Unethical Property Managers

I wanted to start a thread to discuss ways that unethical property managers and real estate agents cost us investors huge money.

So we are thinking of renting for a variety of reasons, mainly related to tax and business, but after 6 months there has been only one place we would contemplate moving into. It's bathroom was so wrecked that not many wanted it and the stove was easily the dirtiest stove I have ever seen in my life. I put in an application for $420 a week and got accepted by the property manager as I had excellent references from our longest rental plus I own and have managed so many properties. The Property manager told me I could have it for $470 a week. The owner wanted $470 a week, I counter offered $450 a week and a 1.5 year lease plus that I would buy a new $3000 stove for him and leave it when I leave and move in quickly to save the owner money by paying him rent early. (I knew a rich person that bought a stove but it did not fit their kitchen so they wanted to get rid of it for $500)

But the property manager did not pass on the offer because they don't want tenants haggling here in Newcastle Australia and to teach me a lesson for trying to low ball and break the real estate agents monopoly. So the property remained vacant for another 12 weeks after standing 5 weeks empty and then they rented it out for $460. Property managers look after themselves. I also found out that they also tried to get the owner to sell telling him nobody is interested in your property, because they can get a huge commission of $30000 by selling the place as opposed to a measly $2400 a year from managing the place. I know who the owner is and can meet him and tell him all about it.

So investors if you think you can trust your agent, good luck.

Whenever your property remains vacant and property managers can't find tenants or they find bad tenants to devastate your property, trust me , don't trust them, take things into your own hands. I have had multiple cases of agents doing everything they can for me to sell properties as my properties are top notch in top notch locations.

What other ways have you been screwed?

 

Not accepting a lowball offer is not really an ethics question at all. More a business decision - maybe they should have accepted it, maybe they shouldn't have - depends on their wants / needs and what else is on offer. Take the no on the chin and apply for other properties.

As for suggesting to sell. If no realistic offers have been made then I'd definitely expect my agent to recommend options, be they:
- sell it
- reduce price to rent it
- renovate it to rent it or sell it
- redevelop it
- etc

They have a fiduciary duty to their client to get them the best possible outcome.

Applicants who are good, and nice to deal with get emailed more properties as they come online. If this hasn't happened perhaps you need to take a hint.

 

If your property managers are finding bad tenants that devastate your property you need to find a new property manager. I don't hire rubbish property managers who find me rubbish tenants. Not my style. I only hire perfect property managers who never make mistakes and never find me bad tenants. I am actually very disappointed every time a tenant leaves because they are that good. I never had to make a bond claim for a tenant found by one of my perfect property managers. 100% of them have left my properties with full rent paid up to date and no damage. Makes disposing of the bond quick and easy.

 

Wow i didn't think the rent would be that high in lake munmoron

 

"What other ways have you been screwed?"

PM advertised the property, a villa where the 3rd bedroom was built in the garage as:- 3 bdr and garage.?

PM authorise trades and repairs without consent as agreed. Not uncommon perhaps.

When discussing rent rises at next lease renewal PM says "we'll see". Of course circumstances have changed. First inspection -- cat in house! Tenant asks "can Father move in and can we have a dog".... Absolutely!

I can't understand, from a business perspective, how PM's value the tenant. I get the good tenant thing.

I appreciate the "find an awesome PM", but I would be happy with a PM that understood their obligation... commercially.

And when you change its costs money!

What am I missing. Or is being a property investor a matter of micro managing PM's?

 

Put the offer into context of a commercial property where returns are a function of value.

Your offer of $50 below what was 'market' equates to a reduction of income of $2600/year. If this was capitalised at say a 2% nett return it would equal a $130,000 loss of capital value for the owner.

Bl@@dy corrupt agents .

 

If you and Darlinghurst Boy were room mates imagine the stories which could be told over a bottle of shiraz

 

The forum's self appointed property messaih, who is also the country's $40 billion dollar a year saving man....cant even haggle $50 off a rental.

pinkboy

 

I don't think you understood the gravity of the situation.

If I had a property being deliberately kept vacant by a property manager who was not passing offers on to me, that is a big ethics problem and a big loss of income for me.

If you don't understand that I am happy to explain further.

 

I thought that I was pretty clear. I wouldn't give you the satisfaction of eroding my capital by over $100k.

