Rental management might seem a bit mysterious if you’re not familiar with the field, so today we are sharing a bit about what a property manager actually does. In summary, we are acting on your behalf to market your property and manage your tenants to maximize the return on your investment. Let’s dig into those details. (more…)
One of the most important topics in Irvine property management is finding a great tenant. Conducting a tenant background check includes five key elements: credit, background, income, assets, and rental history. (more…)
We are talking to you today about why some of our current clients have chosen to work with us. HCM Property Management can most effectively help you increase the near and long term value of your investment property and maximize your returns. There are three ways that we do this. (more…)
When considering property maintenance, we usually think of those responsibilities: fixing or replacing broken appliances, changing locks and performing major repairs.
However, some tasks don’t necessarily always fall to property management. Your tenants also have responsibilities. This is where the lines get blurred for many real estate investors who put the wrong responsibilities on the wrong party and then wonder why they can collect for some maintenance from the tenants and not other maintenance.
Remember that these guidelines are typical and may vary under different legal regulations.
At the top of the list of a tenant’s maintenance responsibilities is simply keeping things clean. Tenants are expected to take out the trash, keep cars off blocks and out of the yard, and keep the property neat — just to name a few basics. That means regular housework: cleaning toilets and countertops, dusting, mopping, vacuuming, and so on. While a little mess can be understandable, tenants can’t neglect these basic tasks.
When properties aren’t kept clean, they can be a breeding ground for mold and infestations of bugs. Keep an eye out for warning signs of this kind of neglect, as it can cost owners a lot to fix in the long run. Easy warning signs are visible from the street, while others need to be regularly inspected or watched after.
Tenants may not be responsible for fixing major property issues, but they’re responsible for reporting them as soon as possible. If they don’t mention a problem (leaking pipes, for instance) to the manager, they may be held liable for additional damages that wouldn’t have happened had the issue been reported and rectified earlier.
It’s vital for the health and condition of your investment property that tenants are actively encouraged to communicate with the property management when an issue arises. While it may be inconvenient at times, leaving a problem unaddressed is far more damaging.
We know that tenants aren’t responsible for covering regular wear and tear. Things get damaged and worn just by virtue of being used, whether that’s the carpet or appliances, but that doesn’t mean that you’ll always have to foot the bill. Tenants who cause damages with carelessness are responsible for fixing the damages. That could be anything from cleaning the carpet after a wine spill to replacing a broken window.
We all want and expect tenants to use the property as it was intended and without illegal activity, but we know that unfortunately, this isn’t always the case. If a tenant uses a room, fixture, or appliance in any way that is not within its intended use and it is damaged or broken as a result, they are absolutely liable for those damages.
If you are strapped for cash, time or both, it can be difficult to get your property rent-ready. Here are 7 ways to freshen up your rental and get it rented quickly.
What does the outside of your property look like? Dead grass, dying trees and scrubby weeds don’t say “welcome home.” Some plants and flowers can take your yard from tired to lively, quickly and inexpensively. Purple fountain grass rapidly grows to about three feet wide and tall. It’s a lovely, rich shade of purple and is drought resistant, which means if you or your tenant forgets to water it, it isn’t going to die. Snapdragons are another great option because they are a great way to add color and are also drought resistant.
If you have an ugly chain link fence, I suggest morning glories since they’re a quick-growing vine with beautiful leaves and colorful flowers that open in the morning. They re-seed themselves and need almost no water.
A fresh coat of paint looks clean and crisp, especially if it is done right. White or cream used to be the go-to paint color for landlords, but adding a splash of neutral color can help your property stand out. Light to medium grey or tan creates a richer, more contemporary look, while costing you nothing extra. The smaller the property, the lighter you should go. Dark colors tend to suck the space out of a room.
One way to save on paint is to buy the five-gallon buckets. It costs less per gallon than individual gallons. Another way to save is to shop the “oops” paint section. These are mis-tinted gallons of paint that are sold at a steep discount.
