Vacant Property Is a Target for Thieves
Q I own an out-of-town investment property, and since summer 2005, I have been using a local management company. The first year and a half, it had the property rented, but the house has been vacant for four months.
Late last month, I received a call from one of the property management staff indicating that he recently had a prospect look at the property but that person called back and told him the kitchen cabinets were missing.
I told him to send someone as soon as possible to check what had happened to the property.
I received no further communication for a week, until another agent called and said his prospect told him that the stove was missing.
My first reaction was to wonder how this could be happening. So I asked the second agent to check what exactly was going on.
To my deep disappointment, nothing has been done by either agent, even though I repeatedly asked them to find out what happened. I was so concerned that last week I asked a former property manager who is still with the company to help me find out why there was no response.
The next day, he called and told me that he visited the property and has filed a police report because the house has been burglarized. I wonder what recourse I have against this management company.
A Property manager Griswold replies:
Most property management companies have contract language that will indemnify them from liability for third-party criminal acts such as what appears to have happened at your rental property. So, unfortunately, you are not likely to have much success in seeking recourse against the property management company unless it was involved in the illegal activity.
It seems that your house was burglarized, and that can happen to any property. Your experience is one of the reasons why I strongly advise real estate investors not to invest in income properties that are more than one hour away by car unless the property is in a location they routinely visit on business or where they have trusted family or friends.
You should file a police report and make a claim with your insurance company. Insurance companies often charge higher rates for rental properties in seasonal areas. If properties are unoccupied, some insurers will cancel coverage. This is another good reason to find a qualified tenant as soon as possible.
Your experience demonstrates that a loss is more likely to occur at a rental property that sits vacant for several months. Clearly, having your rental property vacant for so long is tough on the cash flow, too. I suggest that you hire a new and more aggressive management company.
Hiring a competent property manager is important even in your own area, but it's critical when you invest long-distance. You did not say why the rental unit sat vacant for so long, but it probably was that the management company was unable to find a qualified renter at your asking price.
I would ask you to consider lowering your asking rental rate until you find a qualified renter, as a vacant unit is only slightly better than one occupied by a deadbeat tenant.
Never accept an unqualified renter, and remember that a good renter, even at a below-market rental rate, is better than a vacant rental unit earning no income and, in your case, suffering significant damage.
I am sure your unfortunate experience will ring true with some readers and will be a reminder for those who brag about their success in investing in rental units in faraway places. Maybe they have great tenants, or maybe they have been lucky so far.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold and San Diego lawyers Steven R. Kellman, director of the Tenants Legal Center, and James McKinley, member of the Moffitt & Associates law firm, which represents landlords. E-mail your questions to Griswold email@example.com. Questions should be brief and cannot be answered individually.
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