How to transfer property management

Real Estate Investing Apartments
1

Ok, so I left Atlanta in August and am in Seattle with a major problem - what to do with my rentals?

I have 13 units that are in a low income neighborhood and most PM want to only work in higher profit areas.

I had asked another investor, who used to have properties in the area, and he said that he’d deal with them, together with an agent that he’s working with on other rentals. I’ve known this guy for +10 years and trusted him.

Well, they’re really not doing anything, except collecting rents (which they haven’t turned over to me). They made it clear to me that I wasn’t to talk to any of the tenants (Have managed them myself when I lived in the neighborhood in Atlanta and know each one of my tenants) , to not undermine their relationship.

Well, I kept getting calls from tenants, saying that certain things still haven’t gotten fixed. When I contacted the PM I was told to stay out of it and they’d take care of it. Well, they didn’t.

Finally started calling some tenants today, asking them to please not tell the PM that I talked to them and found out that there are things that they haven’t fixed anything. One of my tenants was offered other houses to potentially move into (not mine) by them, because they weren’t happy with the noise level of the tenant in the other side of the duplex. Several tenants told me that they’re ready to break their leases because of the way they’re being treated. They’ve told all tenants that I instructed them to never contact me again. I’ve also found out several lies that they told about me, things that I supposedly said.

It makes absolutely no sense to me, unless they’re trying to run off my tenants and then make a low-ball offer on my vacant units.

Sooooo, I’m now ready to put in a very good friend of mine, who’s never managed before, but who I trust 100% and who has the time. I can work with her long distance on every little thing.

Is there some kind of paperwork that I can get somewhere, that she can use to instruct the PM to turn over all the collected rents to her? I’m trying to figure out the best way on how to go about the transfer. Is there a name for a form that I can google for maybe?

Thanks for any help

Michaela

2

Did you sign an agreement with someone? If so, what does it say in terms of terminating the agreement.

Just speculating of course, without knowing what your agreement may say, if there is one. But it’s possible you haven’t gotten the rents because they held some for their management fee. Perhaps building a “kitty” up so they can handle repairs.

That said I would simply write them a letter asking them to forward your rents to you by XX date. As an aside, you have to be licensed to manage property in all states, so that IF the investor is managing without a license, that’s a problem for him. Further, if the agent is managing (as opposed to finding tenants), then he would either need to be a broker or need his broker to have a written agreement with you. I’d say if they drive the tenants out they can fill the places back up for a fee (typically one month rent on smaller properties).

Really, you’ve left alot of info out in terms of what your written agreement says, if you have one, like what it says about terminating, when the agreement ends, who the agreement is with, etc etc.

Ben

3

Thinking creatively a bit.

Do you have investor friends in Atlanta you trust to do it? Would they do your management in exchange for a piece of cash flow and maybe a small portion of future upside equity? That would interest investors and motivate them to do a good job for you.

Jim

4

Is what your got into legal.

In Oklahoma, only a licensed broker can manage someone elses property for a fee. Your fried would not be legal as a property manager.

5

Thanks for your replies. We never got around to doing a contract. First I dealt with the investor by phone and email (because I first let me neighbor handle them and that didn’t work out) and I went through him. Then I started getting contacted by the property manager, who turned out to be someone I’ve met in the past and her and her and I never got along. If I’d know it was going to be her I would have never started this.

I’ve basically ‘fired’ her before by email after I was told that she doesn’t care whether someone deals drugs or fights dogs in my houses, as long as they pay the rent. Yes, she actually wrote that. She also went on vacation for 2 weeks without any other contact for the tenant, which I only found out when 1 tenant called me again 2 weeks later, saying that the heat still hadn’t been dealt with and that they’re not getting any responses on their emails of voicemails to her.

I contacted the investor who told me that he wouldn’t get in the middle and she’d deal with it when she’d be back from vacation 4 days later. I wrote a strongly worded email to the investor and the PM and she sent them an email that she’d take care of it the following Monday. 1.5 weeks later I got another call from those tenants, saying that she still hadn’t done anything. She blew up on me, saying that she’s dealing with getting them a new stove and hasn’t had time to deal with the heating (it’s cold in Atlanta and I have a setup with an HVAC contractor, so it really would have only taken a ph call). They’ve finally done the heat 2 days ago, but this stove still hasn’t been handled (which she was supposedly working on the last few weeks). That tenant has never heard another word from her.

Anyway, when she wrote that she was busy getting them a stove and couldn’t deal with the heat issue and that I better never contact any of the tenants again or she’d stop handling this, I told her that that was fine and that I’m turning it over to someone else.

THen the investor got back into the middle and wrote that any communication would only go through him in the future and that we were not to discuss things with each other and for me to stay away from all of my tenants.