Paint is absolutely your best bet for brightening up a property on the cheap — just make sure you use neutral colors. It would be disappointing to spend a lot of time painting, only to lose renters because the vivid paint you put on the walls clashed with their furniture. Remember, you aren’t living there. Choose colors that appeal to the widest array of renters.
A lot of rental properties have an older style oak cabinet in the kitchen. When clean, they don’t look bad. Shiny or dull brass handles or knobs make them look outdated and can bring the whole kitchen down. The big box stores sell understated, classy door hardware in bulk packages of 50 for $45.
Do you have a backsplash? Tiling is a very inexpensive way to brighten up a room, and I have seen quality glass/stone mosaic tile at Costco for less than $5/sq ft. Another inexpensive option is to use beadboard or wainscoting. Cut it to fit the space and paint with a high gloss paint for ease in cleanup. You can pick up some 4′ x 8′ sheets for about $20.
Shiny brass was super popular back in the ’80s, but it’s horribly ugly now. Swapping out an old light fixture is a fairly easy process, and your room can only look better afterwards. Keep in mind that all finishes throughout a room — and ideally throughout the house — should match, so if you’re swapping out the brass light, make sure the door handles, etc. are changed out as well.
The old, grungy shower head may still work, but a newer one will look better. A high-efficiency shower head can save water and money. Changing out a shower head isn’t very difficult; you simply unscrew the old one and twist the new one on. (Turn off the water before you start, and make sure it’s on tight!)
I’m not a fan of oak cabinets from the ’80s. I think oak is ugly in general; however, it is a very sturdy building material. Those cabinets are probably in great shape and why spend money you don’t have to? If they just don’t do it for you, paint them.
Habitat for Humanity raises money for their program through their Discount Home Improvement stores called Habitat for Humanity ReStores. They sell new and gently used home improvement products at significantly discounted prices and can be a great source for unique items to update your home. Plus, you’re helping out a great cause!
Walk around your rental property and take a hard look. What stands out as the biggest eyesore? Bring a friend with an objective eye and ask for honest feedback.
What is the best way to maximize revenue for a rental property? One key element would be reducing vacancies. Raising rents is important, but consider that one month’s worth of vacancy equals 8% of your revenue per year. You stand to lose much more in vacancy over the long term. This sounds simple, but keeping your units full of on-time paying tenants is the best way to stabilize a rental.
Today I will talk about three strategies to make that happen.
Want to get your tenants worked up? Try taking too long to address maintenance issues. This is the fastest way to tick a tenant off and encourage them to move. Tenants want their concerns to be addressed quickly. If you can’t afford the repair at the time, be in communication with the tenant so that they feel heard.
Tenants also want to know that you are committed to keeping the property in good condition even if there is not a pressing emergency. Do preventative maintenance walkthroughs to make sure things are in good working order. If it’s a multifamily, keep the common areas in good condition. These things aren’t hard, but do take budget and scheduling. Doing them will make your good tenants feel like you care about where they live.
Some tenants are just renting an apartment or a house while others would call your property their home. Some tenants stay for years. They decorate for the holidays. Units are clean, and they did some things to personalize them. Maybe they repainted a room or added something to spruce the place up. Some of these tenants will never leave, as long as they are taken care of.
So how do you create that feeling of home for your tenants? It does take the right situation which is outside your control. The 25-year-old fresh out of college may not stay for 10 years and the newlyweds living in a 1-bedroom may have a baby someday. You can’t control these things, but you can create an environment that encourages people feeling comfortable enough to stay long term.
Simple strategies include doing some simple things outside of the property like basic landscaping or lighting. Allow tenants to have a pet or two, as long as they pay a non-refundable pet fee ($250) and pet rent ($25 per month).
