Signs your property manager needs to go - especially during these times
Many investors get into real estate initially because they are excited about the potential growth of wealth. They study the market (or at least rely on what sellers are handing them). Do their due diligence and aim to invest in the right places so they can sit back and wait for the returns to come in.
However, many find out that it’s not that easy. Everyone wants the dream tenant who is conscientious and responsible, pays the rent on time, and treats the property as their own.*
That’s not always what we get. Sometimes a tenant is placed who messes up a property, doesn’t pay the rent on time, and will only alert you to a leaky faucet weeks or months after the issue began, leading to much more expensive repair.
It can be enough to make an investor wonder if it’s all worth it, as owning investment properties can be a taxing endeavor - but hey what isn’t?
And this is where property managers come in.
A great property manager can do much of the heavy lifting for you where rental management is concerned. They will be the one who takes those late-night concerns and deals with shady and hard to understand renters on your behalf. They will also be in charge of screening potential tenants, to minimize the chance of renting your investment property to irresponsible tenants in the first place.
With their experience in the industry, they basically maintain an excellent database of resources for repairs and are familiar with landlord-tenant practices and standard operating procedures, especially in relation to major incidents like tenant evictions and existing lease cancellations. (Owner getting shot by tenant)
However, it is in line with common sense that, if there can be nightmare tenants, there can also be nightmare property managers - boy oh boy!.
If you’re concerned that your property manager might be causing more harm to your property than good, it’s time to review your agreement with the goal of replacing them with someone with experience, expertise and good moral values aligned with yours.
The following are some hints that your current property manager needs to go:
- When your property manager is missing in action.
One or two texts that don't receive a reply may not be a cause of concern yet. but when you're blowing up your property manager's (leasing & Sales agents and reps included) phone and you never hear back, it's time to check on your properties ASAP. Because something may be wrong. There is a chance that your property manager is overwhelmed, has taken on too many listings and projects, or just poorly organised. Regardless of their reasoning, it's time to investigate further.
- When you tenant(s) are blowing up your phone or ranting on social media
Getting enquiries from tenants about problems you property manager is supposed to handle is another serious sign that they may not be doing their job. One of the major reasons why you hire a property manager is so that renters/tenants do not (And should not even need to) know who the property owner is. When your tenant actually looks you up. This suggests that your property manager(s) may have been ignoring their complaints. I myself had to go to actual business owners to escalate certain problems that mall managers, leasing agents and even dedicated property managers seem to let fall into the cracks.
- When your property manager fails to address problems
Has your property manager been maintaining the property regularly? Are broken fixtures and scheduled repairs fittings pushing through? If the answer is No or a painful unclear, then you may have a lazy and unprofessional property manager on your hands (Yes, your hired cousin doesn't deserve to be cut some slack either). Your property lead should be providing you with regular reports (at least every six months -- adjusted to a daily brief if emergencies and high risk scenarios like the Covid-19 2020 i.e running several rentals apartments in the middle of the CBD your property manager needs to be on top of screening and cleaning) So if you have not heard from them in a while, consider reaching out for an update.
What are you going to do if on of your tenants are confirmed to be sick with the Corona Virus (COVID-19). Your property managers should know and address the problem.
*There are developers in the Philippines who offer mass and low cost housing to the market. With units for sale ranging from 1,000,000 pesos & below ($20,000). Investors are enticed with an idea to rent those investment properties for 5,000 pesos a month or $100.00. An experienced property manager should be able to manage your expectations, is there a 5,000 a month tenant market in the first place if so, what's the profile and quality of renters in said market?
- When your property manager doesn’t update you
If your property manager is not giving you regular reports on your tenants, their intentions to stay/move, and updates on repairs and upkeep, then they are doing something wrong. Conversely, your property manager may be providing the needed reports, but they are light on details and action plans. Your property lead is there to act as a conduit between you and your property, so they need to be on the ball about even the smallest issues (before these snowball into big ones)
- When you have compliance issues
Airbnb has become a popular alternative to expensive hotels for a day of “staycation”. Philippines’ Bureau of Internal Revenue (BIR) is turning to Airbnbs as the new source of additional revenue. (Makati, Rockwell, Quezon City, Pasig City and other key cities)
Regulatory changes can impact your investment, and it's your property manager's role to ensure that you are abreast if the latest changes, while also keeping your property above the law. I.e Bureau of Internal Revenue in the Philippines are eyed on Airbnb and prop tech rental platforms on key cities in the Republic. Always distinguish gross versus net rental revenue folks! Particular areas of concern can be smoke alarms, window covering cords and elevators, AC as they are often governed by internal and external bodies. As the property owner, the buck stops with you. But you should be able to rely on your property manager for advise and guidance along the way.
- When your cash flow is poor
Is your property staying vacant for months on end, with no prospects of gaining a tenant in the near future, thereby causing you major cash flow issues? This may be a sign of your property manager is doing a terrible job at marketing if effectively to potential tenants. Even in the slowest property markets, an effective property manager or leasing agent can guide you towards a tenant - Even if that means reducing your asking rent.
If any of the above red flags ring true for you, then do not wait to boot out a bad property manager, otherwise the impact on your portfolio could be disastrous.
When you sign a contract, it's important to include the clauses specifying how you can end your arrangement with your property manager and or his company, as this can help you manage a graceful exit.
Once the partnership has been terminated, you need to ensure that you get all tenant records and logs from the property manager so you can tract tenants and residents to let them know of the change and clear up any residual issues. Make sure all uncollected rent is paid up. Check for anything that needs fixing and repairs, and conduct a thorough inspection to settle any compliance issues. Ideally, you will have lined up a new (and better quality) property manager to help you will all of this!
When finding a new property manager, be clear about your expectations. It would not hurt to schedule an on-site meeting and walk with inspection, and be sure to put everything in writing --- Document it!
How to get rid of your property manager by and large
There is currently no minimum notice period (apart from the agreed notice period) for a landlord wishing to cease the arrangement with the current managing agent for their property (for leasing you need to refer to your managing expert). Once you have engaged a new managing agent, they will send the relevant notice to your old agent and handle the necessary paperwork. Your former agent will need time to prepare the file, though, so we recommend that you allow three clear business days.
Signs of an effective property manager
- Knows the fair rental rates, cap rates, yields, respective to the local market to charge the tenants and or to impose on the deal.
- Screens tenants carefully through background checks, covering social media, digital platforms and referrals. Aligns the property owner with Data Privacy Laws.
- Conducts regular inspections of the property and gives reports.
- Addresses issues with the property in short order, using the most cost-effective approach. There should be a firm grasp on critical items on action plans that gets the job don with minimal to no cost at all!
- Ensures that tenants pay rent on time and knows how to recover capital spend during down times such as pandemics that affect tenancy and or occupancy
- Aware of government regulations that may affect rentals and or sale.
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John G is a partner at Ongpin Roxas Gonzales. A real estate advisory firm based in greater south of Metro Manila. He Started with 1 condo. Turned into 20 units professionally managed as AirBnb pilot for Eastwood City. Evolved into a longer term residential landlord. Ventured into commercial real estate and secured a 15 year lease. Now I am selling said commercial property with a SEA publicly listed petrochemical brand. Talk about 10X
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