Frequently Asked Questions from Property Owners
Investing in residential rental property is often a major source of primary or secondary income for landlords. Owning rental property has many benefits, but like many investments, it also requires rental property owners to put their money at some degree of risk. Also, the job of performing management tasks by self-managing is not right for every rental property owner. Professional residential property management companies provide a very high level of expertise in a real estate environment that can be, at times, quite tenant friendly, litigious and thus, challenging. Noted below are some common questions about property management, as well as some specific questions about San Diego Residential Property Management:
A: Some real estate investors buy rental property based on where they themselves may want to have a vacation or retirement home in the future, choosing a location in either a popular resort area or a quiet neighborhood. However, the most successful rental properties are seldom in these types of areas. Tenants often look for access to urban centers via major expressways or public transportation. Rental properties close to points of interest like hospitals, universities, entertainment districts or in good school districts are more likely to attract tenants and can collect higher rents.
A: Rental property allows the owner to benefit financially in three different ways. The first is by earning a profit from rent. This can only happen once the owner charges enough in rent to cover a mortgage payment on the property as well as other overhead costs such as property taxes, cost of insurance, HOA fees (as applicable), management fees and maintenance costs. The second way to make money on investment property is by owning a residence that increases in value over time. This is called appreciation. Market trends can push the property value higher, so that when the property is sold, it will provide the owner with a surplus over what was originally invested and currently owed on the property. In some markets, a rental property is not necessarily a bad investment if the monthly cash flow is negative. If the appreciation is strong, it might be worth it to experience negative monthly cash flow if a healthy profit is realized when the property is sold. It is recommended to consult with a qualified tax professional to discuss your specific financial situation. A third way is in most cases, the equity position of the owner is improving with each passing month that the tenant continues to make their monthly rental payment, because the monthly rent coming from the tenant is making the owners monthly mortgage payment.
A: Rental property owners must report the rental income they make, along with the expenses such as the mortgage payment and costs related to operating the property. Any profit is taxable income, which owners need to figure into the cost of doing business as a landlord. However, losses on rental property, which are common at first, can qualify as tax write-offs. It is recommended to consult with a qualified tax professional to discuss your specific financial situation.
A: Costs you incur to place the property in service, manage it and maintain it are generally deductible. Even if your rental property is temporarily vacant, the expenses are still deductible while the property is vacant and held out for rent. It is recommended to consult with a qualified tax professional to discuss your specific financial situation.
A: Whether you need to move for a job, have inherited a house, or simply want to move without losing money in the sale of your current home, renting your home may be the right option. This decision does require a shift in perspective however, from that of home owner/occupant to business/property owner, and for some this is a hard mental transition. There is a lot to consider before making the final decision to turn your primary residence into a rental property. We can help as you weigh the pros and cons of this decision including the financial ramifications to the scope and amount of work needed to prepare the property for rental. Most home owners find much relief to know that SDRPM will handle all aspects of the rental management—from marketing the property and screening tenants, to managing the ongoing day-to-day responsibilities including collecting rent and handling maintenance.
A: The benefit of working with SDRPM is that we take care of your property by acting as your agent. This includes marketing, lease negotiations, maintenance, upgrades as the budget allows and all tenant issues. You get the benefit of a rental income without the hassle of being a landlord.
A: Our standard management fee is 10% of gross collected rent. Discounts might apply if SDRPM manages for owners with multiple properties or for larger, custom homes. Contact us today for more details!
A: Generally not. We are paid a management fee only once a qualified tenant occupies your property and begins paying rent. Our fees are calculated off of gross collected rents. However, if a property is vacant for more than 60 days due to an owner’s requirement, there may be a minimal management fee incurred!
A: No. Our standard management fee covers the cost of the leasing of your property. There may be additional fees if you require specialized bookkeeping or out-of-the-norm advertising.
A: Yes. There are specific limits that are placed on each individual property, but generally if expenditure is estimated to be below $300, SDRPM will handle the repair or maintenance item without consulting the owner. If the repair is expected to exceed $300 or is major in nature, the owner will be consulted prior to proceeding with the expenditure.
A: No. Although some management companies have internal maintenance departments that handle all of the property related repairs or get financial kick-backs from the vendors they use, SDRPM chooses to utilize the “free enterprise system”. We strongly believe that each owner we represent expects to receive the highest quality workmanship and service, for the lowest cost possible. To deliver upon this expectation, we use the most qualified vendors who have evidenced their willingness to work diligently, provide quality workmanship, are reliable and charge reasonable rates. If they do a great job at a reasonable price – consistently, we will consistently hire them as the best vendor to handle our property maintenance and repair needs.
