Owning rental units can seem like a lucrative income stream, especially on Maui where the rents are high. Homeowners also see renting out ohana units on the property where they live as a way to reduce their monthly mortgage expenses. But before you decide to jump into self-managing rentals, you need to understand what goes into managing rental properties.First let’s look at the math. Investors may see rental property as a simple equation: rental income minus mortgage and expenses equals profits. However, that overlooks some not so obvious expenses.Your time is a valuable commodity, and landlord duties need to figure into that equation. Some investors have found it more favorable to hire a property management company, while others go it alone in self-management as a way to cut down on expenses. However, self-management does not necessarily mean greater profits. Let’s break down all of the landlord duties that a property manager could handle, so you can see which option is best for your property goals.
It would be lovely to always find the perfect tenant that will treat your home like it’s their own. That rarely happens. Renters are notoriously harder on a house than owners, because they don’t own it and are not invested in its upkeep. Self-managing will require managing routine and emergency maintenance to keep the property in shape.
You will need to schedule seasonal and annual maintenance to check things such as appliance are functioning properly, check for water leaks, rust and ensure mold is not sprouting, pests are under control and tenants have no violations like a pet, smoking or unauthorized marijuana plants. Good maintenance will maintain your property and enhance your bottom line.
You will also need to respond to emergency maintenance from your tenants, which can come at any time of day, night or on a weekend. While property managers have contractors on speed dial, it can be more difficult to get a busy repair person to respond to an individual property owner. They will likely prioritize a company with numerous units first in the repair cue.
When a rental property is vacant, a vacancy is upcoming, or worse case scenario your tenant quits the property with no notice, you need to get the next tenant lined up quickly. Often there is extra cleaning and maintenance that needs to be done before the unit can be shown or rented. Finding your next tenant involves more than just putting an ad up on Craigslist. In fact, Destination Maui Realty uses Craigslist very sparingly and carefully due to the amount of scammers on the platform, and instead has a broader media mix to attract tenants.
There is also the time involved talking with prospective tenants and meeting them at the property for showings (and waiting for the many that don’t show up). You will need to collect rental applications, complete tenant screenings and approve your future tenants, within the parameters of fair housing laws.
Good tenant screening helps ensure a quality tenant. As part of this process, you should look at a rental applicant’s credit report, criminal history and eviction history, verify income and call references and past landlords.
Did you know that your rental application must disclose that you will be conducting a credit check, and the applicant must acknowledge this by signing the application? In an advertisement, you cannot use the word “family,” as in “large home with room for the whole family,” as it might be perceived as discriminatory against those without families? There are many points of law, including those specific to Hawaii, regarding housing. A property manager will likely be better informed than a homeowner in these areas.
A good manager will check in with their tenants periodically. This check-in can be regarding seasonal maintenance reminders or asking if everything at the property is working well.
Sometimes a tenant will call you with a legitimate complaint. Other times, you will get calls for things that should be the tenant’s responsibility to handle, like “the neighbor across the street plays music too loud.”
You will be your renter’s point of contact for anything related to your property, at any time.
Rent collection seems easy. You receive a check and deposit it.
But what if the check doesn’t show up? That’s time you have to spend calling your tenant, listening to their excuse and waiting extra time to get your money. What if the tenant lies about the check being in the mail? What if the mail carrier misdelivers the check but your tenant is on vacation and can’t send a new one?
All the “what ifs” that go into rent collection can typically be managed with an online rent payment software, but if a tenant misses a payment, you will still have to figure out what happened.
You will be responsible for making sure your renters follow the lease terms. If you find out a tenant is breaking the lease, you need to follow Hawaii rental law regarding a Cure or Quit and Pay or Quit notices, which gives a renter to option to fix a lease violation or you will move forward with an eviction.
Other Landlord Duties
The chores listed above are just some of the duties you will face when you own rental property. Others include conducting inspections, then determining how to remedy tenant deficiencies, raising rent, paying GET, property taxes and insurance. Probably the largest time consuming headache is when you have enforce lease compliance or evict a tenant. If not handled properly, the process could drag on and be very contentious.
Benefits of a Property Management Company
Property managers have made a career of understanding the rental industry. Most importantly, they understand rental law and what it takes to meet federal Fair Housing laws and other state statutes. Property managers are usually connected to the industry through associations and professional groups that give them updates on rental law and policy changes. Destination Maui Realty has been in the property management business for over 40 years, and all property managers are also licensed real estate agents.
Self-Management Vs. Property Management: Which Is Right For You?
Property management companies charge a percentage of the monthly rent to manage your properties to handle a range of issues. Note hard costs such as replacing an appliance or having a contractor make a repair is extra, but the time involved making these arrangements should be covered.
You need to decide how much you value your time. For a low maintenance tenant, a monthly fee might seem like a lot.
However, if you get a barrage of tenant calls, your tenant constantly complains about property upkeep, is late on their rent or does any lease breaking activity, that could require hours of your time a month. Suddenly that fee seems very reasonable.
Understanding all of the responsibilities of property management will help you decide whether to go it alone or hire a professional. Having your property well taken care of should drive your decision. If you would like a complimentary property review from one of our expert property managers, please contact us at firstname.lastname@example.org.