Months like this past one make me seriously question the business of owning and renting properties. Yet I remain optimistic, hopeful for the future, positive about my business. It seems like every problem I get hit with makes me stronger and smarter. I’m absorbing the energy, becoming invincible, like that old video game – Donkey Kong? Super Mario? I can’t remember. My brain is filling up with new strategies for business survival and pushing out memories of ‘80s gaming.
Problem tenants are nothing new. I’ve been dealing with them since the beginning. I started renting out my investment properties in 2008 and by 2009 had enough material for a book full of crazy tenant stories. You’ll find some of these stories sprinkled in through the archived posts on this blog. Perhaps I’ll write a future blog series dedicated to these tales!
Unscrupulous contractors aren’t news to us either. Ever since we’ve been trying to outsource property maintenance we’ve been through a parade of them, one after the other. Some were merely incompetent. Some were drunks. Others simply weren’t raised with any kind of work ethic. And sadly, a few were deliberately trying to dupe us out of our money by doing substandard work on purpose, thinking we wouldn’t notice. We noticed.
But this month… it seems they all hit us at once in a full-on Zombie attack.
A little background: Everything is in the archives of this blog, but I’ll give you the short version. Back in March a property owned by one of our business partners was shut down by Wilkes-Barre’s One Strike ordinance, which can shutter an apartment for six months if a tenant or anyone on property is arrested for a drug or gun crime. The assumption is the property owner had implied knowledge of the crime and looked the other way. There is no due process or burden of proof needed by the city. This ordinance is currently being challenged at the federal level by the ACLU. I personally hope the city loses the case and every single landlord affected is awarded treble damages. I don’t care if City Hall goes into receivership over it. I already have some ideas to convert that building into some beautiful apartments!
To say this incensed me is an understatement. It’s the reason for this blog Ginger Snapped. One minute I was just another American story – a working Mom struggling to make ends meet while building a business to secure my family’s future. The next, I was an accidental activist standing up for what should be a common sense right to property - I guess that’s also an American story.
All that was cut short, however, in May when I attempted to launch my own attack on One Strike, independent of the ACLU. I was going to try it through the Pennsylvania Commonwealth court system – the state level rather than the federal level. I had a Pittsburgh lawyer interested in taking the case – a guy who’s won several of these lawsuits against overreaching municipalities. I was willing to put up my IRA for it if I had to. But I probably wouldn’t have had to because I was sure I could raise $20 from 500 landlords by speaking to investors’ groups across the state. That would give me $10,000 – more than enough to take the case through Luzerne County to Harrisburg. I was starting to line up spots on conservative talk radio across the state. I’m pretty sure with my thirty years’ media experience and all the people I know working in media markets across the country that I could have taken this story national. But it was not to be. Not this time.
I didn’t own the property. The man who did was not interested in a prolonged court battle or the ensuing media sideshow I had planned. And my Pittsburgh lawyer could only bring the case if he could represent the property owner.
That lawyer – and a few other people I know and trust – gave me some words of warning. If I poke the bear, I shouldn’t be surprised if the bear bites back. I started getting real paranoid and made a decision to make my business as bulletproof as possible. If one of the units I personally owned got shut down by One Strike, I was sure as Hell going to fight it. So my business had to be titanium.
Even though it is perfectly legal to manage your own properties if you live within 20 miles of them, my husband and I decided we needed to sign on with professional property management. He wanted to do it for business reasons – he was spending entirely too much time managing the rentals and it was impeding his ability to earn income from wholesaling real estate or flipping houses. I’d resisted for months – building a management company for our owned rentals had been my dream from the beginning. Once I didn’t have to work 40 hours per week at another job I could run it myself! We just had to hang in there until we were out of the Suck Zone (I have to work a job so I can’t run the business full-time, Steve has to run the business, Steve can’t make enough money to grow the business because he’s running the business, I have to work a job because the business isn’t making enough money for me to quit – that’s the Suck Zone! I write about the Suck Zone in detail in my last two blog posts about property management.)
I don’t know what I thought would break us out of the Suck Zone - we don’t play the lottery. But I wasn’t budging on property management. Until the Pittsburgh lawyer and some other well-meaning people got me thinking of the consequences of Poking the Bear. There are too many mistakes an untrained do-it-yourselfer can make. If I had to go to war with the city, I didn’t want them to find any vulnerabilities they could use to take me down. I figured if I signed our units on with a licensed broker’s property management company, that would eliminate a lot of liability. My husband was thrilled – I’d finally come around! It did make business sense. In theory.
Signing on with a professional property management company isn’t always what it seems.
We signed on with a professional property manager July 15th. She quit October 1st. Which is fine, because it saves me the problem of figuring out how to get out of the contract. I don’t blame her at all. I’m sure she is a perfectly fine property manager and real estate professional. But I don’t think her company was prepared to take on 49 new units all at once (three of our investment associates signed on with her at the same time.)
The biggest problem was maintenance. Her company, even though it was a professional brokerage, did not have a regular maintenance staff or even a contract agreement with a reliable company. They were doing it the exact same way we were – catch as catch can, trying out different contractors and handymen. As a result, they were having the same issues we were – shoddy work, people not showing up at all, etc. My husband dealt with as many maintenance issues himself as when we were self-managing. We kept thinking it was going to let up, that there would be a month of adjustment. But then it became two months.
The other problem was turning around the units for re-rental. We had several evictions the past couple of months. I call it Taking Out The Trash. We had two empty units at West River St. One at Jenkins Township – and we ended up evicting the downstairs tenant, too, because she was hoarding cats. Somewhere between 12 and 20 felines in a small two bedroom apartment. Another empty at Barney St. One at Finn St. Another at West Noble Nanticoke. And we had a flip in Hanover Township that wasn’t selling that we decided to turn into a rental. So eight units had to be prepared for re-rental. Not all at once – but over the course of the last two and a half months.
With the exception of the flip in Hanover, which was move-in ready, there was quite a bit of work required to ready the other seven units for new tenants. In a couple cases, the old tenants had to be escorted out by the constable, so there was a big mess left behind. Those units had to be emptied, scrubbed down, repainted, and in some cases the flooring had to be replaced. Then they had to be marketed, shown, and rented to decent God-fearing people who would actually pay rent and not destroy the place. A tall order for sure, but nothing Steve and I hadn’t done ourselves over the past 7 years!
Our professional manager was struggling with all this demand. She simply did not have the team resources at her disposal to handle this scope of work. Steve and I couldn’t let our units sit empty while she figured it out, so we went around her, with her blessing. We hired a friend who was also a real estate professional to coordinate the maintenance on these empty units. Once they were done she showed them and rented them in a matter of days.
Silver lining? Lemonade out of life’s lemons? This woman is street-wise and savvy, the contacts in her iPhone full of phone numbers of reliable maintenance people. Well, that remains to be seen. But I like the work they’ve done so far!
She wants to manage our properties. I want her on my team. A line from The Grinch That Stole Christmas has been running through my head: If I can’t find a reindeer, I’ll make one instead. If I can’t find a property management company, I’ll make one instead.
Maybe the dream of my company - GPGH Management - isn’t dead after all.