The Ultimate Guide to Property Management for the San Diego Area
A property owners guide about the role of a property manager and making intelligent property management choices
Table of Contents
1. The San Diego Rental Market
Thinking about purchasing rental property in San Diego or already have a few under your belt?
You’ve made the right decision!
The San Diego rental market is uniquely positioned compared to that of other large cities in the U.S., and some might say that’s a glaring understatement. The Southern California housing market tends to drive trends that affect the entire nation, and San Diego County is a special little microcosm that greatly affects those trends. Many housing analysts closely watch our market with bated breath to uncover potential statewide, and even nation-wide, trends that could emerge.
San Diego’s market has been shown to perform a 6 percent year-over-year rise in median sales price and a 6 percent rise in median rent per month, according to Trulia. In fact, median San Diego home prices have currently soared to $515,000 on average, as of February 2017, while home rental prices have hovered at $2,750/month.
The San Diego Chamber of Commerce revealed in its detailed 2016 report analyzing the housing market, that the continuous increase in San Diego rents in recent years has made the region one of the most expensive places to live in the nation.
“Renting in San Diego requires 35% of income, which is more than the areas of Mountain View, San Francisco and Santa Clara. While these markets have higher rents, they also experience much higher incomes that make rent more affordable compared to San Diego, as well as Orange and Los Angeles counties,” the study reported.
And although this could seem a bit doom-n-gloom, it should be noted San Diego is not nearly as expensive as Santa Barbara County, where a tenant’s rent will gobble up 48 percent of their monthly income. Santa Cruz County, is a close second with 41 percent of median income on rent, said the most-recently available U.S. Census data from 2014.
It’s safe to say: your San Diego property is (or could be!) worth its weight in gold. And truth be told, as we know, San Diego, Calif. doesn’t even have to try very hard to earn its spot as one of the country’s most sought-after locales for those dreaming of a true California Dreamin’ experience. America’s Finest City effortlessly exudes beauty and class, which is why many property owners are smart to protect the value they worked so hard to attain.
2. San Diego Housing Market Influences
If we look to make some sense of it all, there are several factors over the years that have influenced local property owners and their tenants. San Diego Union-Tribune reported summer of 2016 that sales dipped 11.3 percent year-over-year across Southern California. It was the largest annual decline for any month in nearly two years, they noted.
“Mark Goldman, finance and real estate lecturer at San Diego State University, predicted the county median would reach its 2005 peak by next summer. He said the recent slowdown was the sign of a more sustainable market. ‘The market has been just so hot, it’s just recouping a bit,’” Goldman noted.
If we look at that report from the San Diego Chamber of Commerce again, it highlights “the disproportionate construction of new homes and apartments in the city of San Diego compared to the rest of the county.”
Leading up to 2015, the last 20 years or so in the city has seen the City of San Diego constructing 41 percent of new housing units, while cities such as Poway have only contributed less than 1 percent.
If we boil down the recent housing reports to understand how it affects property owners—whether that be single-family homeowners, investment property owners or multi-family property managers—one thing is glaringly obvious. Your property is precious and will be in high-demand once it hits the market, and that’s not going to change anytime soon. In other words, the lack of new housing is creating a scarcity, which means property values in San Diego will continue to rise.
“‘You’re going to have to be traveling pretty far for housing,’ said London Group Realty Partners principal Nathan Moeder, whose firm authored the report.”
Perhaps the most-urgent aspect of the report is the Chamber’s call to action: “The study predicts an economic crisis with a lack of housing that will lead to even higher housing costs and employers having difficulty recruiting workers. Additional issues could be baby boomers who own homes having difficulty finding homes to downsize to, and millennials moving out of the area to find single-family homes, as reported by San Diego Union-Tribune.
Therefore, marketing your property to potential renters will be increasingly more important as you determine what makes a property valuable to a potential renter. The city is unsure how to build more properties to sustain its growth, and is equally unsure of a best manner to sustain workers with new jobs. All this bumbling gives property owners the Midas’ touch: your property is ironically golden in the Golden State. Despite these limitations, San Diego continues to grow by leaps and bounds, and this only benefits investment and rental property owners.
3. Evaluating Your Rental Property’s Value
Owning a rental property in San Diego is, as we have shown, a valuable, lucrative endeavor. If you are thinking about leasing your property or purchasing an investment property, here are some solid tips on evaluating your rental property’s value in one of the most expensive markets in the nation...
1. Location! Location!
One of the reasons so many flock to this gorgeous city is the weather, the beaches, that SoCal lifestyle. There are many neighborhoods—such as Pacific Beach and Bird Rock—that are in high demand. Trulia reports Pacific Beach area has experienced a 20 percent increase in home sales, which dwarfs the city’s overall growth by 4x.
Greater San Diego neighborhoods such as Allied Gardens, Talmadge and College Area, all encourage students and University workers to flock to those areas, which may make turnover a problem, but with a solid property management company by your side, this won’t be an issue. Good news: there will always be new college students in these areas.
San Diego State (SDSU) reports, “One in seven adults in San Diego who holds a college degree attended SDSU.” We can assume that this trend will only increase as time moves on. There are no new plans for a new state college in the county, so SDSU will continue to be an important hub in the city’s housing ecosystem.
Now, even if your property doesn’t have the beach nearby or a college, as long as you’re in a desirable neighborhood with very few rental properties—you're likely to be a competitive property that can command a higher rental price.
Since locale is an important indicator of how much your rental property is worth to a potential tenant, it can be helpful to highlight amenities that are unique to your locale, even if it’s not surf and sand.
For instance, if your property is in the city, highlight parking options, as this is an area of concern for many rental property seekers that head to Downtown San Diego. By the beach, in Del Mar or La Jolla, highlight the centrality of the beach-city-country paradigm and how you get the best of all the beauty the county has to offer. Or, if your property is in a more rural area, highlight amenities nearby, such as potential high-profile employers, grocery stores or movie theaters. Even though renters seeking rural properties may desire a quiet, peaceful area to call home, they may merely be seeking a low-cost living... while still living the San Diego dream.
