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We were robbed by our Property Manager

girl pointing at robber

Reasons to find the best property manager money can buy

We were taken for a ride by a property manager we had in Toronto. His services were cheap (5% of the rent and no charge for new tenants except advertising costs). Well, cheap, if you don’t count the fact that he was stealing rent money from us!

Before hiring him to manage our tri-plex in Toronto, I researched him a bit and learned that he was a Mom & Pop-type shop, but I didn’t check references or dig much deeper than that. His scam? He collected $950/month from our tenants but only told us we were getting $890!

The extra $60 was likely hitting his back pocket. We are sure he was taking a cut from our other two units as well. However, we were never able to prove that. The only reason we caught onto his scam was because we moved into the house and the tenants started paying us the rent instead of him. Imagine our surprise when the cheque was for $950, and we were expecting $890!

Looking back, we could have easily protected ourselves. Now, we want to help you prevent it. Investigate your property manager before hiring him/her (as per article 2 above). After hiring the property manager, we suggest you do the following:

  • When ads are placed for your unit(s), get copies of the ads. Also, ask where the ads are being placed and check for the ads yourself (looking back, I had noticed an ad for our unit for $50 more than we had agreed to rent it for. I wrote him to change it, and he said he would, but now I think it was a red flag that I should have recognized).
  • Ask for copies of the signed leases.
  • Ask for proof of expenses incurred (always get receipts, but for larger repairs or purchases get pictures or visit the property yourself).

This may not save you completely, but had we been able to get copies of the leases or asked to see the ads, our property manager would have had a harder time stealing from us. We are getting ready to hire a new property manager for our Toronto property, and we can assure you that we won’t be just grabbing the cheapest man on the block, and we definitely will be keeping a much closer eye on the rent and the expenses.

Getting your hands dirty

by Dave Peniuk & Julie Broad

Are you ready to clean, make repairs, place ads in the paper, screen tenants and handle emergencies? If you aren’t, then we hope you have hired a competent property manager for your new investment property. If you decided to save the cash, then you should be prepared to do any (and all) of the following:

  • Clean the property of clutter and maintain the outdoor areas of the property while occupied. This includes snow removal in the winter and lawn maintenance in the summer. When vacant, you will likely have to get in there and clean it yourself (or hire someone) to make it more presentable.
  • Repairs and maintenance (from small things like changing a lightbulb or unclogging a toilet to bigger things like painting or electrical work).
  • Determine the market value of rent in order to advertise the units (check comparable houses/units in the area by checking online or local listings).
  • Determine best places to advertise and place the ads for your rental units (front lawn, local university, paper, online, etc.).
  • Show the property, take applications and screen potential tenants.
  • Collect rent, and deal with problem tenants (giving notices, working with the local government tenancy office, evicting).

There is a lot of work involved in managing a property. Often, the work involved (and any problems) are unexpected and happen at inconvenient times.

The Investor’s Saviour: A Good Property Manager

by Dave Peniuk

A good, reputable, hands on property manager really is what makes property investing enjoyable. We haven’t been so lucky with all of our property managers, but thankfully, in Nanaimo we have one. Lindsay Widsten is one of those property managers that makes investing almost painless. He keeps our tenants happy, provides us with monthly statements, only contacts us when necessary and has earned our trust completely. In fact, he is so good, that we often forget we even have the four properties in Nanaimo!

Before you choose your property manager, it’s a good idea to take some precautionary steps, including:

1. Check the Better Business Bureau;
2. Contact associations like ROMSBC, GTAA etc. and ask for a recommendation, or if they know the property manager you are considering;
3. Ask if s/he is licensed, and with who (get details);
4. Ask for 2 or 3 references from your property manager and give them a call;
5. Drive by a couple of the properties currently managed by the property manager;
6. Ask friends and family for recommendations.

Do your homework. Hiring the wrong property manager can cause you a lot of grief. But hiring a good one, can save you time, money, and stress!

Published December 17, 2006

Long Distance Real Estate Investing

It helps to have “Peeping Toms” 

Startled by the couple wandering around the yard, and looking in windows she decided to yell over to them and ask what they were doing. “Excuse me, are you looking for something?” she called as she watched the couple peak into the basement window. My parents replied, “Um, our daughter is considering buying this house, and she told us it was vacant and asked us to look around. She lives in Toronto, and needs to be sure this is a good investment”. Thankfully the neighbour believed my parents, and was kind enough to tell them more about the area, but it could have ended a little differently had the neighbour just called the police on my peeping parents!

Unable to find anything that met our goals in Toronto, we began searching for a property in Vancouver or Nanaimo to invest in.