 

How do you know the offer wasn't passed on?

 

There are plenty of factors and assumptions at play here but to my mind, the following applies:

1. Find a PM who understands their fiduciary and commercial duty to their client. This is one of the reasons I personally struggle to employ a PM for my own properties who also has a sales side of the business. It's not a hard rule, but I believe an agency should do one thing and do it well. Most sales agencies simply start a PM side to the business for the recurring revenue and generate the majority of their leads from the sales department without truly focusing on PM as a necessary and extremely important aspect to the investment equation. Conversely, you then have PMs who simply want to transfer to the sales department to make more money and are not passionate about PM.

2. Find a PM agency who actually understands investment and what is important to their client, because they are investors themselves! As with anything, how can someone truly understand how to manage a situation with regard to their clients' expectations and requirements if they've only ever been learnt about it in theory - if that! It's a broad brush and not all PMs individually will have extensive experience in property investment, but at the very least the agency should be run on good investment principles whilst taking into consideration Point 1.

I'm personally not a property manager, I co-run a property management business and although it might appear sometimes that "property managers look after themselves", I can assure you that it's not the case. A true property manager and agency who is passionate about their role is always looking for ways to improve their service and the ones who I've come across who have been doing it for many years are deeply involved with their role and are passionate about helping their clients, not screwing them.

- Andrew

 

Forget about fiduciary duties for a second.
It is in a property manager's OWN best interest to lease out a property ASAP: they get paid sooner and they can move on to new listings. Also if an agent keeps a property on the market for too long it hurts the reputation. When I try to lease my ip, there was a similar property that has been on the market for 4 months, one of the REAs I talked to used this example to undermine the agent who represented that property.
I can't for the life of me think of a reason why a property manager deliberately keep a property on the market unless it is under instruction from the owner. Most people don't just walk around and trying to screw other people up.
Btw the pm I used: listed the property on Wednesday and leased it on Thursday (she negotiated 10 dollars per week off for the tenant but I didn't care.) I was so grateful I send a huge box of coco black to her, that even that doesn't do her any justice.

 

@Ouchmyknees I don't understand why owners have their properties empty either. In my area, 6 months on the market for rent is not uncommon.

In your case, 1 day on the market is brilliant! Well done

 

Ouch, six months for a tenant as standard. Is that in Perth?

 

They are empty for 6 months waiting for a tenant. I don't know if this is common in Perth but it is not uncommon in my area. If it were my property I would drop the rent or fire my PM.

I watch rentals in my area to see what is happening in case mine becomes vacant.

This property listed in April 2016 but they didn't find a tenant until September 2016.

136 Arlunya Avenue, Cloverdale, wa - Property Rent Price

 

Totally agree.

 

Well firstly my offer was my final offer.

Secondly using capitalisation as you have done is a gross simplification.

But let's turn the tables around on you.

Let's assume that the net rent is $1200 a month which is what you expect after outgoings and property manager of about a $450 a week rental.
Well then using 4% your property should be valued at $360000. Well this property was closer to a million. So he was the idiot in the first place who paid for such a low yielding investment.

But my calculation would also be inappropriate. Because capital gains are not being considered.

At any rate what always counts is what you can actually get coming in every week. And by keeping his property empty for 12 weeks to achieve $460 instead of taking a renter for $450 12 weeks earlier and that was going to chuck in a stove also, shows only one thing.

Immense, dense stupidity, the likes of which is so commonly found in my daily life here.

He will never get back the money he lost, and if he thinks he can write of the loss to the taxman he is also stupid.

All negative gearing does is give you a discount at your tax rate for all your expenses. But if your expenses are $100 and you pay $70 you are still pulling stuff out of your pocket to subside housing for somebody. Then you are relying on capital gains to make up your losses. But it's hard to catch up on your losses using capital gains, it's really only during boom times.,

 

Negotiation requires three things from both parties.

A reasonable intelligence
An ability to compromise for benefits
The ability to communicate effectively

If only one party possess these and the other possesses nothing where is the scope to negotiate?

i think you expect too much from a property manager who has instructions from her boss the principal who is usually a shark.
I have found that dealing with them is like dealing with children of stunted development but which don't know this. Only ever met two or three smart property managers. Rare as hens teeth a good property manager. Most are little minded, without any capacity to think outside the square. They just frustrate tenants.