How to survive a property management nightmare

Smart investors know the value of a great property manager, but even the most experienced investor can get caught. I‘m currently still mopping up the damage from our own property management nightmare.

Signs

The signs were there, but I was too busy to deal with the red flags as they arose.  And I know better.  I’ve had the pleasure of working with an amazing range of professional, skilled and supportive property managers.  But the company ‘managing’ one of our properties was the polar opposite of professional.  Skilled and supportive are not terms synonymous with that particular organization.

Starting

Things started out well.  My husband (Geoff) and I had purchased a magic property with a bad tenant, which meant we picked up the property for a bargain price.  We knew there was a ‘tenant issue’ so we planned to appoint a new property manager after settlement.

Crave clients know I have a particular approach for selecting service providers, and we used this method to shortlist the new property management company – I’ll refer to them as ‘Solutions’ (as this story progresses you will see the irony in the name).  Solutions measured up well against our checklist, and I was really happy with the response I received from my contact at Solutions who was the business development manager – let’s call her Amy.

Amy added value making suggestions and outlined exactly how Solutions would manage the property.  Amy advised that she wouldn’t be the actual property manager but that Solutions maintained strict oversight of their team to ensure stellar performance.  I was introduced to our property manager, Cathy, and she seemed great.  All good.

Red flag number one

As the original tenancy agreement was coming to an end, we were advised to let the tenancy run through to completion, then we would carry out a few repairs and advertise for a new tenant.  A few weeks after settlement, Cathy left Solutions and another property manager was appointed by Solutions’ owner, Laura.

Laura advised that our new property manager – Renee – would be closely supervised and that we were in good hands.  Mmm.  We settled in and looked forward to receiving our first inspection report.  Renee advised that due to the fact that she would be taking leave (um . .hadn’t she just joined the company?), it was probably better that we wait until the first tenant vacated and they would do the inspection just prior to the tenant leaving.

Yes . . we did raise this as an issue, along with a few other unusual actions we weren’t happy with.  Renee and Laura (who we requested investigate) had an answer for everything (now I realise it was an ‘excuse’ for everything), so we decided to just stay on top of things until the tenant left.  I really wish now I had acted with my instincts and discontinued the arrangement .. but I didn’t.

Tenancy bridge

After the original tenant left we organized some repairs we had planned which included repairing the balconies and stairs, plus a bit of a refresh and a few minor carpentry items.  Geoff visited the property before, during and after the repairs so we had a good visual of the condition of the property at that time.

It was unusual for Geoff to be so closely involved, because normally we would just work with our property managers and get the work done through them.  However, the property is an original Queenslander, and Geoff has a particular interest in and experience with these types of properties so he enjoyed being a little more hands on than usual.

New tenant?

When the repairs were almost complete, we notified Renee that the property was ready for advertising.  Without consulting us, Renee used existing photos of the property to advertise the property.  These images were approximately six years old.  If it’s not against the law to use images that outdated, it’s certainly unethical but I wasn’t paying attention so this issue was missed.

It didn’t take too long before we were presented with a ‘vetted’ applicant. We were advised the tenant had four children and was on a pension but we were assured of her ability to pay, and track record of good tenancy, so we accepted.  During this time I tried to check in with my original contact – Amy, the lovely business development manager, but she had quietly left the organization . . .and didn’t say goodbye.

Deja-vu

For the first two months of the new tenancy, all seemed to go smoothly.  We reviewed the inspection reports which came back as ‘satisfactory’.  We didn’t receive images, but I didn’t have time to look at anything anyway so I carried on with my busy life and so did Geoff.

Six months into the tenancy, Geoff and I were in the area so we drove by the property as I had never viewed it in person.  We didn’t organise an inspection because our schedule was too difficult to coordinate, so we just planned to have a quick walk along the footpath and check out the general neighbourhood.  As we walked up, we noticed the following :

  • the roof to the shed was curled up and half off
  • there appeared to be evidence of a fire on the front verandah
  • various large pieces of furniture (couches etc) were sitting in the back yard . .and not under cover
  • the lawn was overgrown
  • there seemed to be quite a few children hanging around the front balcony.

A bit of a long list, but Geoff and I didn’t panic.  I was totally calm about it all until we reported the news to Renee.  I am getting angry about it again just thinking about it now.  Not only was Renee condescending about us visiting the property without her knowledge, she had an excuse for every issue.  She didn’t say she would address the issues . .just provided excuses.  For example – re the roof on the shed “well we had a big storm recently so the shed roof must have been damaged then”.   Okay . .a storm – but a good property manager would be checking all properties and asking tenants to report damage.  I know this because I have experience with good property managers.  Not this one though.

