As a residential property management company, we will perform periodic interior inspections of the properties we manage.  However, we will generally only perform interior inspections of a tenant occupied property upon the request of the owner.

Years ago we use to provide interior and exterior inspections for all of our clients’ properties, whether or not they were occupied.  But what we found is that although many of our property management clients wanted and expected us to complete interior inspections of their properties, there were others that demanded we avoid them at all costs.

I believe most investment property owners understand the rationale of performing interior inspections of a rental property.  However, it surprised me to find out why certain property management clients did not want us to perform any inspections, particularly interior inspections.   It was because they were concerned about the costs associated with the inevitable repairs that stem from the inspections.

If you understand the process of an interior inspection, then you will likely understand their concerns.  When a unit is occupied, and a property management company wants to perform an interior inspection, the tenant must be given reasonable advance notice.  This allows the tenant to not only arrange to be present, but also to prepare.  Inevitably a part of that preparation includes the tenant drafting a laundry list of items that they want the landlord to repair or in some cases upgrade.  This list, and the costs associated with it, is what the landlords that don’t want interior inspections are trying to avoid.

One common example of an item that often becomes a point of contention between our southern California property management clients and their tenants is the air conditioner.  We have performed many interior inspections over the years only to leave the meeting with a request from the tenant to ask the landlord to replace (not repair) the air conditioner because it does not cool down the home as quickly and as well as the tenant believes it should.  This can grow into a contentious exchange between the tenant and property owner if and when the property owner refuses the request.

A personal observation I have made over the years is that property management clients that requested no interior inspections be performed are generally real estate investors and often have multiple properties.  They tend to make each decision regarding their investment properties on a purely business basis, without emotion.  For example, when we would prepare one of their properties to rent, they would decide the flooring they wanted to install based on what made the most financial sense.  This meant that rather than installing carpet in their rentals, they generally opted for flooring with a long natural life such as wood laminate or tile.

On the other hand, I have found that those property management clients that desire interior inspections are generally those individuals that are not in the rental property business by design and the rental is more than just an investment.  Often the rental is their former home and they intend to one day move back into it, or they have inherited the home that has sentimental value from someone who was important in their lives.

These individuals want their property management company to make frequent visits to view the interior of the home to make sure it is being well maintained.  Generally, these clients welcome the laundry list of items that the tenant presents to be repaired because they take pride in the property.

I do understand that these two classifications of clients are generalizations and many exceptions are surely to exist, however I thought it would be useful to look into possible reasons why two similar investment property owners would have completely different views on the issue of interior inspections.  At the end of the day, neither view is “better” than the other.  Instead this message is to simply encourage you to tell your property management company if and when you would like your property inspected.

The lease agreement is the cornerstone of any landlord – tenant relationship.  In the almost fifty years that we have been providing property management services, we have prepared thousands of lease agreements on behalf of our clients.

Since the lease agreement is the contract that will govern any future disputes between the landlord and the tenant, it is an extremely important document.  Whenever a new property management client engages our services and their property is already rented, the first thing we do is request a copy of the current lease agreement and any addendums thereto.

In most cases, after reviewing their lease agreement, we identify issues that are significant enough to require us to prepare an entirely new agreement.  We, as do many other property management companies, utilize a residential lease agreement that is drafted and designed by the California Association of Realtors (CAR).  The CAR form is a great template and contains most of the key terms needed by a California landlord.  In addition to using the CAR form, we have our own one page addendum that clarifies certain other expectations that we as the property management company believe are important in a landlord tenant relationship.

If you are a landlord who has decided to forgo the services of a professional property management company and manage your rental on your own, then you must be careful to ensure you have a well drafted lease agreement.  If you decide you want to prepare your own lease agreement, you should review it to make sure that at a minimum it contains the following items.

1.    Name of all parties to the agreement
2.    Rental property address
3.    Lease term start and end date
4.    Security deposit amount
5.    Monthly rental rate
6.    Address to where rent payments are to be sent
7.    Date rent is due
8.    Grace period for rent payments
9.    Late fee amount
10.    Signatures of all parties

In addition to these basic items, you should consider adding any specialized terms you would like your tenants to abide by.  As with all contracts, you are free to create almost any term you would like as long as it is agreed to by all parties.

