, not computer – lost me my reasonable insurance premium due to late payment of monthly premiums. I never realised they didn’t just pay it all up front, like I do now. One company lost my business because the didn’t do bids for repairs, only used in house staff who cost a mint. Another charged me for trimming the trees brushing the roof; $75 was reasonable but it was their bad luck I happened to visit Oklahoma two weeks later and the trees were still draped across the roof. One company listed my house for rent with the photo which included the garbage from the previous tenant all stacked up in front. I left another company because they let the property get damaged to the tune of $15,000 in repairs. The stories are endless. However, I have had good luck with my current managers in OK and UT. When it seemed that the one in OK was working out well and I wanted to change my manager in UT I asked for suggestions. They suggested finding a property manager who was a member of NARPM. I did this and, so far, I’m pretty happy with the ones I’m with now. Mind, I notice they change hands a lot and I keep having to learn the new name of the company. No idea what that indicates. Good luck with your properties!

  12. Wow, that is a real train wreck. I know real estate is (usually) a solid deal and lots of people push it, but stories like these are exactly why I am apprehensive about being a landlord.

    On the other hand, Mr. Frugasaurus has proven to be an excellent administrator during our purchase/move to our new home and he has agreed to take on all the work related to setting up an airbnb as a side income stream. Perhaps he’ll be happy to deal with a rental in time as well. 🙂
    Kristine @ Frugasaurus recently posted…That Elusive Christmas SpiritMy Profile

    • Revanche says:

      I believe in sharing the honest truth! It’s often good but also it has drawbacks and it wouldn’t be fair to share just the one side.

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