A: Yes. As members of the California Association of Realtors (CAR), we utilize standard CAR documents, but have augmented them with additional addendums. Real estate and property management is constantly changing and therefore we have found that using the CAR forms is a great way to ensure lease forms that are reviewed on a regular basis to ensure consistency with current trends and real estate laws.
A: Yes. In addition to CAR, we are also members of the National Association of Realtors and the San Diego Association of Realtors. Our broker of record, Bob Davie is also the past president of the San Diego Chapter of the National Association of Residential Property Managers, the nation’s largest trade association dedicated to the ongoing education of residential property management professionals. He currently serves as the treasurer of the state chapter (Cal-NARPM). We are also members of the Rancho Bernardo Business Association and Rotary International.
A: In today’s internet savvy world with potential tenants looking for immediate satisfaction to their need to find a home for rent, it is important that your property is effectively marketed on the web, but there is more to successfully renting your property. There are hundreds of real estate websites that claim to reach multiple audiences, but clearly a few websites are much more effective than others. We have found what we believe to be the right mix of sites to most effectively obtain the “right tenant”. We advertise available properties on dozens of free rental sites as well as numerous “subscription based” sites. SDRPM has a very aggressive marketing strategy that is designed to rent your home as quickly as possible with the least amount of “down-time”. This includes re-posting available properties immediately when they naturally fall off rental sites, placing appropriate signage, having a live person to take incoming rental calls, utilizing state-of-art appointment booking software to quickly and efficiently schedule rental showing appointments 6 days per week and a convenient online application process. Remember…..we don’t get paid until we find a qualified tenant that begins paying rent!
A: A majority of the most important work with regard to property management is at the beginning with the selection process. We complete a VERY thorough screening process which includes a background check, criminal background check, credit check, rental history evaluation, check for domestic terrorism, employment verification, income verification, personal and professional reference checks as well as a personal interview with each applicant. Once the due diligence is completed, the information is shared with the owner for their input. Together with the owner, SDRPM is attempting to arrive at a well informed and confident business decision on who will be occupying the residence. It is a collective, “team-oriented” approach that produces outstanding results!
A: SDRPM conducts a comprehensive Rental Market Analysis of other similar rental units in the area and uses no less than three other comparable properties to make recommendations on what is believed to be the optimum rental amount. This is reviewed with the owner and approved prior to advertisements being published. Ultimately, the “right rent” is based on four things: (1) desirability of the property, (2) competitive rate with other similar units in the immediate area, (3) a rental rate that will attract tenants to the property, (4) market demand.
A: Rent is due on the 1st of each month and late if it is not received by 5:00 p.m. on the 4th day of the month. Tenants can pay their monthly rent online using the Tenant Portal on the SDRPM website or they can set up a bill-pay function with their own banking institution. They can also mail or hand-deliver their rental payment to the management office. If rent is not received by the due date, every effort is made to collect the payment in a timely manner. If necessary, a consultation with a qualified eviction attorney is suggested and an unlawful detainer (eviction) action is initiated. Although these circumstances are exceptionally rare, SDRPM works alongside the owner and their counsel to arrive at a speedy remedy.
A: Owners disbursements are electronically deposited into each owners designated checking or savings account between the 12th and 15th of each month. Detailed owners statements are e-mailed to owners with work orders and invoices attached for explanation of each expense. Property owners are supplied with a link to their “Owners Portal” where property related statements and other information regarding their specific properties is available 24/7/365.
A: When a property is vacant, we typically conduct numerous walk-thru’s each week. The next inspection is prior to the tenants moving into the property. This is called the “pre move-in inspection”. This provides a detailed written condition report of the property and includes numerous still photographs that are date stamped for documentation purposes. Regular walk-thru evaluations are completed each year the residence is occupied, again with photos and a condition report provided to the owner at each visit. Routine “drive-by” reviews are completed regularly by SDRPM staff. Lastly, when the tenant vacates the residence a very thorough move-out inspection is performed to evaluate the condition of the property in comparison to that at the time of move-in. As with the pre move-in inspection, still photographs are taken of the interior and exterior of the residence.
A: The management office is open Monday through Friday from 9:00 a.m. to 5:30 p.m. and by appointment on Saturday. The office is closed on Sunday and major holidays. In the event of an after-hours property related emergency, tenants are directed to call our 24/7/365 emergency phone. An appropriate vendor will be dispatched to handle the situation in a professional and timely manner.
A: Yes. A complete list of references is made available upon request. Call our office today for a free property consultation and ask for a copy of our reference list.