For example, if you own a house and you would like to require the new tenants to sweep the roof off once per month, then you can simply make it a term of your lease agreement.  As long as your tenants agree to the term, it will become binding on your tenants once they sign the agreement.

More likely than sweeping the roof, you may have agreed to allow your tenant to have pets.  It will be important for you to clearly document the rules and expectations of all parties in the lease agreement.  When we draft lease agreements for our property management clients, we will usually enumerate the specific quantity, type, and weight of any pets being allowed.  It is also important for you to specify the actual amount of any additional security deposit you may require to protect you in the case of damage done to your property by the tenant’s pet.

Although you do not have to engage a property management company, there are benefits when it comes to their experience.  If you decide to go it on your own, you should pay very close attention to the lease agreement you create for your tenants.  It can save you a lot of headaches in the long run.

I have met many rental property owners that have taken the position that hiring a professional property management company to manage their rental is a waste of money, especially when they could simply manage it by themselves.

I believe this is a “penny wise, pound foolish” approach.  Of course, the person who decides to do it themselves will save the monthly management fee they would have paid to their property manager, but they risk losing much more in the long run.

A good property management company is worth their weight in gold.  The problem is, not every property management company is good.  To make matters worse, rental property owners do not generally find out they have engaged a bad property management company until after the damage is done.

So, how do you know you have a good property management company?  A reasonable indicator is when your property management company provides you a benefit that far exceeds the expense of their monthly management fee.  In other words, you should expect your property management company to provide value for the fee they collect.

For example, a good property management company can shorten the time it takes to prepare your property to be rented.  One reason for this is because they are able to coordinate the repairs and maintenance needed to get your property ready to rent much quicker than you could on your own.  This is true because many vendors give property managers preferred treatment since the property management companies control so much of their business.  So, by reducing the amount of time your property is vacant, your property manager is essentially increasing your rental income.

In addition to reducing the time it takes to prepare your property to rent, a good property management company can also reduce the associated costs of the preparation.  This is because they are generally able to negotiate much better rates on the repair and maintenance work to be performed on your property.  Consider this another benefit of controlling so much of their vendors business.

A good property management company should also be able to quickly identify and define the optimal rental rate for your property.  They have access to a data base that is only available to licensed realtors called the Multiple Listing Service (MLS).  The MLS contains valuable information about exactly how much similar properties in your area have recently rented for.

Being able to quickly and accurately determine the optimal rental rate for your property benefits you in two ways.  First it prevents your property from being on the market for an extended period of time because it is priced too high.  Second it helps you avoid renting it for an amount that is less than the market will allow.

When you do find a qualified tenant, a good property management company will help you thoroughly screen your prospective tenants.  Property management companies regularly screen tenants and as a result are able to identify potential red flags that might not be apparent to you.  Preventing a bad tenant from moving into your property is invaluable.

Perhaps the most valuable thing that a good property management company can provide you is knowledge.  Experienced property managers are well versed in landlord tenant laws and will ensure they are followed.  This means they can significantly limit your exposure to litigation stemming from your tenant.

It is clear that a good property management company can be a valuable asset.  The difficult part is finding one.

Los Angeles and Orange County property management companies are numerous and the services they offer are varied.  Perhaps even more varied than their services, are their fees.  For a homeowner who has never contracted a property management company to manage their rental in the past, determining the “real” cost of property management services can be a daunting task.

I have always told my clients that using price as the primary determination of what property management company to entrust your rental property with, is almost as silly as price shopping for a brain surgeon.  This of course does not mean that price is not important.  It just means that it should not be weighted as heavily as the company’s experience, reputation, and quality of service.

With that said, the fees charged by a property management company is something that you must understand before you make a final decision on what company you will use for your property management needs.  When you discuss fees with a property management company, the following are some items that you should consider.

Most companies will charge you a base property management fee and then charge you additional fees for what they deem “extra” services.  Comparing base fees in the Riverside, Los Angeles, and Orange County property management markets is difficult because what services a company includes in its base fee varies widely.  One company’s base fee may include all services, and another’s may only include a few basic ones.