Another strategy that works is to remove bad neighbors. If a tenant in one of our multifamily buildings is causing problems with the other tenants, address it quickly. Your tenants may not feel comfortable engaging their neighbors and will eventually move if the neighbors cause enough problems for them.
I make sure that my good tenants know that we are happy with them. One option is to create a rewards program for tenants who have paid their rent on time each month. Each month take the names of all tenants who paid their rent on time and enter them into a drawing. Once a quarter draw a name and give them a gift card. You can also implement a grand prize at the end of the year!
If you have several properties this is not a large investment. Tenants will get so excited about this program that they will call to make sure we got their rent on time and to check to see if they won!
If you don’t have many units, find some other way to make your tenants feel appreciated. I have heard some landlords send their tenants birthday or holiday cards. Bottom line, find a way to show them you are grateful for their good tenancy.
There are many factors to making money as a buy and hold landlord. Whether you self-manage or have a property manager, taking initiatives to keep your good tenants in place long term is the best way to keep revenue up.
You should treat your vacation home just like you do a business—income has to be equal to or greater than expenses. Here are a few ideas you might want to consider making to your reservation policies in 2016 to be more profitable.
During high booking season you should price your vacation home at the top of the market. After all, it is called high season because there are usually more guests coming to town than there are vacation homes. During low season, price your nightly rates closer to the bottom of the market since guest are looking for the best deal.
I like to look at my high and shoulder booking seasons as the time of year when I need to maximize my profits and I look at any bookings that I receive during the low season as freebies since I am not really counting on getting a whole lot of bookings during these slower times.
You should keep a record of everyone who has booked with you in the past and send them an email offering them a great rate on the property they rented. This will allow you to do a little yield management to make more money.
Here is an example of how yield management works: If you have 16 nights already booked in your vacation home for the month of March, then you raise your nightly rates for the open nights a little, once you secure another booking in March, you raise the other open nights a little more. You will be shocked at how much more money you will make at the end of the year by just raising rates a few dollars here and a few dollars there.
The easier you make it for guests, the more guests you will end up having. During low season, make your non-refundable reservation fee really low. You might even want to consider doing a fully refundable reservation fee. During low season, if someone cancels, you are not really hurt that much. Now, with high season bookings you should charge a very high reservation fee because if someone cancels during high season, this could affect your income at the end of the year.
It is unfortunate that in this day and age, if someone does damage to vacation home and you ask them about it, most of the time they deny that they did the damage. A property protection fee is non-refundable, and it works just like insurance on the vacation should any damage occur while the guest is staying in the house. This works much better than security deposits since the guests who were doing damages to the property were also disputing the charges as well.
These four simple tips should help you secure more bookings during the low season and maximize your profits during the high season. You also need to keep your eye on all your expenses and make decision accordingly.
Here are a few key points you should follow if you are going to hire a new property management company.
1. Make a Wish List
Before making a change, write down everything you currently like and dislike about the property manager you have now. Use these notes to make a new list of everything that you require your new property manager to do for you.
Most companies will strive to meet your expectations, so the higher your expectations, the better service you will usually receive. This list will be a great tool, especially when it comes to interviewing new property managers.
2. Explore New Management Companies
First, you want to talk to other management companies who you might want to hire. A good place to find other management companies is either online or simply drive around and look at who is managing properties in the surrounding neighborhood.
Another idea is to ask your neighbors who they use to manage their property, or you might want to ask your realtor who sold you the house for a recommendation. After you have at least two possible management companies, contact them and set up an interview. After the interview process, pick the management company that you are most comfortable with.
3. Review Your Agreement
Review the legal agreement you have with your current management company to see if there are any grounds for immediate termination and to double check when the current agreement expires. If you’re happy with the current management company and you are leaving because another company is offering superior services for a cheaper price (like HCM Property Management’s owner special of $150 flat fee per month), then you might find it easier to let the agreement expire on its own.