2. Jobs & Commute
In San Diego, the words job and commute are intrinsically connected. A classic San Diego conversation goes, “Where do you work?” “Oh, Qualcomm.” “Nice, how long does it take you to get to work every day?” “I’m close! Just a 30-min commute on average!” This is a common exchange around town, and it’s meaningful to property owners (current or potential) in two ways:
One, this connection can be a valuable insight when deciding if a rental property is ‘good,’ and this can help you value the property you’re considering leasing. Meaning, if you have beach property, also highlight how long the commute is to nearby job areas.
North County is about to experience a job boom, according to the Chamber of Commerce, so San Diego property management companies marketing your property typically highlight new business growth or large employers nearby. This is a great way to help connect the dots for potential investment property seekers, like you, so you can market more effectively to the tenants you desire.
SANDAG’s 2050 Regional Growth Forecast projects, “the region’s population will grow by nearly one million people by 2050. This forecast is consistent with previous expectations although future growth rates have been reduced due to increased domestic migration out of the region. The growth in population will drive job growth and housing demand within the region – adding nearly 500,000 jobs and more than 330,000 housing units by 2050.”
This is good fodder for property investors of all kinds. Showcasing your property’s value in terms of jobs nearby is an excellent metric for determining whether a property is a good rental, or not. And if the commute is manageable to said jobs, make sure to make note!
3. Family First
Families, according to a 2011 report via the County of San Diego, Health & Human Services Agency, Public Health Services, Community Health Statistics Unit, comprise roughly 340,000 of the city’s population, with 27.9 percent being single parent families—which is a sizeable market that deserves some special attention in terms of marketing a good property to them.
You can be certain that families looking to lease your home are interested in the schools nearby. Areas such as Poway, Del Mar, Scripps Ranch and Carmel Valley are home to many of the top elementary, middle and high schools in the County. Families have two incomes and make excellent tenants for this reason. If you choose to market your property to families do a bit of research on your area's schools. If the property you are leasing is located in a school district with poor ratings, your property may not be as attractive for families. On the other hand, if the property is in a school district with high ratings, you will have more interested families come to look at your property—and you may be able to increase the rent.
These are just a few tips to get you moving in the right direction, but there are many more insights on what makes a valuable rental property, such as HOA fees, amenities, the condition of your property, property taxes and much more.
4. The Role of a San Diego Property Manager
Securing a professional property manager through a reputable property management company will be the gift-that-keeps-on-giving. As we explore the San Diego rental market more, we have learned a great deal about the uniqueness of America’s Finest City’s real estate. If you’re still reading, we also assume you have a desire to begin leasing your property or purchasing an investment property.
Here are some of the key benefits of a property manager (or a property management service):
- Advertising the property and securing new residents
- Conducting background checks and drafting the lease terms
- Renovating and maintaining the property
- Responding to emergencies
- Finally, collecting rent payments and, if necessary, evicting troublesome residents
Also, California state laws require high standards regarding rental property maintenance. It’s imperative to choose a property manager who is well-versed in these laws and has experience upholding them—something a Property Management Team can deliver.
Property management firms tend to take two approaches: hands-on and desk-managed. Here at PropertyADVANTAGE, we like to take a hands-on approach. Some of the key tenets you should look for in a property management firm are two-fold:
No. 1—Make sure they’re accessible. Good property managers are always ‘on’ and can respond within a day or so—and they’re happy to give you their cell number and a myriad of options manage communication—reliably.
No. 2—Seek a property management firm that can successfully and effectively monitor repairs. A reputable company should be able to share a list of their preferred vendors or trusted partners they work with. Feel free to check on references after your interview a San Diego property management company.
Repairs and maintenance are immensely important to anyone renting out their investment property—it just might be your nest egg for the future, which makes it precious cargo, as they say.
Some of the best services a property management firm can offer are the following:
- 24-Hour Emergency Response. If your tenant experiences a major emergency, such as flood, fire, or any other horrid, messy disaster, scoring 24-hour emergency response is a huge plus and helps maintain tenant satisfaction. It can help alleviate the damage of a disaster sitting for more than 24-hours without attention being paid to it.
- Tenant Online Maintenance Request Forms. Many modern property managers in more millennial-focused properties offer online maintenance forms where tenants can merely login via their smartphone or laptop and request immediate maintenance online.
- (Full-Service) Preventative Maintenance Program. Make certain your potential property manager has a licensed contractor managing maintenance—you know, someone who knows everything that needs to be done to keep your buildings shining like the star they are. By protecting and proactively maintaining your property, you not only will hopefully require less pricy emergency repairs, but more importantly, your property will look fantastic. This is like a beacon of hope to those rental-seekers.
- Varied Contracting Services. Whether it’s a heating or cooling issue, or a minor repair or a clogged toilet, it’s integral that your property manager has a plan of attack for anything that could (and may) go wrong. From paint, to drywall repairs, ceiling cracks and leaks, new locks or replacement keys for lost ones, plumbing and electrical issues—make certain your property manager has someone on-hand that has the right skillset to make the repair a success.
- Exterior Services. According to Kingsley Associates of San Francisco, there are proven ways to achieve low levels of tenant turnover. Since 1985, Kingsley has been surveying commercial and residential tenants on their likes and dislikes about properties and have found that, property managers should treat the building as something that “will be around for a long while, well beyond the first lease term. If an issue looks like it is being deferred or neglected, it is a major red flag for the tenant. We all know that budgets are tight and there are priorities, but be careful that it is not an obvious overdue issue that the tenant will recognize and react to negatively.”
This is probably a no-brainer to most investment property owners, but making sure the exterior is landscaped nicely, freshly painted, and has trash cans around to avoid debris being tossed about are other important services your property management firm can offer.
Find the best property management company to work with by asking the right questions!
One of the stickiest issues that a rental property owner could experience with their tenants is an eviction—and California has some of the strictest eviction procedures. As noted, a San Diego property management company will know how to comply with those procedures to ensure the resident is evicted in a timely manner—and legally! Learning the ins-and-outs of California Renters’ Rights and the Fair House Act might be difficult to do on your own. In the end, if your time is as valuable as your property, you should be commit yourself to the idea of managing it properly.
5. How a Property Management Company Prepares your San Diego Rental Property for Tenants
Many investment property owners in San Diego have to contend with a lot of competition amongst ever-changing economic trends. The San Diego Union-Tribune reported in 2016, “About 52.2 percent of San Diego County residents owned their homes in 2014, according to the U.S. Census. The homeownership rate was about the same in 1950, but it rose to 58.6 percent in 1960 — the highest in San Diego’s recorded history of homeownership.”