Timing

It was early December, so we set out what we wanted Renee to do, and requested images of the completed work.  Of course . .no photos arrived . .but Christmas was upon us so we agreed to leave things as is and deal with them in January.  The next happy surprise we received was a water bill of $481.78, which – as the invoice outlined – was more than twice the normal household use of water.

Once again we questioned Renee who was really starting to put us in the too hard basket by now.  At this time we were informed that our tenant had 10 children so of course they would need more water.  Or in other words, how silly were we to question the water bill and enquire whether there could be some leak to a tap?

We’re on to it

Numerous issues started to mount up – such as the council issuing a notice about the overgrown yard.  By this time we were on to Renee and Solutions’ owner, Laura.  But it was too late.  We investigated the possibility of ending the tenancy, but we were advised that we were required wait until the end of the contract unless the tenant failed to pay the rent.  Prophetically, that’s exactly what happened.  The tenant would fall behind in the rent by about four weeks, then would be issued a summons to pay and would pay right at the last minute.

On top of this, we received the next water bill.  Shockingly, this time it was $601.11.  Comfortingly, we received an inspection report in January and in April.  Although there still wasn’t any photos, the reports came back with a ‘satisfactory’ rating.  I bet you know what was happening.  As it turned out, those reports were useless.  We suspect there was no visual inspection completed at all.

Time to go

By May this year, with the end of the tenancy looming, the tenant vacated property approximately two weeks before the official end, and more than three weeks behind in the rent.  The first we knew of this was three days after the tenancy period ended, when Renee and another Solutions employee, Erica, actually visited the property.  You’ll never guess what happened next.

As they’re such professionals (their version of ‘professional’ that is), they sent us a summary email advising that the tenant had left and ‘some’ repairs would be required.  I called to discuss the issue but Renee advised that she couldn’t really describe the damage and that I “should really see the property yourself”.  Err . . .weren’t we paying HER to SEE the property for us???  Isn’t that the role of a property manager ?????

It gets worse

I will spare you the blow by blow but basically we parted ways with Solutions.  Outlined below is the summary of their behaviour and the damage to the property.

  • No formal confirmation that tenant would be vacating the property prior to Solutions’ visit three days after the tenancy had ended (approximately a week to 10 days after the tenant had left but I’m only taking a guess from what the neighbours told us).
  • Discussed list of damage – extensive repairs suggested and was advised that Solutions doesn’t obtain quotes prior to commissioning work . .they just appoint service providers. Also, under no circumstances would Solutions be providing property access to or liaising with the insurers – this would be up to us.
  • Booked an inspection – we were told to collect the keys from the office as Renee was ‘too busy’ to attend the property with us.
  • Sent Crave team member to collect keys – team member was handed keys without being asked for identification or signing for collection despite making it clear she wasn’t the owner of the property.
  • After receiving an email from me expressing concern that the keys were collected without ID or signature, Solutions demanded the keys be returned to their office – ie – couldn’t possibly organise to collect them or pay for a courier.
  • Condition of property was appalling, however ALL inspection reports marked the condition of the property as ‘satisfactory’ including the last report which was completed a few weeks prior to the tenant vacating the property. Even the insurance inspector agreed that the dirt in the property could not possibly have built up within a few short weeks since the last ‘inspection’.
  • We had paid a ‘special’ fee for Solutions to ensure smoke alarms were installed in the property – no evidence of smoke alarms installed . . . anywhere.
  • Solutions couldn’t contact me on one occasion, so immediately contacted the Crave team member (who collected the keys without ID : – )) to discuss the property. The Crave team member advised Renee that it was inappropriate (and surely against professional regulations) to discuss the issues and that it might be best to refrain from disclosing private details regarding the property to someone who wasn’t an owner.
  • Despite telling us they had applied for the bond to be returned to us, no evidence of application was registered until weeks after we had been added to the communication regarding the bond. Advised by Solutions that the Residential Tenancies Authority was at fault.  Nothing was ever Solutions’ fault.
  • Received a demand to pay for outstanding council rates – Solutions was responsible for paying the fees from the rent, but as the rent had not been collected no funds remained to pay the fee. No communication from Solutions regarding this.  Charged interest from Council due to late payment.
  • See below for list of damage summarized by Solutions – note the second point ‘toilet in bathroom constantly running’ . . .remember the ever increasing water bill?? When I asked if Renee and Erica had turned off the water (because they had obviously noticed the bathroom issue) . .was advised that Renee told Erica to do this.  I couldn’t check with Erica though because she had left the organization (or maybe she was a fictional person created to be the scapegoat ??)