If you choose to let the agreement expire be sure to send them a letter notifying them of your plans not to renew with them. Usually these agreements roll over or renew on their own if no notification is provided. However, if you are really unhappy with the current management company, then terminate the agreement immediately. Your rental property is an investment, and any long term neglect of your property can have a negative effect on the value of the property.
4. Notify the Old Management Company
You can notify them through a letter or on the phone.
If you do it over the phone or in person, you should also follow it up with a termination letter. Whenever you terminate an agreement, it’s smart to have it in writing as well. In the letter, outline why you are leaving, the actual date you want the agreement to be terminated, and the name and contact phone number of the new management company.
5. Follow Up
Every few months it is a good idea to check on the property and make sure the management company is doing what they are supposed to be doing. If the management company knows you will make unannounced visits to your property, they will do a better job than if you never check in on the property.
Any time you are looking to make a change it can be very stressful, but if you follow some of these steps it can make the change that much easier.
Don’t forget to subscribe to our new HCM Property Management YouTube channel where we will be posting weekly tips on property management and tricks to help save you time and money
Link to HCM Property Management YouTube Channel: https://www.youtube.com/channel/UCNcV19MkVChJWJZS14IBtKQ
It’s surprising the number of investors/landlords who don’t take full advantage of the services, resources and skills that their property management company provide. Wise investors empower their property managers by making their job easier and more effective.
A great property management company can save you money and maximize your return. Here are six ways they do that:
1.) Choosing Rent Prices
Setting the right rent is not an easy task. Rents are rising, but they are rising at different rates depending on location. Single family rentals are priced differently than multifamily because they offer more space and appeal to different tenants. Rents for single family homes nationally rose about 1 percent last year and demand is strong. These are things your professional property management company probably knows. He’s probably done considerable research on the local rental market and knows what competitive properties are charging today and plan to charge six months from now.
2.) Writing Ads that Sell
Writing and placing ads may be something that you enjoy doing, but you are not as good at it as someone who has years of experience working with online and print advertising. Your property manager knows which outlets work best in your market and he can maximize your advertising dollars. He also knows how to write and use photos that highlight your property’s selling points and reach out to kind of tenant you seek. Your property manager has relationships with the advertising media you will use, and he can get you deals you can’t get on your own.
3.) Navigating the Legal Waters
Unless you’re a lawyer, you’re probably not expert in landlord/tenant laws, but your property manager is. Professional property management companies must be familiar with the local laws that govern the landlord/tenant relationship. If you don’t have someone on your team with that kind of knowledge then you could be leaving themselves open to legal action. Good managers bring vital resources like lease forms, tax forms and other standardized documents.
4.) A Network of Contractors
A good management company has a network of reliable, cost-effective contractors for all contingencies ranging from plumbing, electrical, carpentry and landscaping skills to properly maintain your property. When emergencies arise, they can make one call and get help out.
5.) Tenant Screening
Today there are a variety of different sites that provide screening services for a fee. You could use half a dozen without knowing which is best for your purposes and most cost effective. Managers have access to several services that conduct credit checks, employment verification and criminal checks. They can weed out problems before they move in.
6.) Professional Problem Management
If you find yourself with a difficult tenant who violates rules and invites eviction, a good management company knows how to proceed in compliance with local landlord/tenant laws. If worse comes to worst, managers can call on professional legal support to resolve the dispute quickly.
Summary
If you empower your professional property management company, you’ll transform your relationship until you are a team that truly works together by complementing each other’s skills and abilities.
There are a lot of ways to invest in real estate. A great way for building serious wealth in this world is through investing in rental property. This post will take a look at why rental properties can be such a powerful investment tool and how you can begin investing in rental properties to increase your wealth.
Some people invest to get rich while others invest for their children and grandchildren. Whatever your reason, investing in rental property can be one of the quickest and safest investment vehicles around. Rental property allows you to take advantage of several distinct benefits:
There are several different ways that you can invest in rental property. Here are some possibilities:
To get started you must create a plan to guide you. Your plan should include:
Once you have done this, thoroughly understand the kind of investing you want and follow your plan! It may change slightly and you may need to correct-in-course.
