How To Fire Your Property Manager

how to fire your property manager

YOU’RE FIRED!!

I have always wanted to say that to someone and now I finally get the chance to do it!  Whooo Hoooo!  Well in reality, I’m not actually really going to say those words out loud to anyone, but dag gummit I am going to fire the heck out of one of my current property managers and I am happy to do it!

You see there may come a time in your real estate investing era when you will most likely need to change property management companies.  Whether it’s because they are absolutely horrible or for your own personal reasons, it does not really matter.  What does matter is how to do it successfully with minimal impact to yourself and your tenant.

Lucky for me, I have the luxury of going through this process right now so I can tell you all about it.  I have ended the partnership if you will with one of my property management teams and for good reason.  They are horrible!  It comes with great pleasure to me to be released from the death grip they had on me and my rental property.  Ha, okay maybe it was not that bad and it definitely could have been much worse but if you have paid attention to this blog, you will come to know that I am picky about things and for good reason.   I think in order to have a prolonged successful real estate empire, it is necessary to work with the right teams and people who can help you achieve this.  And the Property Manager is one of the most important players involved.   There are certain must have qualities that a property manager should have and it is important you find one with all these qualities before entering a contract with them.   I have also created this awesome property management interview question list so that you can ask all the right questions when looking for a new property manager.

So where did I go wrong?

I knew beforehand what to look for in a property manager and also knew what questions to ask when I interviewed them.   The property manager in question  came with my 2nd turnkey rental property that I purchased and the turnkey provider was just starting a new property management team.   The owner passed my interview list with flying colors but because they were new, could not provide references of existing landlords who were using them.  And that folks is exactly where I went wrong.  I took the chance with the new property management team.  They had answered all my other questions so well and now I feel like I got duped.   My line of thought was that if they turn out to be no good then I will just replace them.  So that is exactly what I am doing.

So why am I firing my property manager?

Here are the actual reasons why I am choosing to terminate this property manager and have the rental property transferred over to another property management company.

a) Horrendous communication.  Out of the 6 or 7 times that I ever had to call the PM, they only ever picked up the phone once.  They took days to respond to my voice mails.   I normally prefer email communication especially for non emergency issues and this communication was even worse.  My first emails would pretty much always get ignored and I always had to send a 2nd or sometimes even a 3rd email just to get a response.

b) They did not look out for my best interest for repairs.   This one was quite strange because it is specific to this house.  Prepare for my rant.  🙂  On this specific rental property there was a re-occurring plumbing problem with a pipe getting blocked over and over again.  After the 2nd time the problem occurred, I specifically contacted the PM by phone and by email letting them know to have the plumber put in a permanent fix.  This would entail running camera’s through the pipes to see where the blockage was.   I was completely ready and prepared to pay extra to do this just so that I can have the problem fixed for good.  Well guess what happened?  The problem happened again for a 3rd time, they did not tell me about it and put in another band-aid.  Okay great I thought, they just ignored my previous request and sent a repair guy again.   What really threw me over the edge is that the problem happened a 4th time and again they did not even attempt to do a permanent fix after the plumber’s invoice specifically noted the permanent fix solution in the 2nd and 3rd invoice.   It was after this 4th attempt when I finally decided to fire them.

c) Bad owner’s/tenant online portal.  I am all about accessing reports and anything online.  It’s so much more convenient for me.  These days, most property management companies have cool online sites/portals where landlords can go in and view statements, reports and repairs.  Well this PM did have one however they did not maintain it or run it properly.  The statements were never made accessible to me and although this is a minor issue, it did not help the cause one bit.

 

Below are the steps I took for terminating my agreement with the property manager.

 

How to fire your property manager:

1) Find a new property manager

  • Prior to firing your property manager, you will first need to confirm you can find a valid replacement.  When doing your search, be completely honest and straight up with the new property manager.   The new property manager will play a vital role in making sure the transition goes smooth.   It is important you find out what steps and process the new property manager will take during this transition.   Luckily, I was able to transfer my rental property to another existing property manager that I have who is a rock star!    We worked out and clearly defined the steps needed for the transition which you will see below in step 4.

