Do You Need a Property Manager? Stories of Being a Landlord
What a Property Manager Can Do For You
We sit down with property manager, Howard Rudin, Realtor®, to talk about the details of being a landlord. Even if you think you can handle it all, Howard talk about the tasks, laws, and potential pitfalls you might not be aware of.
A property manager can handle:
Tenant Relations: From finding ideal tenants to managing complaints and enforcing lease agreements, learn how property managers free up your time and minimize headaches.
Legal Compliance: Hear about the Landlord-Tenant Act, eviction procedures, and local regulations. Howard explains what and how property managers manage these situations and the laws you need to be aware of. (There are a lot of them!)
Maintenance & Repairs: Understand how property managers handle everything from routine maintenance to emergency repairs.
Whether you're a seasoned landlord or just starting out, this episode will help you decide if a property manager is the right fit for you.
Key Takeaways:
The tasks and legal complexities of being a landlord.
Learn how a property manager can save you time, money, and stress.
What to look for when searching for a property manager and red flags to stay away from.
Howard has been a Realtor® for 22 years and in property management for 14. He manages single-family homes, condos and small multi-family properties for local, out of state and foreign investors.
Time Stamps
00:24 Meet Howard Rudin: A Veteran Realtor and Property Manager
01:40 The Essentials of Property Management: Why You Need a Professional
03:41 Navigating Tenant Relationships and Legalities
06:32 The Financial and Emotional Benefits of Hiring a Property Manager
07:42 Understanding the Property Management Process and Fees
12:03 Insights into Tenant Management and Property Maintenance
15:38 The Realities of Managing Rental Properties: Stories from the Field
21:06 Navigating the Real Estate Market in Arizona
21:25 The Financial Benefits of Owning Rental Properties
22:55 Key Considerations for Investment Property Owners
23:29 Managing Tenant Turnovers and Property Maintenance
25:42 Legal and Financial Responsibilities of Landlords
33:59 Choosing the Right Property Management Company
36:32 Practical Advice for Rental Property Owners
-
Welcome to the Financial Podcast: Property Management Insights
Hello everyone and welcome to the me financial podcast. I am Michelle Moses, your host. I'm a certified financial planner, realtor and former e commerce store owner. And today we are going to be talking about property management do's and don'ts.
Introducing Howard Rudin: A Veteran in Realty and Property Management
And to talk about this today, I have Howard Rudin with me and Howard is a West USA is with West USA Realty and has been a realtor for 22 years and in property management for 14.
He manages single family homes.
Howard owns a number of investment properties himself and knows what it's like to be a landlord. He strives to treat his clients properties like he would his own and focuses on keeping expenses down, which While maximizing profit profits. Thank you so much for being on today, Howard. Oh, well, [00:01:00] thanks for inviting me, Michelle.
Yeah. Great honor. I know that you are a wealth of knowledge and I can't wait to hear some of the stories that you have, uh, uh, cause that's what, I mean, people want to know, uh, how to manage their property, you know, cause a lot of people are interested in having rental properties, but they don't necessarily, yeah, have the time to manage them, you know, um, and so I think this will be a great topic to see the.
Um, different levels of service that people can get, you know, of, um, when you own a property. Um, but then I do think that people, you know, we need to tell some stories of some, um, just stuff that people have gotten themselves into. The good, the bad and the ugly. Yeah. Yeah.
The Role of Property Management Companies: Protecting Your Investment
So, well, why don't we get started with just, you know, why would you need a property management company to do your, I mean, to manage your property?
Well, many investors don't really want to get that involved with their tenants. And the emotions that come with it. Okay. So a lot of times, you know, a tenant has a [00:02:00] hardship and they'll play on an owner's emotions and end up convincing an owner to let 'em slide on their rent and get way behind. And then they just don't have the heart to take care of the problem and they end up financially in a bad position themselves.
I've heard this before that, that there's a great, it's, it's good, almost like having a lawyer in between you and a transaction or something. So just have like a neutral third party so that you aren't emotionally involved. Um, because sometimes you'll actually rent the places. Right? I mean, so sometimes people come to you already rented or you'll actually rent some of these properties.
So the majority of the properties that we have, we find the tenants for, we screen them, vet them, make sure they're as qualified as we can get. And then we write the leases and handle the whole thing. Sometimes we get property owners that I have a property, they've been self managing, I just took on a triplex, the rents are way under market, they needed to raise the rents, they didn't have the heart to do that.
So they got referred to me, [00:03:00] we took it over, now we're raising the rents, we're getting on top of the property, getting the maintenance caught up that wasn't getting done because they weren't getting enough rents. And these are reasons why owners that have full time careers don't need to be involved in this because we can handle all these problems and issues for them and just send them a check every month.
And so would you say that you were already like, okay, not getting emotionally involved with the tenants, you know, or like you're, you're fine just delivering this news. Like it's just business or does that kind of develop over time? Like, why don't people have this skill, I guess? Well, I think.
Navigating Tenant Relationships and Legalities in Property Management
For my part of it, I can play off as hey, I'm a third party, independent of the owner, and I'm just here to do a job.