This helps us understand how volatile and fluid the San Diego rental market is, now and historically. And this leads us to offer three important reasons having a San Diego property management firm manage your investment is your best chance for attaining and keeping excellent tenants.
How a Property Manager Determines Fair Market Rental RatesAffordability and a tight real estate inventory is keeping many San Diegans bound to renting versus owning.
“About 24 percent of San Diego County renters, who have strong credit scores and high incomes, can afford to buy a home but aren’t jumping into the market because of intense competition among qualified buyers for fewer and fewer properties, says a recent study from real estate website Zillow,” as reported on by the San Diego Union-Tribune.
Many cities have very high occupancy rates, and San Diego’s is one of the highest in the nation, so it's difficult for residents to secure alternative housing. For example, the two factors most respondents to the aforementioned Kingsley Associates and MFE survey listed as primarily influencing their decision were the rental rate and location.
"24% of San Diego County renters can afford to buy a home but aren’t jumping into the market."
A property management company in San Diego can work with you to determine a fair market rate for your property. With this knowledge in your pocket, you can prepare your property for tenants knowing you're not charging too much (or too little) for your property.
A property management company can accomplish this for you through the process of a Comprehensive Analysis of Fair Market Rental Rates. PropertyADVANTAGE offers complimentary property consultations, designed to answer your questions and offer advice about maintaining your property, as well as maximizing your rental income in the San Diego County rental market.
We ask what your current mortgage cost is on the property. We use this to help us factor the value of your property.
We use your property’s physical address to aggregate rental costs in your neighborhood with a third-party service called Rentometer.com.
We take the estimate created by Rentometer and use a proprietary formula to add-in the value of your property’s amenities, or detract if there are less amenities than surrounding areas.
For instance: If your property is in Downtown San Diego, having an in-unit washer/dryer is a huge plus. Having an on-site, shared laundry facility is a decent amenity while having no laundry on-site whatsoever is going to detract from your value. Renters are seeking convenience. Highlighting the amenities that makes your property special and unique is never a bad idea. But remember: property managers do this day in and day out, and have their fingers on the renter’s pulse. They know what San Diegans value—on-site laundry, ample parking, access to freeways, safety, good schools nearby, to name a few.
We also use the Zillow free tool, ‘Zestimate,’ which offers property managers a great view of the real-time rental market value of a given neighborhood as another point of reference.
We compile and aggregate information from your neighborhood, your amenities, your mortgage cost, Rentometer’s estimate, Zillow’s ‘Zestimate,’ and get to the best rental rate which will attract qualified tenants and help retain them.
6. Property Managers Offer Much-Needed Maintenance Repair Recommendations
As the owner of a multi-family, single-family or major investment property, you’re probably already aware that you will be responsible for all maintenance and repair services. If something goes wrong or any part of the property is damaged, the residents will expect you to have it fixed as soon as possible. It's part of what they are paying you for. In order to prevent breakdowns and damage from occurring, you'll have to perform regular maintenance; for example, scheduling yearly tune-ups of the HVAC system, fix the railings that wobble going up stairs, and perform exterior inspections after winter rain to check for damage.
California Tenant Law notes, “A dwelling also may be considered uninhabitable (unlivable) if it substantially lacks any of the following:
- Effective waterproofing and weather protection of roof and exterior walls, including unbroken windows and doors
- Plumbing facilities in good working order, including hot and cold running water, connected to a sewage disposal system
- Gas facilities in good working order
- Heating facilities in good working order
- An electric system, including lighting, wiring, and equipment, in good working order
- Clean and sanitary buildings, grounds, and appurtenances (for example, a garden or a detached garage), free from debris, filth, rubbish, garbage, rodents, and vermin
- Adequate trash receptacles in good repair
- Floors, stairways, and railings in good repair”
Any one of these factors makes a strong case for securing a full-service property management company. America’s Finest City offers residents a massive rental swath to choose from. Keeping existing tenants happy and retained, while also making your units presentable and desirable to future tenants is a key ingredient to avoiding potential headaches turning into migraines.
Property Managers Know Who to Call
Situations requiring reasonable modifications or repairs can run the gamut. Did the unexpected winter storms (rare for San Diego) damage your roof? Did one of your tenants suddenly become wheelchair-bound and now needs a ramp installed? These are a just a few scenarios. So, who do you call? (hint: not Ghostbusters) And is the repair even your responsibility? (pro tip: read California Civil Code). Those are just a few questions a property owner might wonder about.
At Property Advantage, we have years of experience understanding California Civil Code as it pertains to renters’ rights, as well as what repairs fall under the Fair Housing Act, and we work hard to manage expectations before an issue surfaces. We have a stable of trusted maintenance contractors and consultants whom we trust and have excellent references for. A great property management firm can offer this approved vendor list to you upon signing a rental agreement and it will truly be a lifesaver for not only you as a property owner, but most importantly, your tenants.
For instance, we do a full property inspection as part of service package. As your management company, we aim to avoid unpleasant and costly problems for your investment, which is why we have certain requirements when properties transition between tenants.
- We have the same "clean" standards for all properties and require vendors to follow these standards. This applies to both inside and outside of the unit.
- Unless unnecessary, we have a professional cleaning of properties so that we have documentation to support the security deposit disposition when the tenant moves out.
- We use reliable vendors to complete the professional cleaning.
- We document the condition of the property before the tenant moves in, and again when the tenant moves out.
- We notify tenants when they move in what the expectations of cleanliness are when they move out.
If time is money, and you don’t have a ton of time, you can see that even this short five-point process is highly time-consuming. Managing the coordination of maintenance exceeds the mere cost of it oftentimes. Using a property management company means you’ll be tapping into a lifeline that knows the real estate market and what it takes to secure reliable, long-term tenants.
7. Property Managers are Trained in the Art of Attracting Tenants
Creatively marketing your vacancy seem simple, but you’d be surprised at the difference between a DIY property listing, and a property management company’s listing description. Let’s compare a couple listings we noted on Craigslist for a couple San Diego neighborhoods that command a high rent, Normal Heights and North Park areas.
Another facet of attractive and effective listings are the photos.