2) Review the property management contract/agreement

  • If you are working with a legit property manager, then you signed a contract prior to going into business with them.  In this contract you will find a clause on how to properly terminate the agreement.  Make sure you abide by what it says and follow the exact steps needed to do so.  In my case, I just needed a written document with at least 30 days notice.   Now that you have found a replacement property manager and reviewed the steps needed to terminate the contract, its time to take action.

3) Fire your Property manager

  • Now that you have your new property manager squared away and you know how to legally terminate the contract, you will want to perform the necessary steps to fire them.  Send a letter/email or phone call if applicable to inform your property manager that it is no longer working out and you are putting your notice in to terminate the contract.  Inform them why you are terminating, who the new property manager will be and when the final rent payment will be that they collect.   It is important you remain cordial at this stage.  You don’t want to piss off your current property manager as they still have control of the property and it would be in your best interest to play nice.   After the property is moved over and the tenant is making the new payments to the new property manager, then you can kick and scream to the old property manager all you want.  🙂

4) Coordinate and devise a plan with both Property Managers

  • You personally may not have to do much during this transition but it is important you understand exactly how it will go down.  For your own peace of mind.  These are the kinds of steps involved during the transition:

a) Have your new property manager contact your current property manager to get all the necessary info on your current tenant.  Phone numbers, lease, deposit info, etc…

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b) Make sure current property manager provides all info to your new property manager and find out when the security deposit will be sent to the new PM.

c) Have your new property manager contact the current tenant to inform them of the new change and provide all the necessary info for the current tenant.

5) Stay involved until your tenant makes the first payment to the new property manager

  • At this state you are pretty much done and are just waiting final confirmation that your tenant is making the payments to the new property manager.   Make sure this happens and remain in the loop until it is certain the tenant is following the new procedures.  It is best if stay on top of this and to not solely rely on the property managers.

 

Additional tips for firing your property manager:

6) Time the transition at the expiration of a lease.

  • It would be easier for all parties involved if you time the switch at the end of an expiring lease.  The tenant can then renew a lease with the new property manager and you can start a fresh cycle and paperwork with the tenant.  If the tenant decides to leave, it will be easier for the new PM to make the house rent ready, find a new tenant and take care of all the paperwork themselves as they normally do.

7) Understand the costs involved.

  • Make sure you know all the costs upfront by the new property manager and also confirm if there are any costs involved with terminating the contract with the old PM.  Sometimes they do charge for terminating.

8) Obtain copies of all paperwork.

  • Be sure to gather all statements and reports from the old property manager.  Once you are done with them, it could be very difficult to get these and these documents in the future and the documents will come in handy when you do your taxes or update your income/expense spreadsheets.

 

If you follow all these steps then you should hopefully be in a position of successfully transitioning your rental property to a new property management company.   Hopefully you will not have to go through this but when you are in the rental property business, it is best to prepare for all outcomes including evictions, late payments, and bad property managers.




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23 Comments

  1. I appreciate the tips Alex. I knew this was coming, from out conversation at South by Southwest, but I wondered how exactly you’d go about it. It’s one thing if it’s a local property manager, but being 800 miles away, it’s tougher to keep an eye on this person. If they wanted to be malicious, it would be tough to catch them…..before they did something serious anyway.

    Anyway, you’re kicking ass……and it was great to meet up with you. Thanks for the tips. Have a good weekend buddy
    -Bryan
    Income Surfer recently posted…Two Tips For New InvestorsMy Profile

    • Hey Bryan!!

      Man I have been so tired this week. Still trying to catch up from the sxsw madness last week.

      I agree, the property management thing is much more difficult out of state for it is a necessary evil. 🙂 Looking forward to catching up with you some other time hopefully.

  2. Very good post. The biggest questions I always ask folks with a property management firm; What would you do if your property manager stopped all communications with you today? Do you have a copy of all your leases? Statements? Rent collected? Security deposits? known maintenance issues? agreements with utilities and contact information? Are you ready for tax season without their I-9?etc etc. You better have all this info ahead of time. If you have trouble obtaining any of it in the first place, that’s your first sign its time to move on,

    Ask me how I know. I have had to fire 4 pm’s now. Two of which disappeared on my with 10k of my rents and deposits(Essentially the down payment on another property). You should be ready to transition any day as if your pm up and skipped town, no matter how good your PM is now.

    Glad you made the right move.

