Purchasing rental units is the biggest concern you will face as a landlord is the dishonest property manager. Unfortunately, the problem is significant and widespread. I have seen far too many examples of these costing investors thousands of dollars in losses each year. It’s so bad, especially in low-income neighborhoods, that the investor’s losses at the national level run into millions. A dishonest property manager can steal security deposits, rent checks and bill for unnecessary repairs. I have seen them remove expensive appliances such as ovens and air conditioners and then report that a burglary occurred and replace them (sometimes the same units) and then bill the owner. Usually it can take months before you suspect a problem. By the time you get on top of that, especially if you are an absentee owner who is busy with your own affairs, a few more go by and before you know it you have lost a few thousand dollars. If the property manager manages multiple properties, this is big money.
Money recovery is almost non-existent. These criminals know how to play the system; they know that you are unlikely to do anything and too expensive for you to sue them. You can file a police report, but the police generally have too much on their plates to do much other than file a report. You can complain online or to complaint agencies, then? Prosecution is almost never a success, because if it gets too hot for them, they open openly under a different name or leave the city altogether. It’s a lost proposition for you all around.
How do you protect yourself from becoming a victim? Do your homework first before retaining one. Examine your own “due diligence” thoroughly examine the individual or company. Perform a background check; search their names for reviews and complaints. See what others have experienced. Check them out with the Better Business Bureau. Contact the Department of Real Estate (they must be licensed in most states). If they are not, go fast. Here are a few great tips:
1. Use only a licensed real estate agency;
2. Carry out a thorough background check;
3. By regular contact with them;
4. Always ask for pictures before and after to substantiate any requested repairs;
5. Insist that your phone calls be returned promptly (this is the # 1 property manager complaint).
6. Make sure they do inspections twice a year and take photos;
7. Stay on top of your account, question all deductions;
8. If your tenant gets their rent paid through a “Section 8”, make sure you receive the checks and then you pay the property manager their fee.