A rental property owner called my property management company about five minutes ago, and the conversation stuck with me enough that I wanted to make a whole episode about it. She owns a property in Philadelphia with two other partners, they’re all based outside of New York, and the property is in rough shape in a rough neighborhood. They just went through a massive eviction after dealing with a squatter, the place is badly damaged, and now they’re worried about more squatters coming in because the property isn’t fortified.
Money was the huge factor for her. She was very concerned about property management fees, and she also told me straight up that they don’t have the money to make the repairs the property needs.
At that point, I had to end the conversation. And I want to talk about why — because I think there’s a bigger lesson here for rental property owners who might be in a similar spot.
Why Property Management Companies Won’t Take On a Problematic Property
Here’s something a lot of owners don’t understand: the good property management companies are vetting you just as much as you’re vetting them. When you find the best property management company in a given market — in my case, Philadelphia — they’re not going to sign up a problematic property or a problematic owner. Our margins are set for a functional owner with a functional property.
What does that mean? It means the property has to be tenant ready:
- It has to be safe
- It has to be clean
- It has to be presentable
We can’t have holes in bathroom doors where someone put their fist through the wall. We can’t have a property that’s basically inviting the next squatter in. That’s not tenant ready, and no legitimate property management company is going to market a place like that.
Now, my property management company will step in and help get a property to tenant-ready condition. We’ll oversee repairs, you get the benefit of our contractor relationships, you get our expertise at a discount compared to hiring it all out yourself. But there has to be money to actually do the repairs. If the owner can’t fund the work, there’s nothing a property management company can do.
The Trap of Holding On Too Long
Here’s the situation this woman is in: a D-minus property in a D or D-minus neighborhood, no money to renovate, no money to fortify against squatters, no local presence to manage it herself, and no property management company willing to take it on in its current condition.
She’s going to keep hemorrhaging money. Every month it sits empty and unfortified, she’s losing money. Every squatter situation is another eviction cost, another round of damage. Every repair she can’t afford compounds the problem.
At some point, you have to be honest with yourself. It might just be time to sell.
I don’t say that lightly. I own rental property myself and I manage rental properties for a living. I’m not in the business of telling people to give up on real estate. But there’s a difference between working through a tough patch and holding on to something out of pure entitlement or stubbornness.
The Out-of-State Owner Disadvantage
The other layer here is that she’s not local. She’s not even in the state. That’s already a disadvantage — you can’t drive by the property, you can’t meet contractors on-site, you can’t respond quickly when something goes wrong. If you’re going to own rental property out of state, you basically need a competent property manager. But if no competent property manager will take your property because it’s not in rentable condition, you’re stuck.
That’s the situation to avoid. And if you’re already in it, that’s the situation to seriously consider exiting.
What I’d Tell Her If She Called Back
If this owner called me back tomorrow, my honest advice would be this: sell the property. Take whatever you can get for it. Get the partnership out of the ongoing bleed. Use the experience to figure out what you actually want your real estate investing to look like going forward. Maybe next time it’s a better neighborhood, a better property, a better financial position to weather the surprises — because there are always surprises in this business.
There’s no shame in selling a bad rental property. There is a real cost to holding on to one that you can’t afford to fix, can’t afford to manage, and can’t get anyone else to manage for you.
Owning rental property is supposed to build wealth, not drain it. When a property is doing the opposite month after month, and you don’t have the resources to reverse it, the smart move is often the exit.
But what do I know? I’m just a humble Philadelphia property management company owner doing his best to answer your rental property investing questions. As always, happy rental property investing.