    • Thanks Bilge! That is actually a great tip to collect all documents from the beginning to cover your butt if anything like that happens. That is crazy you have fired 4 different PMs already. Just makes you realize its not easy finding a good PM. And that is really crazy that they duped you out of 10k worth of rent. That is just flat out criminal activity right there. Did you sue them or anything?

      • We contacted our lawyer in the area. To be honest, not much we could do since it was small claims and we would have to file in person. Even if we won judgement, we would likely not see any of the money. In other words it would cost us more money time and frustration with little chance of seeing any results. We did get paid back in 2 ways, learned some lessons and vowed not to use single person shops anymore for property management. That 10k will hopefully save us from more expensive lessons later.

  3. I agree completely, a property management company is vital as they represent you and manage your property/relationship with the tenant. I had a horrible issue as well with my previous management company, although they hid it and I didn’t find out until the property got transferred to the new company.

    • Sorry to hear about the PM problems you experienced. Im starting to hear more and more horror stories from these horrible PMs. Glad you found a new company though. Congrats and hope you didnt lose too much money from it!

  4. Bad managers are the pits, and it must be that much tougher since you’re remote. At least there was a concrete way for you to know they were doing a bad job! I would worry about the things that are harder to see from far away, like if they’re just letting the property slide, or embezzling by phonying up repair invoices, etc. That’s one of the reasons I prefer to manage myself, although I get the appeal of turnkey, too.

    • Yeah in these early stages of my investing career I would prefer to PM them myself but in the long run, I am trying to make it as passive as possible so I will definitley want a property manager for when I am older. But it does in fact have its issues and its tough finding a good PM.

  5. I think the bottom line with property managers is they don’t own the property. So getting them to manage the property like they own it is rare / tough. But not even communicating in a timely manner? If they can’t even do that with you, how are they going to effectively manage the property? Asking them to permanently fix the problem and they keep doing temporary fixes is not how it should work. It was definitely time to get a divorce. It is like getting rid of a bad tenant, you just have to do it and maintain the integrity of your asset. I am fortunate to live near my rentals so I can self manage. But obviously that gameplan changes when it is necessary to invest in other areas in order to produce acceptable cash flow. Nobody said being a landlord was always easy. But still worth it because it takes up to the promised land (early FI).

    • Exactly, I think its just part of the territory for dealing with bad tenants, property managers, contractors and pretty much all players involved when being a landlord. At the end of the day, this type of investing can set you financially free so no matter what it is worth it to me.

    • Thanks! I completely agree that it is a must to interview the PM and its shocking to me that people would hire just any PM without at least attempting to do property due diligence.

  6. Good stuff and great information. Fortunately for me, I don’t have to worry about firing a property manager as I manage my own rental property. My experience, and it definitely applies to property management companies, is that no one cares about your ‘stuff’ like you. When possible, and that isn’t always the case, you’re better off doing it yourself.
    James recently posted…Positioning for a Potential Early RetirementMy Profile

    • I agree that you will never find a PM that will take care of your property as if its theirs but i do think there are some good PMs out there not looking to screw you over, its just a matter of finding them. Plus as I mentioned before, when I have 10 plus properties and am financially free, I dont really want to spend the time dealing with the PM type work so having a PM is essential for me.

  7. Man shame to hear that, although feels like you’re taking it well 🙂 & in your stride ha
    You’ve always wanted to tell someone they’re fired ;)? Such a power trip eh?
    All the best with finding a better PM too!

  8. I’m saving up for my first rental now but property managers do worry me. I really like to travel and would like to be away for long periods of time but worried about having a bad manager. Thanks for the post though, its something I do need to think about.

    • Hi Justin,

      If you want to travel and be away for long periods of time or even just keep your investing more passive, then having a property manager is essential. Eventually, even the one property I manage myself now will be under property management.

    • Yes it is unfortunate but stuff like this will always come up I think. Whether its a bad PM or a bad tenant or whatever. Just part of being a landlord. Im okay with it. Hope you are saving some money on your new car insurance.

  9. I love your blog! It’s really inspiring for an out of state investor such as myself. I’m actually looking to do some investment in Indy. Would you be able to contact me offline for some details about your experiences? Mainly just looking to whom I should avoid working with!!

    Thanks again!

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