There is a huge difference between using professional-grade property photos and... your iPhone. Realtor.com reported, “In an internal case study, IMOTO—a company creating real estate photography for both sellers and realtors—compared 350 listings using their professional photography against 350 similar listings in the same ZIP code.
Professional photography helps properties rent 50% faster!
Listings using IMOTO’s professional photography sold 50% faster and 39% closer to the original listing price than similar homes without professional photos. The statistics department at Latter & Blum, a New Orleans-based real estate agency, also found listings using IMOTO’s professional photography were viewed 118% more than comparable listings. If it works for selling houses, it works for renting properties too!
At Property Advantage, we use an equally fabulous San Diego-local photography firm to take images of every property we manage. We too have noticed a lift since utilizing the service ages ago. We offer professional photos at no added cost for all properties we manage.
Another way your property manager can help you rent faster is in the way they list your property. Of course, Property Advantage has a listings microsite but we don’t stop there. How will folks find your property if it’s only listed on your property management firm’s site? We believe in the age-old dictum: More is better. Listing your rental property on 30 or more sites is important and sometimes necessary to reach more qualified tenants.
We write extensively about the process of finding a tenant often. Where you choose to advertise and how you choose to advertise, affects the prospective residents you attract. Property management companies always ask the following which have a huge impact on a prospective tenant:
- Why is the person looking for new housing? If they're moving because of conflicts with a previous landlord, or because they're being evicted, this is an obvious red-flag.
- When does the person want to move in? A short period of time may indicate poor planning skills, while a long period of time may indicate that they're not in the decision-making phase of their search yet.
- Can they offer references from previous landlords? Ideally, you'll want more than one landlord's reference, not just the most current one.
- How many people will be living on the property?
- Will they submit to a credit check and criminal history check?
One of the trade secrets of property management companies is that applicant checks are rigorous, and absolutely standardized, to avoid discrimination and increase the opportunity for a top-notch tenant.
Here’s an example of a listing we’re promoting on our site that really includes all the qualities we’ve been hammering on. See below:
Show-and-Tell Isn’t Just for Kids, But It’s Time-Consuming for Adults.
Showing your property in endless open house scenarios is a great way to not only kill your social and personal life, but your patience, time and money, too. Many DIY-ers think they can hack the system and find a qualified tenant without trying too hard. But property showings are emotionally draining, fraught with no-shows who further waste your time and require you to give up your weekends until you find that perfect tenant.
To make them worth your while, you have to first spend 10-20 minutes on prospecting calls for those who want to schedule or show-up at your showing. Depending where you live in relation to your investment property, you may have to drive 5 to 50 miles, let’s say, and then wait around for your prospective tenant to show, then if they show and like what they see, they must fill out your application. Typically, they’ll return that to you later, or give it to you by the end of the day, etc.
No matter which way you slice, just this part of the property showing process alone can eat up most of your day. Now, think about doing that 4-10 times per day, all while maintaining your composure, your charm, your patience. And on that note, think about performing this process all week-long with no results.
8. How Property Managers Thoroughly Screen Potential Tenants:
The California Department of Consumer Affairs offers property owners and tenants a myriad of resources on how to screen potential tenants, and conversely, what’s legal for property managers to ask or request from potential tenants during the screening process.
There are several steps that property managers take during the tenant screening process. The first step is acquiring a rental application, which includes a Credit Report screening request. Property managers typically utilize the potential tenant’s credit information to decide on whether to agree to sign a lease.
According to the Department, “A landlord usually doesn't have to give you a reason for refusing to rent to you. However, if the decision is based partly or entirely on negative information from a credit reporting agency or a tenant screening service, the law requires the landlord to give you a written notice stating all the following:
- The decision was based partly or entirely on information in the credit report; and
- The name, address, and telephone number of the credit reporting agency; and
- A statement that you have the right to obtain a free copy of the credit report from the credit reporting agency that prepared it and to dispute the accuracy or completeness of information in the credit report.”
What you should also know about requesting applications is that you also have the right to perform a criminal background check and call prior landlords or property owners and managers to see if there’s also an eviction history, which San Diego property management companies routinely do. Credit, Eviction and Criminal background checks are all important pieces to the screening process but each check requires knowledge of California Civil Code Laws, as well as Fair Housing Laws.
CURRENT NEWS & LEGISLATION THAT AFFECTS PROPERTY MANAGERS: California Bill Making Criminals a Protected Class Fails
And here’s why you should care:
In 2015, The California State Legislature introduced AB-396, which sought to amend §12955 of the Government Code to include a criminal record as a basis upon which housing discrimination is prohibited. This means property managers would no longer be allowed to perform criminal background checks on potential renters. The Resident Screening Blog wrote, “In what should be viewed as a big win for the rental industry, the bill AB396 [...] has been officially shelved for the remainder of the year.” Property owners breathed a collective sigh of relief but in 2015, the following revisions to the bill were introduced:
"The owner of a rental housing accommodation may disclose to the applicant, on the rental housing accommodation application, the policy and screening criteria that the owner uses in deciding whether to rent or lease to an applicant with a criminal background. The disclosure shall include a written disclosure that the applicant may provide evidence demonstrating inaccuracies within the applicant’s criminal record or evidence of rehabilitation or other mitigating factors."
The most important thing for you to remember, is that no matter what: You as a property owner are responsible for what your property manager does or doesn’t do. That’s why it is so important to work with a company that understands the laws and will protect your interest like Property Advantage.
In a recent report by the Housing Equality Project of Silicon Valley, the reminder is clear: “If they break the law, treat tenants unfairly, or discriminate, you could get in trouble, regardless of whether you approved or knew of the discrimination. You should make sure that your property manager and staff are properly trained, especially about fair housing laws.”