As a prospective client, when a property management company tells you their base fee amount, you should be comfortable following up with a question regarding what services are included in the base fee quote.  The best answer to this question is “everything” but the more common answer will exclude certain things like repair coordinating, finding a tenant for the property, screening prospective tenants, and similar tasks.

For example, many of the Los Angeles and Orange County property management companies will advertise a low monthly management fee rate.  However, they fail to inform you until later in the process that the quoted fee does not include finding a qualified tenant for your property.  These companies will generally charge you an additional 2.5% to 7% of the entire first year rents to find you a tenant.  You should note that such additional fees are generally required to be paid in a lump sum upfront and is in addition to the base fee amount.

The base fee is generally presented in terms of either a flat rate or a percentage of rents that are collected by the property management company on your behalf.

Under the flat fee method, the management company will generally collect a set amount of money each month your property is under their management.  When you have a tenant that is paying their rent timely, this fee structure does not pose much of a problem.  However, when your tenant does not pay his rent or your property is vacant, you are generally still required to pay the monthly management flat fee.

Under the percentage of rents method, the management company will generally collect a fee based on each monthly rent payment they collect on your behalf.  Unfortunately, some of the property management companies that charge a fee based on the percentage of rents, will also still demand some sort of payment if the rent is not paid or the property is vacant.  In contrast, a few of the more reputable Los Angeles and Orange County property management companies only charge a management fee based upon rents “actually collected.”  That means that when you are not receiving rental income, you don’t have to pay the property management company.

In addition to the base fee amount, many of the Los Angeles and Orange County property management companies will charge what I refer to as “hidden” or “junk” fees.  These fees include things like adding a 10%-25% surcharge to the cost of any vendor repairs made on your rental, or a $100-$1,000 contract “set-up fee” just to become their client.

When you are searching for a property management company, please do not just consider the base fee amount by itself.  Instead, you should make sure you factor in all of the “extra” costs and junk fees the company will charge as well.  When you do this, you will find that some Los Angeles and Orange County property management companies that have advertised base fees as low as 3% can end up costing you in excess of 20% when all other fees are taken into consideration.

As an established Orange County property management business, we have been providing investment property owner’s exceptional residential property management services since 1964.  During this time we have learned that although the subject of emergency repairs seems quite benign, it is an important topic of discussion in the Orange County property management market.

It is not surprising that over the years the issue of emergency repairs has been the basis of many disputes between landlords and their tenants.  However, you may be surprised to find out that it is also source of a fair number of disputes between property owners and their property managers.  I will explain why.

First we must point out that emergency repairs will generally cost more than routine repairs.  This phenomenon is caused by a wide variety of factors, the most basic being that emergency repairs often occur outside of normal working hours which causes the vendor who was awoken at 3am to charge a premium for his time and services.  In addition, when a pipe burst in the middle of the night, one normally does not have much time to price shop for estimates before getting it repaired.

Despite the fact that emergency repairs are generally bad news, it is a very common practice among the major Los Angeles and Orange County property management companies to have agreements under which, in emergency situations, the property manager is given the authority to arrange for repairs to be completed without first obtaining the property owner’s permission.  The rationale for such an agreement is that in emergency situations, the property manager must be allowed to act swiftly to minimize potential property damage.

This of course sounds pretty straight forward, however the reason so many Riverside, Los Angeles and Orange County property management companies find themselves in conflict with their clients is regarding the definition of an emergency.  What constitutes an emergency on the part of the tenant and/or property manager may not rise to the level of an emergency in the mind of the property owner.  It is this scenario, and generally after the owner has received a large bill for an unapproved emergency repair, from which disputes arise.

This begs the question: What is an emergency repair?  During our almost fifty years as the Orange County property management specialist, we have developed a general rule we follow.  We generally consider an emergency repair to be one that if not immediately addressed would likely cause damage to the rental property or injury to its occupants.

In situations where a pipe burst and water is running through the living room and out the front door, it is clear that an emergency exits and immediate action must be taken.  Those types of calls are easy to make.  But what about less obvious scenarios.