Single family properties are great rental properties, but like anything else they have both pros and cons. Here is a list of both.
None of these pros and cons are deal makers or breakers, but they may affect your thinking on how you want to invest. It is always good to look at both sides of the spectrum.
Investing in a piece of real estate can be an exhausting task. You have several variables to pay attention to, lots of math to do, and your financial future rides on the efficacy of every decision you make as part of that process.
Once you have invested in a rental property and gotten it ready to rent, you should be completely done with that place. If you’re not, then you probably didn’t stress enough. But unfortunately, that level of exhaustion and declining interest makes it very easy to open a phone book, pick a name with “property manager” in the title, and hire them.
That is actually the worst idea you can have. It’s better to have an average property and a great manager than a great property with an average manager.
Why is This?
An average manager is going to allow many more problems to reach you than a great manager is. In addition, a great manager is going to save you more money compared to an average manager.
Here’s an example:
Investor #1 has a home with great investment qualities. He rents it out for $1,450/month, pays only $450/month total in all costs, and spent $35,000 cash to buy and $25,000 cash to renovate. He’s looking at a rental yield of 20% ,but his property manager is forced to evict two tenants within six months. Each tenant leaving the place empty for a month and costing $2,100 worth of repairs to complete. This was all due to a failure to properly screen out bad tenants.
Income for those six months: $5,800
Costs for those six months: $4,800
Net profit: $1,000
Investor #2 has a home with average investment qualities. He rents it out for $850/month, also pays $450/month in costs, and spent $52,000 with only $8,000 in renovations. Total rental yield is 8%. This is respectable, but not the best. However, his property manager screened his tenants properly, found one with a great credit history, good job, and no major issues. That tenant signed a two-year lease, and six months later:
Income for those six months: $5,100
Costs for those six months: $2,700
Net profit: $2,400
So not only did the lesser of the two investments pay more money, but there was also significantly less stress because a great property manager is worth more in the long run than a great property.
What we learn from this example is that after you have spent six months of hard work carefully reviewing the house, neighborhood, and your finances, don’t let your exhaustion come into play when picking the right property manager. Even if you need to wait a week or two and take a break, do it. Once you have had time to rest and recover find the best property manager available for your property. This will save you more trouble and money in the long run.
All tenants have differing wants, needs and desires. These wants, needs and desires translate into the type and location of properties they wish to live in. It is essential for a landlord to understand what is important to prospective tenants. Here is a list of common elements tenants seek out when renting a property:
Cleanliness
The property should be clean and presentable. No one wants to live somewhere littered with trash and unkempt landscaping. First impressions are important, and the best tenants are going to stay away if your place is a mess.
Safety
Safety is always a major issue. Everyone wants to feel safe in and around their homes. Safety can be attributed to location. Some locations are simply going to be safer than others, and there may be little the landlord can do about these situational problems.
But there is plenty you can do with your property. Tenant screening is the place to start. Weed out the bad prospects before they move in. Solid locks and security doors are also a big help, as are security systems and lots of lighting.
Location
Location is one of the most important elements when it comes to real estate. Some will want to be located near their job, others near their family. Some will want a particular neighborhood or access to transportation systems. Some may want to be near the trendy shops and restaurants. Others will want no part of that. Others will want to be in the city or out of the city, etc. These are all very different wants, and you need to understand where your property is and what locational benefits it offers to potential tenants.
A Good School District
School Districts can play a key role for tenants who have children or plan on having children in the near future. Some tenants will be looking for a home in a particular school district because they want their children to go to that particular school. Schools can be so important that prospective tenants will be able to overlook many other problems with a property as long as it is in the right school district.