More on background checks: Eviction screening
Eviction is one part of the background screening process your property manager should be vetting potential tenants for. California has strict guidelines for eviction, and these guidelines are more ‘pro-renter’ in design. That being said, not all evictions are created equal. For example, according to the California Dept. of Consumer Affairs, a landlord can properly serve you with a 30-day or 60-day notice to terminate your tenancy, and although they’re not required to state a reason for giving a 30-day or 60-day notice, most landlords do have a reason for terminating a tenancy. Here are most of the reasons a landlord can use to begin the eviction process here in California:
- Failed to pay the rent
- Violated any provision of the lease or rental agreement
- Materially damaged the rental property ("committed waste")
- Used the rental property for an unlawful purpose
- Substantially interfered with other tenants ("committed a nuisance")
- Committed domestic violence or sexual assault against, or stalked another tenant or subtenant on the premises
- Engaged in drug dealing, unlawfully used, cultivated, imported, or manufactured illegal drugs
- Using the building or property to conduct dogfighting or cockfighting
- Unlawful conduct involving weapons or ammunition
DO YOU KNOW?
The Ins-and-Outs of Tenant Screening Law.
When your property manager begins the background screening process, they’ll gather a potential tenant’s Social Security number, last known address and driver’s license number to conduct a background and a credit check. But there’s some rules surrounding this process on a more granular level.
“According to the Fair Housing Act, it's strictly illegal to use this information to discriminate. It's also illegal to screen according to a tenant’s ethnicity, race, language, color, sexual orientation, marital status, gender, age or disability,” reports the SF Gate. “If the eviction stems from any of these above factors, it's wrongful and can be prosecuted as a civil matter. An overturned eviction on these grounds must then be expunged from all tenant reports.”
How property managers screen potential tenants, while upholding fair housing laws.
Fair Housing Laws make it illegal to discriminate against potential tenants for rental housing, tenants, or homebuyers in housing. Throughout this section, you’ll understand better how these fair housing laws work and ideas for how San Diego property management companies handle special situations. Of course, this advice should never replace the support of a legal professional or attorney, but you’ll hopefully be able to better grasp the intent of Fair Housing laws and how they work to keep tenants safe and property owners stay legal.
9. Understanding California Fair Housing Law
The Federal Fair Housing Act protects against several categories and/or groups but California protects six additional special traits: sexual orientation, gender identity and expression, source of income, marital status, age, and arbitrary characteristics.
How to Facilitate Tenant Screening While Abiding by California Fair Housing Law:
The first part of the process of renting your property is placing an ad online to advertise the rental property to potential renters. According to a report by the Housing Equality Project of Silicon Valley, “You can ask that tenants make a certain amount of income, have good credit, and do not have a criminal background. However, you can’t say that you prefer a certain group of people in your advertising.” For instance, even something seemingly benign, such as noting the limitations on how many can reside in the property, can be construed as discriminating against families or single parents with children.
PRO TIP! It’s best to advertise in more than one place. For example, if you choose to place an ad in a Mandarin or Spanish-speaking newspaper or untranslated on Craigslist, you may be showing an illegal preference for potential tenants who speak that language or have that ethnicity. In the spirit of this example, make sure to cover your bases and translate the ad for English-speakers, too.
The next part of the process involves showing the property to interested prospects, and interviewing prospective tenants. At Property Advantage, we understand the intent of not only Federal Fair Housing Laws, but California Fair Housing ones, too. We understand that during the background screening process, you can’t ask applicants whether they’re U.S.-born citizens, legal residents, or undocumented immigrants. We adhere to these guidelines and laws incredibly closely because we understand that our job is to protect you, the property owner, we contract with, and keep their tenants content. At the end of the day, we understand that you’re responsible—no matter what.
PRO TIP! As a property owner, you can protect yourself beyond the shield a professional property manager by getting involved in associations for property owners or investment property owners. To name a few, consider the California Apartment Association, the Rental Housing Network, the Rental Housing Association, and the National Association of Rental Property Managers. These organizations provide free or low-cost training and some of them also provide technical assistance, plus their annual or quarterly gatherings are a great way to see what recent legislation has been passed regarding housing and network with likeminded folks. For instance, The California Apartment Association offers site visitors free search on its Knowledge Base microsite. Here, the association has compiled all its most useful forms, white papers, and frequently asked questions into this consolidated knowledge base.
After a property manager shows-and-tells a bit, the application process may start. Oftentimes, during a showing, a prospective tenant may take the application with them—but they may choose to fill it out and apply right away. Before a savvy property manager moves forward with next steps, they’ll ask: was this prospective tenant a person with Limited English Proficiency (LEP)? Unless the property you’re showing is approved under a federally funded housing program, you do not have to have a language access plan for oral and written communication to ensure meaningful access for applicants and tenants with LEP. In fact, translation is not required for standard non-funded rental properties but according to the law as it stands, you must allow tenants to choose a translator of their discretion, even if it’s a friend or family member.
PRO TIP! Also important to know, if your property manager spoke another language to the prospective tenant, such as Spanish for instance, it would be wise to have on-hand a rental application that’s also written in Spanish. Remember, renting only to people that speak the language you speak is likely to be considered discrimination because it could show that you prefer tenants from a certain racial or national origin background(s), according to California Fair Housing Laws. Learn more about Fair Housing restrictions on our blog here.
At PropertyADVANTAGE, we understand that a property manager cannot deny a potential tenant’s application for any person who is protected by state and/or federal Fair Housing laws. Below, we are providing most of the main categories that are protected by these Fair Housing discrimination laws:
- Ethnic Background
- National Origin
- Familial Status, which includes:
- pregnant women
- families with children
- the age or sex of the children
More Guidelines can be found: Cal. Fair Housing and Employment Act, Cal. Gov’t Code § 1200 et seq., Fair Housing Act, 42 United States Code § 3601 and et seq., Cal. Civ. Code § 51.
Understanding ‘Reasonable Accommodation & Modification’ Guidelines, According to California Fair Housing Laws:
First thing first: what does reasonable accommodation or modification actually mean?
A “reasonable accommodation or modification request” is when a disabled tenant asks for a change to help them live in your property. Oftentimes, the reason a disabled tenant’s making such a request is because it might violate your rental agreement for them to perform the modification without permission from the property manager or owner.
For instance, tenants bound to wheelchair, or a walker, may ask to be assigned closer parking spaces to make it easier for them to get to their units, or install a ramp, or additional railings on the property or in the shower stall area to prevent a fall or injury from falling. The Guide to Renting and Managing Property: The Fair Housing Way explains further, “Other common requests for reasonable accommodations include requests to transfer to a different unit, for permission to keep an emotional support animal, for an early release from a lease agreement without penalty, a “second chance” after the tenant violates a rule or lease provision because of a disability, or for permission to have a live-in caretaker.”
