Q & A: Let Tenant Manage Property?
December 1, 2006
Q: I bought a four-plex in Kansas City last winter to help my brother out. He was to manage them and live in one. That did not work out and I had to hire a management company. When I bought them it was 100% rented. In July I lost two tenants, one due to bad management by the company and the other just broke her lease. That was no loss as she was three months behind in rent…so she paid for one month and the management company never went after her or anything.
I went back, cleaned them up, etc. and left after hiring someone else to manage them. She also has turned out to not be the best. I don?t believe much has been done to rent these. One more tenant left in November without telling me. She had sent me a letter in October saying how happy she was and how she had no intentions of moving and then the next month she was gone. I found out when I didn?t get her rent.
Once again we went back and cleaned it up. I have one good tenant left. They are willing to be on-site management. I trust them and I think this would work. I live in California and got a phone with a KC number to use for renting the apartments. I need to run ads and get these rented but feel at a huge loss being so far away. Do you have any advice for me, other than this was a stupid move!
Michelle H.
A: There is no easy answer to your problem. I hope your one good tenant who is left will work out for you. But to help it work out, you need to define exactly what his or her duties are to be.
Are they to make repairs? If so, how much should they spend before they call you? Who should they hire to make repairs they can?t make themselves?
Are they to run the ads and do the marketing for the property? If so, what kind of experience have they had in marketing? How good are they at it? Are they familiar with the Fair Housing Act? If they are not and violate it, it will be not only your tenant/manager who gets in trouble, but you as well.
Will they collect the rent? If so, if the rent is late, will they be the ones sending the notices? Will they file evictions, if necessary?
Will they be responsible for returning the security deposits? If so, how will they determine how much the departing ten?ant owes?
How will the tenant report to you?
Finally, but certainly not all you should think about, how will you define success?
These are all questions you must answer before you give your tenant the go-ahead to manage the property. It can work, but you have to remain in charge.
About the Author: Bob Cain
Some 30 years ago Bob Cain went to a no-money-down seminar and got the notion that owning rental property would be just the best idea there is for making money. He bought some. Trouble was, what he learned at the seminar didn’t tell him how to make money on his rental property. He went looking for help in the form of a magazine or newsletter about the business. He couldn't find any.
Always ready to jump at a great idea, he decided he could put his speaking and writing skills to work and perform a valuable service for other investors who needed more information about property management. So Bob ferreted out the secrets, tricks and techniques of property management wherever he found them; then he passed them along to other landlords.
For over 25 years now, Bob has been publishing information, giving speeches, putting on seminars and workshops, and consulting for landlords on how to buy, rent and manage property more effectively.