Property Management Not For Every Rental Property Owner

Property Management Not For Every Rental Property Owner

We just had to release one of our property management company owners. This owner was incredibly entitled and part of that entitlement, we often see owners that are entitled, they're also highly suspicious. I don't know why the two behaviors kind of coincide, but they always seem to be the type of person who thinks somebody's trying to take advantage of them is also the type of person that's actually taking advantage of other people.

We were having a problem with this woman. She had purchased a condominium and it was in shell condition. She requested that part of our management will come in and make the unit new. We have all the contractor referrals, we'll line up all the talent, we'll get it looking pretty.

Through that process, we actually found a tenant. We found a tenant that loved this place so much that she insisted on moving in, even though she would have to live through the renovations, which she did. This was an incredible tenant, the sweetest tenant, the nicest tenant, live through the renovations, the owner didn't have a second of vacancy, and then the renovations all came out great.

We had to fire the owner because for a couple reasons. One of the reasons was that the owner was visiting. So the owner lives in Hawaii, we are a Philadelphia property management company and she insisted on getting into the unit again and again and again. So the whole time that she was visiting, she kept repeatedly asking to get into the property.

Now, we typically prohibit this and we do so because it's the tenant's space at that point, it's not the owners. So when you actually rent a space, the tenant becomes a legal user of that space. It becomes their property to use, and you're giving up that property for consideration. In this case, consideration is the rent that you receive. So in exchange for you giving me rent, I'm going to let you use my property and you will become the legal user of that property. And sometimes we run into owners that have a little bit more of a mentality of, "Well, it gets my property. I'm going to do what I want," and the tenant doesn't have rights. We have to unfortunately let those owners go.

Another problem we had with this owner after the renovations is the same kind of mindset. We had done the renovations; it came up to a total of over $7,000 in renovations. Our company actually paid for the renovations to the contractors because we feel very strongly about getting the contractors paid and paid quickly and as soon as the work is done, and that's how we actually build good contractor relationships and get work done at discount and better quality work and better quality contractors.

This woman, same entitled mindset, someone who actually tends to take more from others, also feels that others are trying to take from her. She kept asking, "Well, how do I know you did the work?" And it's like, "Well, you know, we did the work because we have shown you all the photos." The contractor uploaded maybe 40 photos of the new flooring, of the walls painted; contractors sometimes do get somewhat proud as they should if they do a great job. And we had plenty of photos. Her response was, "Well, how do I know what work was done behind the walls? How do I know everything was good behind the walls?" And the answer to that question is you don't. That's the part of trusting somebody else to do the work.

When you live in Hawaii and you buy a rental property randomly in Philadelphia, you're going to have to kind of trust that someone's going to do the work. The type of mentality that someone tends to take, also tends to think someone else's going to take. If that's the kind of property owner that you are, then you might not be suited to own a rental property. I don't mean that it's bad for tenants - which it is. I just mean it's going to end badly for the property owner. This woman ended up having to get terminated by us.

We can't have an owner engaging in predatorial behavior of using a tenant by evading their space excessively. We can't have an owner turn around and refusing to pay us our $7,000. And don't worry about it. We have mechanisms and ways we have already secured our money from her in ways that she didn't even realize was coming. I would not mess with a property management company and an experienced broker.

I don't know if rental property management is for everybody. It's going to end up not being profitable for this woman at all, who now is actually attempting to sell this property and she's just going to take a bath on it because she just purchased it. That means he had to pay transfer tax which is sizeable. She's going to have to pay transfer tax to sell it, and we're up to around 5% of a loss there. She's going to have to pay a real estate commission and I doubt she actually realizes that. See, again, she's kind of somewhat an entitled person, but I don't think she's realizing she's going to have to pay typically 6% on top of that. To put on top of all her expenses, the market has slightly gone down. The renovations were only around $7,000 hours, so they're not significant enough.

She would have gotten far more money for that $7,000 that has been spent in renovations, but she's not going to make enough money to cover all the costs of title insurance, transfer tax and all the other charges that come out of it.

This is Joe White. I don't know if I was helping anybody with real estate investing questions today or venting about my woes as a Philadelphia a property manager. But as always, thank you. Good luck!!!


Joe White

Joe White is a Philadelphia Property Manager and Real Estate Broker. He is the owner of Grow Property Management and has been involved in the management, sales and purchases of Philadelphia area rental investment properties since 2008. He is an author and works as a real estate investment consultant and construction manager.

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