Deepak Malhotra, Investor & Landlord, Cheney WA,  99004

When to fire a property manager


One of the most difficult things to do is to fire someone.  However, a bad property manager can mean destruction of your property and your wealth.  Sometimes, property management companies have one good property manager who jumps ship.  I had this happen to me once.  Unfortunately, my contract was with the company, not with the individual who knew property management and who used to work for the company.  Statements starting getting late, proceeds stopped showing up.  I read my contract several times and it stated that it was for one year.  In fact, the standard Texas management agreement lets the manager out of the contract with minimal notice but not the owner.  When you sign a management agreement, look carefully at the termination clause and make sure it is reciprocal.  That is only fair and reasonable.  I had a friend personally visit this management company and he was assured that all was well and believed it himself.  All was not well.  They ended up filing for bankruptcy.  Most of my units with this management company ended up vacant.  I never collected the rent that they took from the tenant.  I should have jumped ship at the first sign of trouble.

Sometimes, a property manager is wonderful, but ends up taking on too many units.  They get burned out or stretched too thin.  This has happened to me more than once.  They get complacent.  One of my good property managers started skipping the move-in reports.  Without a move-in condition report, you have no evidence as to the condition of your property at move-in time, which means you cannot keep a tenants deposit no matter how much damage they’ve done.

Bottom line, when things start going bad, when payments stop showing up or statements stop showing up or get later or later, when you have unexplained expenses, when you stop receiving replies to phone calls or emails, don’t wait, take immediate action.  It will not get better, only worse.  The property manager is probably in breach, probably knows it, and will usually let someone else take over without much of a fight.  Worst case, pay them commission as if they managed until the end of the contract.  That is the maximum damages they could obtain if they sued you anyway (unless the termination clause says they get more).  Maybe half of what they would have earned if the contract continued until the earliest allowable termination date (according to the contract) is fair.  It is worth it to pay them off to save your hundred thousand dollar plus investment.

Read your termination clauses carefully before hiring a new manager and make sure you can get out as easily as they can.

When you research new property managers, save your research in case you need to return to it later.  When your manager goes bad, you will not want to spend weeks researching new managers.  Have an alternative ready.  When hiring a new manager, always ask for references and call each one.