Not everyone who owns investment property in the Monterey Bay area needs a property manager. Even those who do need one do not necessarily need full property management.
Some landlords have the people skills to deal with tenants, vendors, contractors, neighbors, insurance adjusters, city, county, state and/or federal government officials, and others who impact the day-to-day operation of their rental properties. They also may have time in their days to learn how to write a strong lease, to find out what disclosures are required at the local, state, and federal level, and to keep up with legal changes that are happening in the landlord-tenant arena every day. But even some of the people who have the skills and time to manage their rental properties may not want to manage them!
So if you don't want to manage your rental properties, or if you don't feel confident in your skills at property management, you can feel confident that there are professional property managers who can simplify the landlording aspect of your life.
A successful and experienced property management firm offers you professional business procedures and "people skills" to insure that you derive the greatest net income from your investment real estate. A good property manager can maximize income, minimize expenses, and help you maintain the highest property value possible while avoiding legal pitfalls. In fact, when time and efficiency are taken into consideration, you will most likely find that a professional property manager can create a better yield from your property than you can! Ask us for examples of how we have made that happen for our clients over the years.
The right firm minimizes the negative impact of various laws and regulations that affect the real estate's use. A good manager can set high standards for tenants and motivate them to meet and sometimes even exceed these standards. Property management is both an art and a science. Our property management company has the "art" of good people skills and we employ the psychology required to be successful in this business. We also have the "science" part in place with good forms, systems and procedures that have allowed us to excel over the long term.
Monterey Rentals provides all the services you need to allow you to focus on the aspects of your life that need your attention. These services include extensive online advertising to insure maximum market exposure; effective tenant screening to place highly qualified applicants negotiation of rental agreements that incorporate the latest legal changes; timely collection of rents; effective handling of maintenance and repairs with tried and tested vendors; emergency hotline operating around the clock; coordinating eviction services when necessary; automatic deposits to your bank account and monthly statements of all transactions affecting your property; if you are out of state or out of the country, we will handle the required California state withholding for you; oversee all aspects of tenant turnover; provide the required 1099's to all vendors who work on your property; and an annual statement of all transactions, making your tax preparation simple.
We subscribe (at no expense to the owner) to a national tenant screening service that provides us with credit reports and searches court records for any unlawful detainer actions as part of our screening for long-term residents. We also confirm employment and talk to past landlords, all contributing to building a complete picture of your future residents. As we indicated earlier, property management is both an art and a science. There is an art to reading credit reports and talking to past landlords. Our experience has provided us the opportunity to perfect our talents in this arena.
We collect deposits that, in our experience, are appropriate to the number of people who will occupy your home and the length of their stay. California law permits us to collect up to two times the monthly rent for an unfurnished unit, however, the market will rarely bear these rates. We typically have more deposit than is necessary to cover damages.
Rates for rentals are based on the rents for comparable properties in similar locations. Since approximately fifty percent of residential property on the Monterey Peninsula is non-owner occupied, this is relatively easy to accomplish. Rates are not set by totaling your mortgage payment, your taxes on the property, and your expenses! While it might seem reasonable to attempt to set your rate in this way, keep in mind that there is no correlation between what a property costs an owner and what it will generate in rent. The market sets the rents-you and I do not.
Our standard contract has a no-smoking clause and a no-pets clause in it. However, many of our rentals permit pets of one type or another, making them easier to rent and giving us more prospective residents from which to choose. Keep in mind that service animals are not considered to be "pets" by both state and federal law, thus a tenant with a service animal must always be accommodated.
Depending on the time of year your property becomes available, it will probably take one to four weeks to locate a superior, highly-qualified resident for your long-term rental.
As do all property managers, we require the owner to name our company as an additional insured on the landlord's insurance policy that protects the property. The owner must be willing to maintain the property and its furnishings and landscaping in a manner suitable for rental.
You need what is known as a "rental dwelling policy", which is a policy designed for a property owner who will be exposed to the liability of having tenants in his home. Since there is minimal additional cost to having higher limits on your liability coverage, we recommend having $1,000,000 or more as your liability limit. Your insurance company must be willing to name our company as an additional insured on the policy.
This is for the owner's protection as much as for that of the company. Under a legal principle known as respondent superior, the property owner is liable for harm done by his agent while acting within the scope of the agency. The property owner must be insured against this vicarious liability. (Vicarious liability is liability attributed to a person who has control over or responsibility for another who negligently causes an injury or otherwise would be liable. Whenever an agency relationship exists, the principal is responsible for the agent's actions. The negligence of an agent acting within the scope of the employment of his agency is attributed to the employer of that agent.) We would not want you to have to defend yourself and us against a resident who charges us with doing something we shouldn't have done or not doing something we should have done in a case of resident injury on the property.
We can help you determine whether your property is best suited for a long-term or short-term rental, depending on the location of the property, its condition, and your personal preferences. Any residential property can be rented to long-term tenants, but not all properties make good vacation rentals. Properties that are nearer to the water and in a "walk to town" location are more in demand than those that are not. Thus, the location of the property will be a big influence in your occupancy rates and rental rates.
The condition of the property is also a consideration. Properties that have been well-maintained, but are dated, can be rented long-term. However, to be a successful vacation rental, a property must be updated and stylishly decorated. It takes more of an initial investment to get a property ready for vacation rental than for long-term rental.
One of the personal decisions you must make is whether or not you want to use the property yourself. If your personal utilization of the property is important to you, you will want to consider the short-term, fully-furnished rental of your home to facilitate your own access. On the other hand, ask yourself what tolerance you have for being surprised every month when you get your monthly statement. Short-term rental income is very erratic. In some months, it is great, and in some months, it is non-existent, so it is important not to be too reliant on the income stream.