In between she had sent me a contract to look over, sign and send back, but it has all the information from her other client, houses etc, in it, so I told her that and she said that she’d send me another one - which I never got.

So, now we’re without contract and they have all my money and they claim that they need every penny from october and November to fix things, but won’t exactly tell me what supposedly is wrong. Have not yet received an accounting for October.

I am going to call the Real Estate commission in the morning. In Georgia you also have to have a license to manage properties, but the exception is if it’s a full-time employee of the owner. Well, I don’t know what the definition of a ‘full-time employee’ is - it’s sort of not fair if they require 40 hours per week and health benefits etc. So, I’m going to ask them. My friend has her own business and my properties would be the only ones she’d manage.

I’ve only found 2 other PMs that are willing to work in the neighborhood - 1 has a really bad reputation. Have heard of them for years and tenants just hate them. The other one has such high minimums per unit, that the fee is 25-30% of my rent.

6

What if I’m still the official manager and my friend is just the local ‘helper’ for collecting rents and arranging repairs etc? Would that bypass the licensing requirement?

7

Just a couple of points:

A licensed agent managing property without a written agreement would be illegal in most states, probably Georgia as well. If she is really an agent, I would consider calling her broker. The broker should have a written agreement that the agent operates under. If the broker hears that the agent has your rents, that’s going to be a problem. Further, it should be accounted for. These would all be problems in all the states I’m familiar with. I would prefer speaking with the broker to contacting the Real Estate Commission, because I think it will give you quicker action. But I would mention the real estate commission to the broker.

If this is an agent, right now she has no agreement and therefore you not be providing any management function. I would send a letter that instructs the agent to cease any property management function she may be doing as of now. I would further demand that my rents be returned to me immediately along with an accounting.

If you have a lawyer in Georgia, consider having him write a letter to the agent. I would also contact the investor in writing and tell him to cease any activity relative to your properties.

One thing of interest here is that you made a deal with these people which was illegal for either of them to perform. Evidently it was a verbal deal. I would discuss this with a lawyer if I were you, and again, consider having him contact them directly.

At that point I would contact my tenants and inform them that they should not be paying any rent to the investor or the agent in the future.

I don’t think either of these people are employees. Employees earn salaries or wages, have taxes withheld, Fica paid, etc etc. They also will out W-2 forms.

Just to point out the obvious, you trusted the investor because you evidently had known him for 10+ years. Obviously that has not worked out for you. So now you seem to be going down the same path, another arrangement with a friend, which of course would also be illegal for your friend, unless she is actually an employee.

If I were you I’d consider a different type of arrangement. First, if I had relationships with HVAC guys, plumbers, electricians, handymen, etc in the Georgia area, I would contact them as problems arise, have them go out and make the repairs. I would collect the rent myself, initially by flying back to Georgia to do so, or by setting up a local bank account where they could deposit their rent, or both. That would enable you to check your buildings periodically.

If I needed a new tenant, I would consider hiring an agent and paying a commission for that.

Any of the costs you incur doing this for flights would likely be less than it’s going to cost you for property management.

I would only use my friend to check certain things like whether the unit is empty, etc., basically the things that you are unable to do yourself of that type.

I think what you’re seeing here is the difficulty of managing property long distance, along with the fact that most property managers are not particularly good.

I would recognize the possibility that you’re going to lose those October and November rents. The reality is that you also have some responsiblity for this situation. I don’t get why you’re allowing other people to tell you what to do. I mean you are the owner of the properties. Again, I would simply tell them to cease their activities, and demand my rents.

Ben T

8

What’s GA licensing say?

Call the GA dept of RE licensing and see if any of these individuals are RE licensed.

9

An investor can do it if you structure it right. Think of it in terms of a sandwich lease or master lease with an option that secures his future interest on a piece of the upside equity someday when sold.

Jim

10

Well, the reason I let them do it is that agents here don’t want to handle that neighborhood. The rents are too low. And tenants usually don’t have bank accounts and checks. It’s cash or money orders and it’s really difficult to get them mail anything. I used to live in the neighborhood, so it was easy to just drop by and pick it up. And the previous PM (who no longer works in the neighborhood) used to do that as well, before I moved back to Atlanta, so I assumed that that was the norm there.

They did reply that they’re putting October money into my account tomorrow and are working on accounting for November, at least what they’ve collected so far.

I’m really not a pushover, but I was desperate. Originally let my next door neighbor do it, until he stopped communicating with me and didn’t send September rents. Tried desperately to find a professional PM and nobody wanted to deal in the neighborhood. Then went to this investor, hoping he could recommend someone, at which point he came back to me , telling me that he’ll do it with his agent. That was end of September.