What if the bathroom toilet is clogged in one of your rentals, but it is not overflowing with water and there does not appear to be a risk of any immediate property damage.  However, the tenant calls you at 11pm and demands that this is an emergency and a plumber be sent out immediately.  He goes on to explain that the only other bathroom in the house belongs to his roommate.  What would you expect your property manager to do?

There are many reputable Los Angeles and Orange County property management companies that would consider this an emergency repair.  However, when this recently happened at our company, we applied our general definition of an emergency and concluded that this did not qualify since the property was not in risk of further damage and the tenant was not in physical danger.  As a mitigating factor, we also considered the fact that the tenant did have access to another toilet within the home.  As such, the tenant had to wait until the following day when we could gather the appropriate estimates and then contact the owner to obtain approval for the repair.

Before you engage a Riverside, Los Angeles or Orange County property management company, you should obtain a clear understanding of what their emergency repair policy is.  You will find that many Riverside, Los Angeles and Orange County property management companies do not even have an emergency repair policy, which should be your first clue that the company may not be the right one for you.

Whether or not to allow tenants with pets to occupy an investment property is one of the most common questions asked of not just Orange County property management companies, but property management companies nationwide.  Over the decades that we have specialized in the Orange County property management market, this question has evoked strong emotions among both property owners and tenants.

What I have learned over the years is that more often than not the client is seeking advice on whether they should allow pets out of a concern that doing so may cause undue damage to their property.  They generally tend to have a picture in their minds of a one hundred pound pit bull clawing his way through the walls of the rental, or a little old lady with fifty cats to keep her company in her golden years.

What we have experienced over the years as the Orange County property management specialist, is that such extreme scenarios are rarely in line with reality.  More often than not, the pets that tenants want to bring with them to a rental have been well trained, are house broken, and have shared indoor living spaces with their owners for years.  Based on that perspective, I generally approach the pet question with my clients by analyzing it as if it were any other business decision.

From a business standpoint the most common reason to accept pets is because it dramatically increases your pool of perspective tenants.  As any investment property owner knows, the larger the pool of prospective tenants, the more likely you will be able to find someone that meets your particular income and credit requirements.  In this market, a landlord must do everything possible to compete for quality tenants.

What we have seen in the Orange County property management market, a significant number of tenants in southern California have multiple pets.  In most cases, those pets are thought of as another member of the family.  This means that when looking for a place to live, the pet owner would not consider any places that do not accept pets.  So, by not allowing pets you have effectively shut off your rental property to a large population of well qualified pet owners that may have made great tenants.

I mentioned previously that the most common reason not to accept pets is a concern about potential damage to the rental property.  Although this is a valid concern, there are ways to minimize your risk of loss.

The first thing a property owner should consider when accepting pets is placing parameters on the type, size and number of pets they will allow.  Whenever we are looking for qualified tenants for our clients’ properties, we often require the tenant to submit with their rental application, a photo of their pet along with a description of its size and weight.  This has really helped many of our clients who were hesitant about accepting pets feel more at ease.

The second thing the property owner should do is require a pet deposit.  In the Orange County property management market, pet deposits are common place.  The amount of the deposit can be set at an amount that you believe will correspond to the potential risk of damage the pet may cause.  Hence, someone with a pet hamster may not be required to provide as much of a pet deposit as someone with a pit bull.

The third thing that we have found helpful to reduce the risk of damage to our clients’ properties by tenants with pets is to request an in-house visit with the applicant at his current residence.  This is a great way to get an idea of not just the pet’s propensity for damage, but also the tenant’s.  Our clients generally feel much more relaxed once such a visit is completed.

The thing to remember is that throughout the Riverside, Los Angeles and Orange County property management market we have see a growing population of tenants with pets.  Pets are a part of many of our lives and in many cases they are able to live indoors without doing undue damage.  Since there are several ways to minimize the risk of damage your rental property, accepting pets can be a win-win for the landlord and the tenant if done carefully.

In the decades that we have been specializing in Orange County property management, we have made it a point to teach each of our clients that the less time they spend on finding a qualified tenant, the less money they will lose on carrying costs and foregone rent.  That is a somewhat obvious principle that can probably be classified as Property Management 101.