It is a mistake to elect short-term rentals in an effort to earn more income. While short-term rents are traditionally higher than long-term rents, the expenses are higher as well! Short-term management commissions are higher, utility costs are greater, and the cost of maintaining furnishings and equipment is more in a short-term rental than in a long-term rental. For most homes, the net income to the property owner is greater with a long-term, unfurnished rental.
The market conditions may influence whether you decide to proceed with a short-term rental or a long-term rental. Because so many former homeowners are now tenants again, the long-term rentals are in demand. The vacancy factor is lower than it has been in a number of years. Long-term rentals that are priced appropriately for the market are snapped up quickly by qualified tenants. The short-term rental market, on the other hand, is very much the opposite. As the economy began a downward spiral a few years ago, many second home owners attempted to make up financial deficits in their stock portfolios by vacation-renting their second homes. As a result, the number of vacation rental homes on the market today is many times what it once was. This over-supply of vacation homes has led to stiff competition for the vacation rental dollar and dramatically reduced prices and reduced occupancy rates.
If you are not sure whether to select long-term, unfurnished rental, or short-term, furnished rental, we recommend that you start with a long-term, unfurnished rental. It is easier and less expensive to start with an unfurnished rental and switch later to a furnished rental than to do the opposite. Owners who elect the short-term, furnished option will go to a great deal of time and expense to get their homes up and running as vacation rental properties. Furthermore, it takes six months to a year for vacation rental advertising to have a significant impact on the market (think renters coming back year after year to the same properties) and to build a clientele. It takes approximately one to two years to earn an amount of rent equal to the money an owner will spend to get a vacation home ready to rent.
Vacation rentals require a similar investment on our part. Because of the enormous amount of labor involved in getting a short-term rental up and running, we do require a minimum two-year commitment to start, so you will want to be sure that short-term rentals is the way you want to go. If you do not feel that you can commit to a two-year agreement and you want the option to use your home, you may want to consider our A La Carte Services, which is less expensive for you and for us.
Certainly no business endeavor is without risk. However, in our career in managing property, we have had to evict a resident only twice. We do see occasional damage that can typically covered by the security deposit. But it would be foolish to assume that major damage or the need for eviction will never occur. Nevertheless, with proper management, the risk in the rental business is low. We estimate that we have rented to approximately 20,000 tenants, and the significant problems we have had number less than ten.
Sometimes it is difficult for a property owner to make the transition from regarding his property as a personal residence to perceiving it as a business asset. To be a successful owner of income property, an owner must let go of his emotional involvement with his property. He must look at it as a resource from which he will most certainly generate business income and from which he may sustain some business losses. It is also important to remember that unless a business asset is maintained, it will produce less and less income, so it is vital to keep the property in top condition at all times. There will be some wear and tear, just as there is wear and tear in your own home. For this reason, we work extremely hard to assure that the properties are being maintained in the condition that will generate the most income for the owners we represent.
Ask any property management company with whom you are considering doing business the questions that are listed here, so you can compare apples to apples. Ask questions that you feel will address your specific concerns regarding management and that will insure that the services you get will support your goals for your investment. Ask us for suggestions if you are unsure as to how to formulate the questions that will accomplish this. You should also question the integrity of any company who provides you with materials/information that seems to closely resemble that which you have received from us. While we do consider imitation the most sincere form of flattery, we are dismayed that a few local companies have seen fit to copy our material verbatim and pass it on as their own.
We have generously shared our expertise with our friendly competitors by teaching classes on property management and answering questions posed by our competitors as to how we do business. However, all the material and information that we provide to prospective owners is the original work of the broker, Jan Leasure, and is copyrighted. We hope that our competitors will do the same and provide only original material to their prospective clients.
First, call our office with any questions that we have not answered here. We want you to have an opportunity to have all your questions answered before committing your property to our management! When you feel completely comfortable with our operation, we will schedule an appointment to see your property and to facilitate its placement into our inventory in order to get it rented for you as soon as possible. At the appointment, we will assess your property, discuss marketing plans, and review our agreement. We do require, at this time, the start-up fee and a one-year commitment.
After the agreements are signed, we will send our property managers to review the rental and familiarize themselves with the property so that they may describe it accurately to potential residents. Prior to the first rental, we will have our housekeepers do a "pre-clean" to insure that the house is ready for the first resident.
Well, first of all, you need to know that none of us who own Monterey Peninsula real estate that was purchased with a traditional mortgage (25% down) have positive cash flow for the first few years. There is simply too much discrepancy between what the property costs and what it will generate in rent. However, there are some other good reasons that I purchase property here periodically. One is because I believe in its long-term appreciation potential, even after the recent recession. Another is because the rents do go up, and one of these days, the rent will catch up with, and eventually exceed, the mortgage payment. Many of the owners I represent purchase now with the idea of ultimately retiring to the area. The rental income certainly offsets the cost of maintaining the property.
Second, you need to know that Monterey Peninsula real estate prices cover a very wide range. There are a few properties under $400,000.00 and some for several million, and everything in between. As a general rule, the higher the purchase price, the wider the gap between property cost and rent, but this is not a hard and fast rule. It is affected by the location and condition of the particular property. Once we know your approximate price range, we can advise you as to the best properties for income production. We do not represent buyers and sellers, so we are happy to work with you and your real estate sales agent to help insure that the property you purchase will meet your goals.