I’ve been a landlord for about 12 years now. My immediate family bought a 22-unit apartment building in 2003, and we managed it ourselves from 2003 to 2010. It turns out that 22 units is a lot to take care of, especially when everyone has full-time jobs. So in 2010, we hired a management company, with mostly good results. But there were a few times in the past 12 years where it became clear that it was time to fire the manager.
Our First Manager
The first manager we had was just a resident manager (we did the corporate management part, i.e., paying the bills, maintenance, evictions, etc.). We inherited him with the building, and we figured that we would leave him in place because the tenants all knew him, and we figured we might learn a lot from him. Let’s call him “Shifty.”
It turned out that Shifty was a problem for a number of reasons. Shifty had a brash New-York-style attitude that was fairly effective at getting most tenants to follow the rules. That is, if Shifty cared about making them follow the rules. It turned out that Shifty really didn’t care much about anything other than getting paid. He had no loyalty to anyone but himself.
Shifty was given free rent in one of the largest apartments, plus a bonus if he kept the apartments full and collected the rents on time. Unfortunately, in his quest to earn the bonus every month, he cut corners on finding new tenants to fill vacancies. He would rent to anyone with a pulse and a security deposit. I would look over the applicants’ credit scores and income and give the thumbs-up or thumbs-down, but it was Shifty’s job, as the man on the front lines, to give us an honest assessment of whether their personalities might make them good tenants or not. Sometimes a tenant looks great on paper, but when they show up to look at the place, they nitpick every detail, or let their kids run around and draw on the walls (no joke—this happened). Those are not the sorts of people you want to rent to.
But Shifty was short-sighted, and wanted to get an apartment rented, even if it was with horrible people. He lied to us, telling us how great the prospective tenants were, and he lied to the tenants about all sorts of things to try to get them to move in. He even told one lady, who owned a motorcycle and who was concerned about parking it in open carports, that she could store her motorcycle on the back patio, which meant that she would need to wheel it through the carpeted living room every time she rode it.
Fortunately, Shifty’s bad judgment came back to bite him. Because he had helped choose bad tenants, he had problems collecting rents on time, and we had higher than average turnover. It ended up being nearly impossible for him to earn his bonus with the bad tenants he chose. A split second before I was about to fire him, he quit because he had found a higher paying job at another property. God help the owner of the place he moved to.
The Second Manager We Had to Fire
The second problem manager was a resident manager working for the management company. We’ll call him “Bro.” We knew Bro was a problem when we started getting reports of certain tenants partying. Every. Stinking. Weekend. Bro always happened to be out of town. It turned out that he was regularly staying at his girlfriend’s house on the weekends, and the tenants had learned his routine. Some of the tenants took advantage of this, and turned the entire interior courtyard of the building into a frat party. This is the quickest way to get your good tenants to leave, and your bad tenants to take over the place.
The last straw was when Bro went out of town for yet another weekend, and an upstairs tenant’s sink started leaking and dripping through the ceiling of the apartment below. Bro wasn’t answering his phone, and the tenants were anxious about what to do. Fortunately, one of the tenants had my cell phone number. (This is a good idea, by the way. You might not want to give your cell number to all of the tenants, but choose one or two trustworthy tenants, and it can really save your behind.)
I called the building phone number, and apparently Bro had forwarded the number to his cell phone for the weekend. He still wasn’t answering his phone, but I got his voicemail: “Yo, this is Bro. Leave a message.” You’ve got to be kidding me. This guy was supposed to be representing us and his management company, and on his company cell phone he thought it was okay to sound like Spicoli? I called Bro’s boss at the management company, and then his boss, and said that Bro needed to go.
Our Last Manager
The last manager we had to get rid of, we will call Annika. Annika was formerly a regional supervisor for the management company, so they (and by extension, we) had high hopes. But after about six months, I noticed a troubling trend. Our monthly financial reports showed that some of our tenants were falling behind on rent. At first, it was just a couple of newer tenants, but after a few more months, it had spread to a few of our long-term tenants, who had lived in the property for nearly ten years and had never paid late. Something was wrong. It turned out that she had stopped charging late fees. Aack! If you don’t charge your tenants a late fee for paying rent late, then you are guaranteeing that your tenants will pay all of their other bills first, because they all have late fees and interest charges, and you will get paid last. That’s not good.
Another problem I discovered was that something weird was happening with our vacancies. With a 22-unit building, it’s not uncommon to have one vacancy a month. That equates to about a 4.5% vacancy rate, and it’s about the right amount if you consider that many tenants move every couple of years, on average. We were right on track, having one vacancy per month. One month it was Apartment M. The next it was Apartment U. The next it was Q. Then F.
It wasn’t until several months in that I noticed something weird. I compared the prior month’s rent roll to the current month’s, and noticed that one of the vacancies was filled by Mr. Gomez, and Mr. Gomez’s old apartment was now showing as vacant. I went back another month, and discovered that the vacancy from that month was filled by Ms. Smith, and Ms. Smith’s old apartment was vacant. I tracked down each of the vacancies for the past several months, and every single one of them was filled with an existing tenant. This means that the apartments weren’t getting filled, the tenants were just moving around. We hadn’t filled a single vacancy with a new tenant for months. This was bad.
We will let a tenant to move from one apartment to another, so long as they can afford the new rent, and so long as the tenant has the ability to pay for the cost of getting their old unit ready for rent again. You have to treat it as if the tenant is moving out, and then moving back in again. Very few tenants want to move so badly that they will pay for the cost of moving out and back in again. In the 7 years that we managed the property ourselves, we had only one tenant who chose to do that. With this manager, though, we had four move-arounds in four months. There’s no way she was charging the tenants for those costs.
We had a come-to-Jesus meeting with the management company, and they immediately took steps to correct the problems. They made sure that Annika started charging late fees, arranged repayment plans with the tenants who were behind, halted the tenant move-arounds, and redoubled their efforts to advertise the vacancy and get it filled with a good tenant. Shortly thereafter, Annika quit.
The moral of the story is that whether you’re managing the property yourself, or whether you’re paying a resident manager or professional management company to manage the property, it pays to take some time each month to evaluate your property and determine whether your manager (including you!) is doing a good job. If you find that the manager is coming up short, it might be time to fire the manager.
Have you ever had a problem with your property manager, and if so, what did you do about it?