Vancouver turned out to be a bigger financial committment than we were prepared to make at that time, so we eventually focused on Nanaimo. We found a place, put in an offer, negotiated the deal and closed on our purchase from Toronto. I did not see the property before we bought it. In fact, we have had it for almost a year, and I still have not seen the property.

How did we do this? First of all, Dave grew up in Nanaimo and knows it very well. This is the fourth property we have bought in Nanaimo (fifth if you count the one Dave bought with his mom many years ago), and we have a very reliable and trustworthy real estate agent and property manager, Lindsay Widsten. Dave kept in close contact with Lindsay, and kept his eye on MLS listings to spot opportunities.

Second, we both have family in and around Nanaimo. Dave’s Mom did the initial walk through with Lindsay when the opportunity arose. She sent us photos and described it to us in detail. My parents went over on a different day, and walked around the block and peaked in the windows.

There is not much you can’t do over fax, phone and email these days. All our negotiations were done via Lindsay over the fax and phone. We had our lawyer here notarize our signatures on the purchase, with another lawyer in BC acting on our behalf for the purchase. We used the same fantastic mortgage broker in BC, Cindy Faulkner, who has convinced many lenders to loan us money at great rates. Finally, we had Lindsay rent it out and manage it for us.

It helps to have the right resources, and to have some knowledge of an area to make a purchase. It definitely makes it more comfortable. And, if you don’t need to see your investment on a regular basis then it’s definitely worth looking in other locations to find your investments. It gives you more flexibility, and may diversify your risk of market crashes because those are often very geographically focused.

Published June 16, 2006

Worth Checking out for a Canadian Perspective:

 

No Money Down Real Estate Deals

Manslaughter & a Crack House: No Money Down Real Estate Deals

No money down“, “100% Annual ROI”, and “Positive cashflow” are all catch phrases commonly used by real estate investment gurus. It’s hard not to get wrapped up in the hype. I certainly did. After participating in some investment seminars and reading several no money down books, I decided to go after my dream of quitting my job by age 35.

Find foreclosures in your area - Free TrialFrom what I learned, it seemed the only way to do this was to buy several positive cash flow properties with little or no money down. After some searching, I was able to find two of these “gems” in Las Vegas North; Niagara Falls, Ontario. I bought a total of nine units for about $5000 of my own cash.

I have now learned there is usually a reason that you can buy a property for no money down. It is because no one else wants it!

The first clue that these properties were not a real bargain should have been when the only one who would manage them was a shifty character I’ll call Bob. I became aware of Bob through the seller of the property.

To begin with there was an occasional fire code issue and frequent police presence on the property. And, of course, my tenants always paid in cash which made it easy for Bob to skim some extra for himself. These issues were small compared to what I would face though.

The real problems began when Bob killed a tenant in another property. In an altercation where the victim was harassing other tenants, Bob delivered what ultimately was a fatal punch to the head. The death of this person sent Bob into a drug induced pit of depression. He slowly turned one of my properties into a crack house, while letting everything run into the ground at the other.

All of the crack use and prostitution in the buildings attracted the attention of the fire department. Several substantial orders against each property were filed, and $25,000 later (including a $5000 court fine) I am finally in the clear with the violations.

No money down, doesn’t mean it won’t cost you!

Properties such as this can make you decent positive cashflow, but they are very stressful. You also need an outstanding hands-on property manager, and access to a lot of cash. Property issues often arise because of tenant abuse and property defects.

We both have very busy full time jobs and several other properties to oversee. Having a run down stressful building was not a good fit for our goals, even if there was sometimes positive cashflow.

We are no longer completely focused on cashflow, and let’s face it, 35 isn’t too far away. I am not going to be quitting work just yet.

We want the numbers to make sense, but that isn’t the only factor we consider in our purchases. We now look for properties in good or improving locations that have features that will make them easy to rent, easy to resell and that we can proudly say we own. These properties aren’t on every street, and it takes more money to buy them, but it is a property type we can handle.

Published:May 15, 2006

Article Archives: Property Managers, Real Estate Agents, and Tenants

What to Bring to a Tenant Showing

Tenant Screening Checklist

How to Deal with Tenants: Taming Tenant Turmoil

Succeed as a landlord

Property Management isn’t for everyone

Tenants, Toilets and Other Rental Property Repairs

Dealing with Late Paying Tenants

8 Ways to Know if You Should Hire a Property Manager

Five Steps to Rent Out Your Property

Real Estate Agents: Whose Side Are They On?

Preventing High Tenant Turnover in New Construction Condos

Five Ways to Protect Yourself from a Bad Property Manager

Playing the Real Estate Insurance Game

We Were Robbed

Manslaughter and a Crack House

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