Yes, Property Management Can Be A Waste of Money

THERE’S ONE KEY FACTOR THAT CAN UNDO ANY ADVANTAGES OF HIRING A PROPERTY MANAGER

Hiring a reputable property manager is a great way to ensure you’re on the right track with your real estate investments. A property manager will help you make important decisions about your rental properties and will take care of all of the headaches that come with investment property ownership. They’ll handle your leasing and maintenance so that you can sit back and collect passive income. That’s the way it’s supposed to work…but from time to time it just doesn’t…and here’s the main reason why:

THIRD PARTY INTERFERENCE

One of the most challenging tasks for a property manager is dealing with owners who have hired them to tackle the responsibilities that come with rental properties who then jump back on the field of play. Over the years we’ve had owners who have been worried about rent that was a day or two late that have gone to the property to collect it themselves!!! We’ve had owners make unapproved agreements with tenants to have them handle their own maintenance in an effort to save a couple bucks. We’ve had owners decrease rent on their own without communicating with us in exchange for favors from tenants. Even things as simple as communicating with tenants is enough to throw a wrench into the systems and processes that are essential to effective property management.

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WHY OWNERS NEED TO LET GO OF THE LEASH

Most commonly there are issues when the owner had previously managed the property themselves. Because of that, they then have relationships with the current tenants and a wealth of knowledge regarding the history of the property and the tenancies. This information can be extremely valuable but not at the expense of clear communication with the property manager. To stick with the football analogy thrown in earlier, it’s why every NFL team establishes the primacy of one QB. There’s nothing like a quarterback controversy to christen the end of a team’s upward trajectory. In the same way offensive players struggle to know who their leader is, tenants don’t know who to turn to when something goes wrong.

It is essential that property managers have that (potentially) difficult conversation with owners and instruct them to cut ties with the tenants. Rental property investment is a business and by hiring a property manager you’re creating a buffer between those relationships and your income. That is essential when conflicts arise. There needs to be one point of contact (the property management company) and any interference can be catastrophic.

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A RECENT EXAMPLE

One of our clients in Massachusetts owns three units and the tenant in one of them has been hired by the owners in the past to help out with rent ready turnovers. He owes them rent so they’d asked him to do work on one of their vacancies. He’s also been living in a single family home without a lease for several years and his rent has been far below market value. The three owners hired Nexus Property Management to straighten this all out.

We now have the tenant on a lease for (just under) market price. However, last month, one of the owners agreed to charge a lower rent (without property management approval) and collected it himself. When asked about it, he told us the tenant didn’t know how to pay his rent. Not only did collecting the rent himself break contractual obligations and lead to a late fee because we weren’t made aware of it, but it also set a dangerous precedent as the two were obviously communicating with each other, rather than with the entity that’d been hired to manage the property.

So far, I’ve used the words “catastrophic” and “dangerous” so let’s get to it: This tenant most recently discovered a leak somewhere in the house. Water traveling where it shouldn’t is considered emergency maintenance and would justify a call to Nexus’ 24 hour emergency maintenance hotline. In this instance, what do you think the tenant did? He, of course, contacted the owner instead. We had no idea of the leak…why??? Because of third party interference.

LEARN MORE: YOU ARE NOT GIVE UP CONTROL WHEN YOU HIRE A PROPERTY MANAGER, YOU’RE GAINING A TEAMMATE

WHY THE CHAIN OF COMMAND IS SO IMPORTANT

To back track, when the tenant told the owner he didn’t know how to pay the rent, the owner should’ve told him that the instructions were in the lease (the owner would know this if he’d read it before he signed it). That document exists for a reason but tenants won’t use it as a guide if they know they can just text or call the owner to handle their problems for them. When it came to the leak issue, the lease has full instructions of what to do in this case. The tenant failed to do that because it was that much easier to just use a lifeline. Much like the water exiting those pipes, human nature is also to find the path of least resistance. Hopefully the damage is not too costly.

REMEMBER, WHEN YOU HIRE A BONAFIDE PROPERTY MANAGER LIKE NEXUS YOU ARE NOT RELINQUISHING CONTROL YOU ARE RELINQUISHING RESPONSIBILITY!

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Mick Lefort is the General Manager of Nexus' New Haven County Franchise Office and the Vice President of Operations for Nexus Property Management®, a National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.

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