And all this service from the recipient of the REIQ Award for Excellence – Property manager of the year.  Yes . .I have made formal complaints to the REIQ and Qld Fair Trading.  I will post an update on the outcome of my complaints.

But the hits didn’t stop there.  While we were coordinating quotes and commencing repairs, a local villain dropped in to steal the electrical wiring on the property (I understand the copper in the wiring can be sold . . .like . . who buys that stuff??).  He ripped out the wires which damaged the connections to light fittings and power points, and caused a mini explosion which the neighbours heard.  Lucky for us, one of the neighbours saw what was happening and followed the thief home.  Subsequently, the police were able to make an arrest.  Love those neighbours, but the property required a full re-wire after this incident. Ugh . .

Also . . . the last water bill we received was $841.14.  Nice.  It’s not only the money though . .the waste of water is shocking.

The lessons

Despite the sorry saga, this experience makes me feel very, very lucky.  Geoff and I have rented out properties for many years and this is the first major issue we have experienced.  It was well within our power to address the issue early on by changing property managers, and will never let this happen to us again.  After a few more weeks of venting about the drama to anyone who will listen, I will recover.

I feel safe in the knowledge there are fabulous property managers (PMs) out there who have shared so much knowledge with us, as well as contributing to the expansion and profitability of our portfolio.  Like the real estate industry, the PM industry is becoming increasingly professional which will benefit both tenants and landlords. In the meantime, we all need to remain vigilant and ensure bad components are forced from the industry.

If you’re still awake, outlined below are my lessons and tips.

  1. Put in the time to select your property manager wisely (review our suggested process outlined in ‘How to manage your property manager‘).
  2. Include a clause in your agreement that will allow you terminate the agreement if your original contact leaves the organization. If the original manager leaves, interview any new managers provided by the company and move on if you’re not completely happy.  Feel free to follow your original PM to their new organization if possible / preferable.
  3. If you feel you have a ‘bad’ tenant – investigate the property manager first.
  4. Never sell because you ‘have a bad tenant’ or can’t seem to find a good tenant . . .you will sell under duress and lose money.
  5. Ensure you have a clause in your property management agreement that will allow you to terminate the agreement due to poor or unsatisfactory performance.
  6. When you uncover red flags (hello massive water bill), investigate and ensure you resolve the issue immediately.
  7. Request visual proof of inspections.
  8. Give your contact details to at least one or two neighbours and let them know you would be happy to hear from them if they have any concerns.
  9. Utilise the opportunity to inspect your property yourself at least once per year.
  10. Set up a system whereby you check your monthly statements each month. It only takes a few minutes and will give you oversight of discrepancies before too much time elapses.

Appendix (because this blog is so long : – ))

Outlined below is the original list of damages.  Spelling mistakes of the original author have been corrected, but capital emphasis remains.  My comments are noted in red.

The damage caused by the tenant is as follows:

  • There seems to have been some small fire on the veranda as a few of the exterior boards are burnt and melted. (We reported this to Renee six months ago . .guessing they never ever set foot on the property before this visit . . .what a surprise.)
  • Toilet in bathroom constantly running.
  • There are missing palings on veranda and under the house.
  • The property has a huge amount of rubbish . the pile is quite large and high. Rubbish is also scattered under the property including 2 x washing machines and various items of clothing and debris. THIS IS A HEALTH HAZARD AND NEEDS TO BE REMOVED ASAP.  We have received complaints from neighbours about the smell. (Are they suggesting this is our fault? And when were they going to share the complaints?  When did they receive them? How hopeless are these PMs ???  How on earth could they have won property manager of the year????)
  • Broken window.
  • Broken internal door.
  • Hole in bathroom door.
  • Timber pane broken.
  • Broken drawers in kitchen.
  • Walls heavily marked.
  • Walls written on outside and inside property.
  • Rubbish and belongings left behind at property.
  • Broken front gate.
  • Lawns not mowed, whipper snipped or weeded.
  • Keys not returned – LOCKS WILL NEED TO BE CHANGED front and back.
  • Property needs a full bond clean inside and outside.

If you would like the contact details for the property management company, I am more than happy to share the information.  Please email me at debra@craveproperty.com.au

Buy smarter = limitless ways to build lifetime income

Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property.  A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income. 

Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.

Follow us on facebook.com/CravePropertyAdvisory for regular updates, or book in for a strategy session to discuss your property questions.

Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.

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