The Rules of Engagement: Handling Modification Requests
Choosing a professional and experienced San Diego property management company is an important undertaking as a property owner. Oftentimes, there’s so many rules and regulations in California, it’s best to have ‘backup’ and know you have someone looking out for your best interest.
For example, regarding reasonable modification requests, Property Advantage would like to remind you of a couple important things:
1. Whether it’s in writing or in-person, once your tenant makes a modification or accommodation request, you or your property management brokerage must answer the request in a timely and meaningful way—usually within 3-5 business days.
2. You can’t ignore the request, or wait too long to answer the request.
3. You must provide a reason why not: you can’t simply say “no” without explaining why.
4. Homeowners could get sued simply because they did not respond to a reasonable accommodation or modification request within a reasonable period of time.
HOW PROPERTY MANAGERS EXECUTE RENTAL AGREEMENTS SUCCESSFULLY
Obviously, this section has focused strongly on the legalities involved with vetting and acquiring a new tenant. The most exciting step is when your potential tenant signs your lease agreement and you contract together. But, as with screening, the lease itself must be executed in the right way. As we here at Property Advantage noted on our blog recently:
“A report released by the City of San Diego found that 72 percent of housing discrimination cases name the owner as the perpetrator. Both the Federal government and California impose anti-discrimination laws, the Fair Housing Act (FHA), and the Fair Employment and Housing Act (FEHA), the California supplemental to the FHA. The FHA and FEHA both impose obligations on property owners to advertise, manage, and lease their properties in a certain way. Violation of either law could land you in a serious lawsuit that could cost you thousands of dollars (and may even subject you to an investigation by the Department of Housing and Urban Development (HUD) or the State Department of Fair Employment and Housing (DFEH). Essentially, you want to avoid any violations that involve one of the ‘alphabet soup’ government agencies.”
So, how do you avoid inadvertently landing yourself into deep trouble? Great question. (We even included a handy infographic here from our guide that explains the difference between hiring a property management company us, and doing it yourself.) We’ve already provided a variety of ideas to prevent discrimination and similar issues of disclosure during the screening process, but how do you make sure the lease agreement process itself is not discriminatory in any way? Here are several tips here that’ll help you make good decisions as you move on down the line.
- According to the California Association of Realtors (CAR), your rental agreement contract should identify the parties to the contract and should therefore include the owner’s name, unless you want your property manager to be liable for your property and the decisions that are made.
“If the property manager executes the agreement in her or his power as an agent for the landlord, and the lease agreement does not include any information about the owner or the fact that the property manager is an agent for the landlord, the practical consequence is that the property manager takes on a greater risk of liability to the tenant in any legal action. The property manager takes on the liability of the owner for performance of the owner’s obligations under the lease. Therefore, if the landlord, for example, fails to maintain his or her obligations under California law to maintain a habitable premise for the tenant, the property manager could be liable for that failure.”
- If you choose not to disclose yourself on the lease, and the only person named on the lease is your property manager then, the property manager will be deemed an agent for you, the owner of the property, for the following purposes, according to CAR:
- For the purpose of service of process and receiving and receipting for notices and demands.
- For the purpose of performing the obligations of the owner.
- For the purpose of receiving rental payments.
- When potential tenants are provided an application, and they then sign the application, and your property manager understands that this allows the broker the right to:
- Perform a credit check
- Verify the other information requested on the form.
- Confirm employment history
- Check prior residential information or rental history
- Call references
- During the screening process, your property manager will let potential applicants know the cost of the background check. According to California Department of Consumer Affairs, (Cal. Civ. Code § 1950.6.), California law limits the screening fee to an amount of $30.00 adjusted annually from January 1998 by any increases in the consumer price index (CPI). As of 2012 the screening fee can be $49.50 according to the Dept. of Consumer Affairs. If you wish to calculate the exact amount you can charge, you can use the CPI inflation calculator at the Bureau of Labor Statistics website, www.bls.gov.
- If a background check yields a poor credit history, unsavory references or a prior eviction judgement, your property manager may deny the rental to the potential tenant, or reject the application. In certain situations, the Fair Credit Reporting Act or FCRA affords potential tenants in this circumstance the right to receive access to the consumer report in question, as well as request an opportunity to dispute inaccuracies.
“However, if negative information is accurate,” explains Privacy Rights Clearinghouse Organization. “The landlord may have a legitimate argument for turning you down. Even if the landlord does not find negative information, the landlord may simply consider you a less worthy candidate than someone who, for example, has a higher salary or a longer work history.” For more information, see the FTC publication, Using Consumer Reports: What Landlords Need to Know.
KEY TERMS EVERY LEASE AGREEMENT SHOULD HAVE
Most rental agreements are written versus digital, but regardless, all leases should contain key terms, such as the following:1. Full names of the landlord and the tenant
2. Address of the rental unit
3. Monthly cost of the rent
4. When the rent is due, to whom it is to be paid, and where it is to be paid
5. Amount and purpose of the security deposit
6. Amount of any late charge or returned check fee
7. Pet Policy
8. Total number of people allowed to live in the rental unit
9. Whether attorney’s fees can be collected from the losing party in the event of a lawsuit between you and the landlord
10. Who is responsible for paying utilities (gas, electric, water, and trash collection)
11. Also, if the rental is a house or a duplex with a yard, who’s responsible for taking care of the yard should be noted
12. Any promises by the owner or property manager to make repairs, including the date by which the repairs will be completed
13. Other items, such as whether you can sublet the rental unit and the conditions under which the landlord can inspect the rental unit
In addition, your property manager is a winning asset, as they know your rental agreement or lease must disclose:
- The name, address, and telephone number of the authorized manager of the rental property and an owner (or an agent of the owner)
- Information as to whom is authorized to receive legal notices for the owner. (this information can be posted conspicuously in the building instead of being disclosed in the rental agreement or lease)
- The name, address, and telephone number of the person or entity to whom rent payments must be made
- If a tenant is required make rent payments in person, the agreement or lease must state the usual days and hours that rent may be paid in person
- Or, the document may state the name, street address, and account number of the financial institution where rent payments may be made or information necessary to establish an electronic funds transfer for paying the rent
Regarding Rent Collection:
Conducting the Walk-Through and Move-In Inspection
The next phase of the process in executing the lease agreement will be orchestrating the walk-through and inspection of the property. This commonly occurs at the same time of the signing of the actual lease agreement. At Property Advantage, we take the following move-in approach. In fact, we view it more like our grounding philosophy: When the property is clean upon move-in, you send a message that this is what you expect when they move out.
