Property Management and Investor Information: January 2008

Over the years I have been asked this question many times.  In the current market, many solvent homeowners are becoming reluctant landlords in the greater Sacramento area since they cannot sell their property right now.  Converting a owner occupied property into a rental property is straightforward, but it is not the same a selling the property.  Purchasers of real estate are not as concerned about small maintenance issues like paint condition, carpet condition, or cleaning as a prospective renter.  This makes sense because a purchaser of a home is looking at the long term prospects for the house and will cover the small items for the sake of a good deal on the purchase.  But a renter, wants an immediate payoff as rents paid today are lost.  The renter has to be sold on the immediate deal, there is no long term benefit.

 So, what should be done to make a house rent ready?

1.  Paint the walls.  No shortcuts here, if the walls don't look like they have just been painted, paint them. 

2.  In the Sacramento, CA rental market, put up good window coverings.  This varies by market, so check with your property manager, rental housing association, or local realtors.

3.  Clean the carpets and interior.

4.  Fix up and clean up the yard.  Curb appeal applies to rental properties. 

5.  Make sure everything works.  Windows should lock, appliances should work, heating and air conditioning should work, doors and locks should work, put cover plates on, fence gates should be operational, fix broken windows, no leaks, no mold, no trip hazards, and get rid of any smells.

A final question, would you move into the property in the condition it is in?  If so, you are getting close!

Robert A. Machado, CPM, MPM  916-429-1205 X 105

5896 South Land Park Drive, Sacramento, CA   NATOMAS TO ELK GROVE

8856 Greenback Lane, Orangevale, CA CITRUS HEIGHTS TO CAMERON PARK

1220 Melody Lane, Roseville, CA  NORTH HIGHLANDS TO LINCOLN

www.HomePointe.com

The next subject to be concerned with in selecting a property manager for your property is the property managment company's knowledge and ability with regard to property maintenance.  How do calls get answered? How are incoming calls from residents tracked by the property manager?  How is it determined when the owner will be contacted?  How are vendors selected?  How are emergencies handled?  Is there an in house maintenance division?  Is it licensed and insured?  How are after hours calls handled?  Ask your prospective property management company these questions.

Fees you will be charged is usually very important to most owners of rental property.  It is important, but I think you would agree with me that some of the other items I have already discussed in Parts 1-4 may be more important.  A difference of a few dollars in fees is meaningless if the property manager cannot get your home rented to a quality tenant, for example.  That said, ask what fees you will be charged.  Single family managers will typically charge a lease fee, a management fee, and fees for bounced checks (from your residents).  The property management company may also keep all or part of late fees collected from your resident.  Some charge for inspections, delivery of notices, a percentage of maintenance, and advertising. 

The important thing is to know what you will be charged.  The total fees may vary, but again, other items carry a lot more weight.

Having a frank discussion with your prospective property manager, and carefully reviewing the property managment agreement are essential to the process.  Check out my website at www.HomePointe.com for more on property management and our management program in the greater Sacramento area.

Find a manager who knows how to screen prospective renters.  It is my experience that not enough time is spent discussing this between landlords and property managers.  The property management company should have a written policy that is given to prospective renters.  Do you agree with the policy?  Beware if there is no policy!   A property management company could be discriminating without even doing it intentionally.  Is the written policy adhered to? How are exceptions made? Does the broker or a supervisor review every decision?

Be careful of requiring the property manager to contact you prior to accepting a new resident.  This is a recipe for a fair housing complaint.  You should have enough confidence in your property manager to allow them to make the decision.  If the prospective renter meets the minimum criteria, why would the owner need to be involved?  It only opens the door for a problem if the owner disagrees with the property manager's decision. 

Items that you can set up prior to the search for a renter are minimum income levels (3 times the monthly rent is typical, 2 times in lower income areas), rental history required or prior ownership, and credit history.  Some property managers outsource this whole process and others do it in house.  HomePointe Property Management, my company in Sacramento, runs a credit report online and then we do our own discovery to verify income and rental/ownership history. 

Some of the items you can preset as conditions are your pet policy (be careful, you must accept service pets with no deposit!), deposit levels (different states have different restrictions), smoking policy, and the number of persons allowed in the rental (be careful to follow fair housing guidelines).  Note that you should not set a number of children allowed. 

Some companies run criminal background checks and some do not.  Each company makes it's own determination as to the need for a criminal background check.  The rule is to treat each renter the same, either run them for all prospective renters or do not run them for any prospective renters. 

There are many rules to follow in screening for renters.  Make sure your property manager has a good track record! 

NEXT:  Part 4 Maintenance Concerns & Property Management and other Fees.