Of course there are many factors that determine how quickly you are able to find a qualified tenant for your property.  The obvious and most influential factors include how well your rental is priced, the advertising mediums used, and the location and condition of your property.

However, a factor of lesser importance and therefore quite often over looked involves the photos you use to advertise your property.  Simply creating multiple good quality photos of your rental can significantly increase the amount of traffic your property receives.

Over the years I have found that many professional Los Angeles and Orange County property management companies will advertise vacant properties they are managing on Craig’s List or similar sites with pictures that are horribly unflattering, and in some instances they may not include any photos at all.

Please consider the following.  On a Saturday morning, if a prospective tenant is looking at the available rentals on Craig’s List, they will find thousands of vacancies posted in any given county.  With so many properties available for rent it is easy for yours to get lost in the crowd.

Put yourself in the seat of that person who is searching through Craig’s List for a new place to live.  You find that there are pages upon pages of available rentals in your desired location that also fall within your price range.  What do you do?

Well, if you attempted to read every single ad you would spend a few days in front of your computer.  So instead, you would probably do what most people do in that situation.  You would narrow your search down to include only those ads that have pictures.  You realize that doing this will save you hours that would have been spent calling landlords, setting appointments, and driving all around town, only to find that the place you were interested in is an aesthetic disaster.

Properties without pictures often get overlooked by potential tenants.  Hence, it is clear that having no pictures is bad.  But the reality is that having unflattering or poor quality pictures can be even worse.  What we have seen as an Orange County property management company is having an unflattering picture will stop many prospective tenants from picking up the phone to schedule an appointment to see your rental in person.  Instead, they will just move on to the next ad and continue searching for something that is pleasing to their eyes.

For that reason, you must be very careful to ensure your pictures are good quality (e.g. proper lighting, no thumbs on the lenses, well focused), and flattering to your property (e.g. no pictures of your living room when you have moving boxes stacked from the floor to the ceiling).

The following are some of the simple guidelines we follow when we market our Orange County property management client’s properties.

1.     At least four photos should be taken of the property, with one photo being an exterior view of the home/condo.  Ideally, enough photos should be taken to provide the potential tenants a good idea of what the home/unit looks like.  The pictures will hopefully be enticing enough to prompt them to call you to set-up an appointment to visit the property in person.

2.    You should always make sure your home is clean and free of clutter before taking any pictures.  This includes the yard and garage.  The idea is to make a good “emotional” first impression on potential tenants who happen to come across your advertising.

3.    You should make sure your photos are crisp and clear.  With the various automated digital cameras they have nowadays, it is very difficult to take an out of focus picture.

4.     You should ensure that you have the proper lighting.  Photos that are too dark do not allow the potential tenant to really see what your rental has to offer.  So when you take your photos, you should make sure you have plenty of natural light or you should use a flash.

As the Orange County property management specialist, we realize that we have to do everything we can to get our clients’ properties rented quickly.  Even though pictures do not carry the influence of pricing they can and do make a difference.  Please take that into consideration the next time you market your property.

As the Orange County property management specialist, we have witnessed a severe drop in the number of qualified tenants in the southern California rental market over the past eighteen months.  Although the reasons for the drop are plentiful, they can best be summed up as yet another side effect of California’s troubled economy.

I have experienced firsthand how important it is for us to assist our clients to quickly identify the best rental price at which to market their vacancies.  It is important because vacant properties in the Riverside, Los Angeles and Orange County property management markets that are priced correctly and advertised well are still able to attract a qualified renter within the first thirty days of listing it.

Unfortunately, the rental properties that are not priced right can remain vacant for months; and even the novice investment property owner knows that the longer it takes to rent a property, the more money you will lose on carrying costs and forgone rent.

That is why we always tell our Riverside, Los Angeles and Orange County property management clients that the single most important thing you can do to rent your property quickly is pricing it correctly.  Over the years, we have found that when our clients attempt to list their property at even the slightest premium, it tends to take the property three to four times longer to rent than those properties priced correctly to begin with.  This translates into a loss of income for the property owner.