As your property management company, we want to avoid unpleasant and costly problems for your real estate investment, so we have certain requirements when properties transition between tenants.
- We have the same "clean" standards for all properties and require vendors to follow these standards. This applies to both inside and outside of the unit.
- Unless unnecessary, we have a professional cleaning of properties so that we have documentation to support the security deposit disposition when the tenant moves out.
- We use reliable vendors to complete the professional cleaning.
- We document the condition of the property before the tenant moves in, and again when the tenant moves out.
- We notify tenants when they move in what the expectations of cleanliness are when they move out.
During the walk-through and inspection, much of this can be explained to the tenant so they understand fully the expectations. During a walk-through, it’s also smart idea for you take photos of the condition of the total unit, inside and out. Make sure note any damage(s) to the unit. These inspections protect you and the resident. The inspection window is an important part of the process where the property manager and the tenant can become aligned on the status of the property before an agreement is signed, or before move-in. Move-in inspections ensure you and your resident agree on the condition of the rental which is integral for establishing an honest, trusting relationship.
10. How Your San Diego Property Management Company Oversees Your Rental
There are three pillars to the ongoing management of the property process:
- Maintenance Coordination, which involves securing preferred, trusted vendors for ordinary, standard repairs and also includes informing both parties (owner and tenant) of the correct contact numbers or processes for requesting maintenance.
- 24-Hour Emergency Service, and much like it sounds, this involves the management of emergencies, such as flooding, electrical, locks, break-ins, damages, etc.
- Annual Property Evaluations. Throughout this section, we will look at each management of the property pillar and examine best practices that your property management firm should be well-versed in, as well.
Maintenance Coordination 101
At PropertyADVANTAGE, we understand that you’re busy, and as property owners, we also know you probably do not have time to keep your property pristine. Performing routine maintenance at regularly scheduled intervals can reduce or eliminate emergency fixes. Utilizing a San Diego property management service can take the stress off as you will be off the hook for planning and executing preventive maintenance. Here we would like to share our process and philosophy for maintenance, which we funnel into three major areas, detailed below.
Coordinating Repairs and Maintenance Services
Having a firm maintenance program for your San Diego rental property is incredibly important. Whether you own a single-family home, duplex or multi-unit building, a scheduled maintenance program can save you time, money, and most importantly, a lot of frustration down the road—for both you and your tenants.
It just makes sense: A well-cared-for property helps keep constant complaints at bay. We sang this swan song in one of our recent blog posts and we stand by it: “A rental property will not attract and retain long-term tenancy – which translates to a better return on investment – unless it’s properly maintained. With the rental market constantly shifting, being prepared is the best way to keep your real estate on the market.”
24-hour Emergency Services
One of the greatest perks in utilizing a property management company or services, is having someone handle those 1:00AM frantic tenant calls when there’s been leak or a flood or worse, a fire. At PropertyADVANTAGE, we offer our customers a detailed Emergency Contact Plan which offers contact information for all our on-call, qualified maintenance staff for emergency situations—24/7!
We have built long-term, trusting relationships with our preferred emergency vendors, and should you choose to find a property manager to tackle this program for you, make sure you ask about their vendors and check them out. Also, another perk is that your tenant will receive quick, timely attention. After assessing the situation, your property management company should be able complete most repairs in a timely fashion.
Annual Property Evaluations, in Three Easy Steps
Scheduling periodic property evaluations help to understand the full breadth of your property, inside-and-out. Scheduling routine annual property evaluations is an excellent way to ensure your property is being maintained and kept to its highest standards. The best way to create a successful evaluation plan is to follow these steps:STEP ONE:
Every time a new tenant moves-in and moves-out, take photos of the entire property, each and every nook and cranny, inside and out. This provides your baseline. At PropertyADVANTAGE, we utilize a checklist for each room to supplement the photos and document accurately the condition of the entire property, room-by-room.STEP TWO:
We encourage our clients here at PropertyADVANTAGE to build into the lease an addendum that requests periodic inspections. This request needs to be laid out clearly in your lease agreement but it’s not uncommon, so your tenant will most likely not have any objections. As long as you are clear and transparent as to the timing and what you’ll need from your tenant to accomplish the evaluation or inspection, tenants are typically pleased that you take such pride in maintaining your property and will respect the effort.STEP THREE:
Don’t forget to check ‘under the hood’ of your property as well. Yes, you will want to document the overall condition of each room, but what about the appliances, plumbing, electrical, air conditioners, water heaters, thermostats and other home necessities? Make sure to have a building engineer or ‘repair guy’ evaluate these areas of the property as well. And yes, always take photos of these areas, too. Lastly, make certain that your walk-through addresses the condition of these areas and your expectations for keeping them up-and-running to your tenant.
Each one of these steps takes valuable time and energy out of your day, which is why partnering with a reputable property management firm can help keep your San Diego property in tip-top condition, while giving you less headaches. And it just makes good business sense! A well-maintained property attracts good tenants, fetches higher rents, and is valued more highly by your lender. These are all big wins for an investment property owner in San Diego county.
If you’re still reading, you know firsthand that maintaining rental properties takes a significant amount of work and sometimes, that’s the most challenging aspect to owning a property! It’s a big responsibility, both literally and figuratively. Plus, finding dependable renters is also challenging, too, as it requires many time-consuming meetings, focused research, background checks, and contract negotiations. Who’s got time for that?
At PropertyADVANTAGE, we specialize in handling all of these processes. We can help reduce the amount of time your properties sit vacant by sourcing good tenants and ensuring that properties are well-cared for day-to-day—so you have fewer major repairs and expenses over the life of your investment, and of course, more free time to enjoy the fruits of your labors.