Once the problems arose with them I didn’t want to drop them until I had someone new and couldn’t find anyone that was willing to manage in the area, except for the 2 previously mentioned companies .

Informed them last night that they’re out. I’m officially PM and have informed my tenants (the ones I have a ph# for - there are 3 that were put in after I left and I have no #) and several have thanked me for not having to deal with her again. I also set up with a handyman in the area, who’s done a lot of work for me over the past year and who’s been very honest with me in regards to fees etc. And my friend is going to do the local work on my behalf for showing properties etc. I can’t use an agent for that, because agents don’t work this neighborhood and these properties don’t rent through MLS. It’s signs and craigslist.

So, I hope I can deal with it this way.

Thank you all for your help and suggestions

11

[QUOTE=jimingersoll;887105]An investor can do it if you structure it right. Think of it in terms of a sandwich lease or master lease with an option that secures his future interest on a piece of the upside equity someday when sold.

Jim[/QUOTE]

Jim,
it’s an investor that’s gotten me into trouble with this - and he’s fully involved in this, supposedly being the repair person (but who didn’t do a damn thing) . I’ve known this guy for a very long time. I would not trust another investor with this.

I’m just going to do the communication myself and get help from others in Atlanta as I see fit. That’s the only solution I can see here. Nobody is ever going to care about my tenants the way I do

12

Michaela,

I checked with an attorney on this and in Florida at least, you can manage property without a license provided you do not show the property, you charge a set fee that is not a percentage of rent, and you do not deposit rents, but instead forward the rent checks to the owner. I have a written opinion on this. This would probably apply to all 50 states, but if it was me, I would get my own written opinion.

13

[QUOTE=marcdonovan;887131]Michaela,

I checked with an attorney on this and in Florida at least, you can manage property without a license provided you do not show the property, you charge a set fee that is not a percentage of rent, and you do not deposit rents, but instead forward the rent checks to the owner. I have a written opinion on this. This would probably apply to all 50 states, but if it was me, I would get my own written opinion.[/QUOTE]

Thank you, Marc, I’ll see what I can do. Right now I’m kind of screwed. Am pretty much broke, since I haven’t received rents for the past few months. Don’t have the money to fly to Atlanta or hire an Attorney for anything. Just have to try to move forward and manage them long distance. I’m the official property manager and I have someone in Atlanta showing the properties (only when they’re vacant) and I’ll check out applications and sign leases.

They didn’t forward the funds to me, which really surprised me, because both of them are very well-known in the Atlanta investor community. Have both been previously presidents of the RE Association and know that I have ties to many people there. Surprised that they’re willing to ruin their reputation over what is not a huge sum of money. Yes, it’s a good bit of money, but if you’re working in this kind of industry your local reputation is worth much, much more, especially, if you regularly do business with other people in this community and your reputation depends on it.

14

If your friend is your employee, you bypass the licensing.

15

This story is exactly why I do NOT use full service PM.
They are almost universally bad.
They all swear they are different/better etc.
They are all WAY too expensive for what they do.

You are moving in the correct direction. PMs are almost never necessary. And full service PMs are NEVER necessary.

Find the couple of local trades that you absolutely need.

I have a great HVAC guy and a really good plumber who basically does anything else- carpentry, paint, light electrical. 100% reliable which is absolutely critical. I expect I pay more for him but it’s worth it because he shows up and fixes stuff. That’s really all I need.

Then I just have the tenants call me and I give the tenant his phone #. The tenant makes the appt which leaves me out of it and puts the onus on THEM. Tenant would need to be there anyway as I would want the tenant onsite when the handyman is in the house.

The handyman calls me with any major issues or just fixes the problem and bills me directly.

If you have no one local, I originally used a free service called servicemagic.com to find local handymen.

For rents, I use a national bank and my preference is that tenant direct deposit into the account. (They can do so at any branch.) This eliminates needing to mail the check, check lost in the mail excuses etc. Also, it lets them pay rent last minute since the funds are there immediately and I can check online.

5 day notices are handled by mail. Evictions by a local attorney who specializes in them (which I would do even if I were local).

The one real problem is moving from occupied to un-occupied to occupied (especially in the case of an eviction). I will occasionally use processors for skip checks. And filling vacancies is the one place I WILL use a PM. Flat fee. Fill the property with a tenant I approve and then I take over.

I used to use classifieds, handle the phone calls, have open houses etc. But it’s too big a hassle and in recent years was very unsuccessful. Easier to let the PM do it. They don’t fill the vacancy, they don’t get paid. So they are motivated.

GL

16

Michaela,

Any update as to how things are working now that you have taken back control?