For example: Let’s assume the market rate for properties similar to yours is $2,200 per month.  If on January 1st you decided to list your property slightly below market at $2,100 per month, it will likely rent in the first 30 days.  This means that over the course of the first calendar year you would collect $23,100 in rent [11 months @ $2,100 per month].

Now let’s assume that you decide to list the same property at a slight premium, at $2,300 per month.  It is our experience that in the current Riverside, Los Angeles and Orange County property management markets, a property that is priced even slightly above market may take three or four months to find a tenant.  Assuming you are able to rent your property in just three months, you would only collect $20,700 in rent over the course of the first calendar year [9 months @ $2,300 per month].

Result: You would earn an extra $2,400 in year one by listing your property at a slight discount.

Remember, you can always increase your rental price at the end of the first lease period.  Once your tenants have made your rental property into their home, they will be more likely to accept reasonable rental increases.

We do realize that there are other factors that go into attracting qualified tenants such as the property’s condition, location, your advertising, and what the competition is offering.  But we have found in the almost fifty years we have existed as the Orange County property management specialists, regardless of how nice, well marketed, and desired a property is, it will not be given serious consideration by a potential tenant until it is priced appropriately.

In this tough economy we have noticed that the pool of qualified tenants in the Riverside, Los Angeles and Orange County property management markets is evaporating.  As a result, there are thousands of vacant properties in competition with yours for a decreasing number of qualified tenants.

This means that when your rental becomes vacant you must do everything you can to attract those hard to find qualified tenants to your property.  I thought it would be helpful for us to share with you a few of the ways we help our Orange County property management clients to generate interest in their vacancies.

Advertise. Advertise. Advertise. Having an appropriately priced property will do no good if no one knows about it.  Many Orange County property management companies will simply put your property on Craig’s List and wait for the phone to ring.  It should be no surprise that this method will not work in this market.  You must explore and utilize other advertising options such as the Multiple Listing Service (MLS), local news papers, targeted emails, and various online sites.

Declutter and Clean. Do your best to make your property shine.  Just like you must do when selling a home, it is important to ensure your rental is aesthetically pleasing to prospective tenants.  This means that you may want to consider investing in a fresh coat of paint on the interior walls, landscaping, or a spring cleaning of the windows and carpet.  Also remember, homes that are not cluttered, but instead are organized and clean, tend to rent for more money and in much less time than those offered in “as is” condition.

Place Multiple Signs on the Property. It is important for potential renters to know that your property is available.  The best and most inexpensive way to do this is to place bright and easy to read signs in conspicuous places on the property.

Increase Your Availability for Showings. When someone is seriously interested in your property, they will want to see the inside.  If you do not have a property management company assisting you, it is up to you as the property owner to schedule the showings.  Many Riverside, Los Angeles and Orange County property management companies have adopted policies, in the name of efficiency, under which they will only show their client’s rental on set days and times (e.g. 2pm on Thursdays).  Although such a policy allows the property management company to reduce its costs for gas and compensation, it negatively impacts their client’s chances of finding qualified tenants.

In my experience, when someone is looking for a place to live, they are generally on a tight timeline.  Hence, if you tell them they need to wait 24 hours, let alone an entire week, before you are available to show them the inside of your rental, they will almost always continue their search in the meanwhile.  This means that there is a very good chance they will have found another place to live before your scheduled showing time rolls around.  In the almost half of century we have been providing Orange County property management services, we have always made it a point to make ourselves available to show our clients’ properties as much and as often as possible.

Consider Accepting Pets: You will open yourself up to many more prospective tenants if you decide to accept pets.  Remember that if you decide to do so, you can set limits by number, size, and/or type of pet.

Unlike many of the other Riverside, Los Angeles and Orange County property management companies, we do not charge a management fee when our client’s property is vacant.  We only charge management fees when the property is rented AND the tenant actually pays the rent.  Hence, for the past four decades in which we have specialized in the Orange County property management market, we have always been motivated to ensure our client’s properties are rented quickly so that they can begin receiving their rental income and we can of course begin receiving our management fees.