Accounting Services: Understanding the Rent Collection Process
Creating a streamlined process for collecting rent each month is an excellent way to, well, get paid! But beyond merely getting paid, creating a process for collecting payment from your tenant is an important part of lease. Most lease agreements are setup to have the rent paid by the 1st of each month. Offering your tenants a couple different avenues for payment submission or various options for direct deposit and the like can help prevent late payments. The Balance offers the following logic, “Deciding on one or two ways in which you will accept rent payments will make it easier for you to track the payments and for you to know sooner who is behind on their rent.” Below you will find several methods for collecting rent, plus the benefits and cons of each method.
1. Face-to-Face Rent Collection
PROS: Many rental property owners are what we consider ‘old-school’ in their approach, but that’s not to say it doesn’t have its benefits. Some landlords request tenants leave the rent in a secure spot on-site for retrieval on the first of the month. Or they even schedule a time that they’ll come on-site to collect the rent face-to-face. The biggest benefits to this approach are that property owners A) know they’ll get their payment on-time, B) the property owner can avoid paying a servicer fee and/or getting mired in technical issues with a servicing program.
CONS: How many units do you have? This is an important point to keep in mind. If you own several multi-family properties, or single-family ones, do you have time to do this chore every month? Also, what if you don’t live close to your unit(s)? The task of driving monthly to collect rent may seem overwhelming to those who still work and are not merely using the investment property as pure income. Lastly, building such personal relationships with your tenants can backfire. It’s sometimes smarter to keep the relationship more professional in nature to avoid any potential issues.
2. Online Rent Collection Services
PROS: This option is becoming more popular, we’ve noticed at PropertyADVANTAGE. Especially with Millennial renters. This is probably due to the fact that collecting rent online is a reliable method as it goes directly into your account via a secure process. But of course, if you choose this route, make certain you clearly explain the process to your tenants. Provide all the necessary information so they can easily create an account with whichever online servicer you chose.
The Balance, again, offers some suggestions, “There are many online sites which offer this service to landlords. These sites include ERentPayment, RentMatic, and RentMerchant. You can do a search of online rental collection services to find the site that best suits your needs.”
Oftentimes, the price for these services will vary by the type of collection services they offer. For instance, RentPayment.com offers Property Managers the ability to have their tenants pay via Text, Phone, AutoPay, Phone or a Member App. This gives tenants a lot of flexibility and opportunity to pay even when they’re on-the-go.
CONS: Using services such as Venmo, Cash or PayPal might not be the best manner to collect rent payments online. “For example, if the tenant does not mark the payment as a personal payment, you could get charged a business transaction fee. It can also take several days for a payment to go through, so it can be hard to determine when the tenant actually made the payment,” explains The Balance.
3. Snail Mail…
PROS: Of course, taking face-to-face collection out the equation and removing the online option saves dollars and cents monthly, which is why more often than not, property owners choose to collect rent via mail. It’s a time-saver and a cost-saver. In addition, to prevent excuses regarding the mail issue, you can ask your tenant to obtain a Certificate of Mailing at any U.S. Postal Office for a small fee which the tenant must pay to prove that they mailed the rent before its due date.
CONS: It’s not called snail mail for nothing! You might not receive payments on-time due to mail delays and remember, rent lateness is calculated by the postmark date. So if the postmark is before the 1st, and even though you received it late, you’re not allowed to charge a late-fee.
In addition, there are California laws regarding late fees. “Under California law, a late fee will be enforced only if the fee is a reasonable estimate of the amount that the lateness of the payment will cost the landlord, and if specified language is include in a written lease or rental agreement.” In addition, regarding bounced check fees, “California allows landlords to charge $25 for the first bounced check, and $35 for each additional bounced check,” also according to NOLO.com.
4. Stop Headaches in their Tracks: Hire a Property Management Company:
Why not completely bypass the rigamarole involved with trying to accomplish the prior steps and advice all by your lonesome and completely outsource rent collection by hiring a property management company? Remember though, whichever property management firm you choose, choose one with great local expertise in your given market.
“No company or agent will ever be your best advocate, you are. You can drum up advertising while the management company handles the finer points of collecting applications, performing tenant screening of possible residents, and ensuring that you comply with Fair Housing Act (FHA) guidelines,” we offered on our PropertyADVANTAGE Blog recently.
These are the greatest benefits to securing a property management service: they understand California Tenant Law, Fair Housing Laws and discrimination avoidance guidelines, and the like. This alone could not only save your from a lawsuit, but could save you from investing in things that are not your problem. Property Managers can be the Robin to your Batman, and isn’t life just simpler with a sidekick?
So, Why Hire a Property Management Company?
Most investment property owners strive to attain more profit by enhancing their property in some way, while increasing the value of the property overall. Reduce the busy work associated with these goals and hire a property management firm to help you save time and money, while they protect your investment with their deep knowledge of California legalities regarding renting and fair housing. Here’s our Top Three Reasons why property management services work:
1. Adios Tenant Complaints and Repair Calls: This might be the best benefit of all, which is why is landed our No. 1 spot. Dealing with 1AM calls for a leaking sink, or worse yet, a complaint about a crying baby, is not a ton of fun for an investment property owner. Let’s face it: You’d much rather be enjoying the amazing San Diego beaches versus slinging calls all hours of the day from cranky tenants. Hiring a Property Management Firm takes all that out of the equation as the property manager will become the point-of-contact for your tenants, hence taking the heat off of you. Now you can catch those rays or zzz’s in peace.
2. Go Big > Go International: Do you have grand dreams of attaining property overseas? Or below the Border? Well, with a property management company by your side, this could become a reality. Remember, if you choose a local, reputable firm, you’ll have someone to help you understand laws, legalities (etc.) associated with renting in a foreign country.
3. The Cost Doesn’t Outweigh the Benefits: To be clear, Property Management Firms are paid via a small percentage of your tenant’s rent. In addition, upon contract, most property managers require a small fee to initiate or start service, and this cost is usually to support listings, tenant openings, and the like. But if you take the value of the monthly fee, and add it up against the services offered:
a. Lease Preparation and Execution
b. Tenant Screening
c. Move-In/Move-Out Evaluation
d. Rent Collection e. Accounting Services
f. Bill Payment
g. Maintenance Repair Coordination
h. After Hours Emergency Maintenance Availability
i. Annual Property Evaluations
j. Eviction Assistance
k. Advertise Available Properties
l. HOA - Tenant Relations
m. Lease Re-Writing and Modifications
n. Large Investor Asset Management
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