Quiet
Some tenants like a quiet property. This can be very important, especially if the tenants have to wake up early every morning for work. This is something a landlord should keep in mind, especially with multi-unit properties, as noise complaints will drive you crazy.
Amenities
Amenities always make things a bit easier and more convenient. An amenity could be something as simple as ceiling fans, or it could be having a dishwasher or a washer and dryer located in the property. These amenities and others like them can make a huge difference to those looking to rent from you. Learn what is available in your market and up the ante a bit if you can.
Professionalism
Tenants want to be treated professionally no matter what. They want to know that they will be respected and that their home will be maintained. They do not need the hassle of badgering you for repairs nor do they want you interfering too much in their lives. The landlord/tenant relationship is a professional one, and that is how you should present yourself.
Tenants wants, needs and desires can vary significantly, and it is just not possible to accommodate everyone all the time. But landlords should be aware of what factors are important to their prospective tenants. Some of these factors, such as school neighborhoods, are dependent on location and there is little the landlord can do about these factors except to be aware of them going in.
But many others are within the landlord’s power to control or at least affect. Items such as cleanliness and professionalism, which are so important in this business, offer you the chance to make a great first impression and pick up the best tenants first. Others, such as the amenities you choose for your properties, can give you an edge over your competition. And in this business, a slight edge can make a big difference.
Here are some of the most important deductions you could benefit from:
1. Interest on Your Rental-Related Loans.
It’s important to make the distinction between principal and interest. You cannot deduct the amount of the loan (the principal), but you can deduct the interest on the loan that you pay in any given year.
Typically, as a rental owner, you’ll have some of these deductible interest expenses:
Interest on loans to buy your rental property (look for the Form 1098 from your lender each year).
Interest on loans to refinance your rental property (ditto: Form 1098).
Credit card interest for goods and services bought for the rental property.
And don’t forget about personal loans for things related to the rental property.
2. Travel Expenses.
If you have any travel expenses related to your rental property, such as transportation, lodging, and meals, they’re fully deductible. Also, if you use your personal vehicle in your rental property business, you can use one of two methods to deduct your related expenses: use the standard mileage rate or actual expenses.
3. Repairs & Maintenance.
A repair is any work that puts the property back in its original condition. Reasonable and necessary repair costs for your rental property are tax deductible. Maintenance does not always involve fixing something that’s broken, but it gets to the idea of keeping the property in its original condition, and in the long run a regular maintenance program could save you on emergency repair costs. Maintenance expenses that are deductible include:
4. Depreciation.
Depreciation is a process through which you deduct long-term assets (assets you hold for more than one year) over many years. Long-term assets include rental buildings. Land is not included. Tangible personal property that lasts for more than one year, such as carpeting and kitchen appliances, can also be depreciated. Because depreciation can be very complicated, it’s best to discuss it with your accountant.
5. Insurance.
Insurance premiums, including those for landlord liability, theft, fire, and flood, are tax deductible.
6. Taxes.
Real estate taxes, property taxes, and state, county and local sales taxes are deductible.
7. Home Office & Office Supplies.
Many landlords don’t take advantage of the home office deduction, because quite frankly, it’s a bit of a pain AND the IRS tends to closely scrutinize this one. However, if you use an area of your home exclusively for your rental business, it might be exploring with your accountant. In addition to deducting for your home office, you can also deduct for office supplies used in carrying out your rental business. Deductible office supplies include writing implements, paper, notepads, printer ink, envelopes, and stamps.
8. Utilities.
If you pay any utilities for your rental property, you can deduct them. These include:
9. Professional Services.
If you need to hire a lawyer, accountant, or other professional, that cost is deductible and considered part of your operating expenses. Often, DIY landlords hire lawyers to handle tenant evictions (link to evictions article), or they’ll decide not to landlord themselves anymore and hire a property management company.
10. Advertising.
Any money you spend on advertising your property for rent is deductible, whether it’s online, print, or radio.