So, this is what I need to do, these are the rules we need to follow, this is the way it is. Not to say that we don't work with people though. You know, I understand things happen, [00:04:00] people get sick, they have losses of jobs, things like that. So in those instances, if people are communicative with us, we talk to the owners and see if there's something we can do.
Like, oh, you're going to be late on your rent because, you know, your mom died and you had to fly back to Michigan and deal with that situation. Okay, well, we're not inhuman. Let's figure out a way to make this work. But the tenant needs to sign something that says, okay, well, I promise to pay you guys. By a certain date, and if I don't, then I understand that there's going to be repercussions and they're all spelled out.
Well, and as a property manager, I don't think that if it was just a person that they would know to necessarily sign something that they would catch up. They'd probably just take their word for it. Most owners don't, and that's what happens. So then they get behind, and then the next month comes, and then they send another note, and it becomes a whole song and dance and avoidance, and pretty soon you're four or five months behind in rent from this tenant.
And owners just don't know what to do. They don't know the legal [00:05:00] ramifications. They don't know who to call. Um, and of course tenants still want repairs done even though they're not paying rent and legally you have to do them. Mm hmm. So a lot of, also a big advantage would be that you know the laws. I mean, because when you just own a one off house or maybe even two, you don't necessarily know all the laws to even evict someone or get, yeah, how to get them out or even make them pay.
Right? Right. So we get calls from people who, like a friend of mine called the other day and said, I need to evict somebody. Can you do that for me? Like, no, I don't do that, but I can give you the name of our attorneys. Okay. So, but they had gotten themselves into some real similar situation where they were, you know.
Wow. And they had no clue how to go about it. Right. Right. Because there's definitely a lot of laws in place too. Well, and there's specific paperwork that has to be mailed out in a certain time frames and you have to keep track of it and you have to provide proof to the [00:06:00] courts to make sure that they know that the tenant was properly served.
Okay. Um, there's just a whole. Yeah. There's a lot that goes into it. There's a lot of. I'll call it minutiae. Yeah. But if you don't follow all these little details, it can come back and cause you bigger problems. It's kind of like knowing HR for your company. I'd say that's a good, you know, that's a good comparison.
I mean, if you're gonna fire somebody, then you need to have some documentation that they were doing some work. Right, otherwise they're going to file an unemployment claim against you and potentially sue you. Yeah, yeah, so it's important to know the laws. Okay. I hadn't really thought that that would be the biggest factor of not only knowing the laws, but just the emotional of people playing on emotions and feeling bad for people.
Well, and the other thing is, so we've got some clients that are very busy doctors, attorneys, investment bankers. I've even have a few realtors who want me to manage their property because. They don't want to get involved. They want to keep making money and they want to buy more property. So for those [00:07:00] guys, all of those guys and ladies, you know, we're handling the details for them.
I get all the repair calls, you know, if somebody calls me at 10 o'clock on a Saturday night, their conditioning's not working. I'm not sending anybody out on their roof at 10 o'clock at night, but we're getting the calls made the next morning. We're getting people taken care of versus if, you know, you, Michelle, are on vacation, we're You don't want that call.
Right. And we, a lot of calls come in on holiday weekends. It seems really miraculous. Yeah. That's what happens. Things break on the 4th of July. Yeah. And they're home too. So, I mean, they might just be at work other times. And then when they're actually at home using all their stuff, then, you know, things break.
Or they notice that it's broken, I guess. Yeah.
Understanding the Financial Aspects of Property Management
And so when you are brought on, are you building in your fee in the rent? So like, like, let's say somebody already had somebody in there and they were, I mean, what do you normally see is that it, cause are people hiring you before they actually get the renter in there?
Cause that's what you said happens most of the [00:08:00] time, right? So if they hire me before The tenant's been placed, which is what we prefer, because then the lease gets written the way we want it written. Mm-Hmm. with all the rules and restrictions we want, because we're gonna require renter's insurance. No smoking.
We don't allow certain breeds of dogs. There's a number of things that we put into our lease that if you went and rented to a tenant on your own, you may not have thought about and then you don't have it. And I can't just arbitrarily add things on until the lease expires. Okay. So ideally. We prefer to find the tenant, screen the tenant, do all of our vetting, and then say, okay, we've approved Susie and here's her situation and we're ready to roll with this.
Um, when we inherit a tenant, which is what you're describing, then we've got to deal with them until the lease is up. And if they're a good tenant, then we just say, okay, well, we're writing a new lease and it incorporates the rest of the rules that we have with the rest of our tenants. And then we [00:09:00] present it to them.
And if they want to stay, they've got to sign that lease as far as the fees go. So if you have a property and whatever it's rented for currently, we have to honor that for the balance of that lease. And the owner needs to understand that, okay, well, if you're going to hire me, you're going to pay me a percentage of that until it expires.
Then we'll raise the rent because you can't just raise the rent in the middle of a term. Right. Okay. And then we can talk about, okay, here's the market comps for your property. And then where do you want to be and understand that, you know, you're still paying me a commission, right? A percentage. Okay. So that is how you get paid as a percentage of the rent.
So we have, we have two fees that we do. So we have a tenant acquisition fee, and that's a percentage of the value of the lease. And it gets split between myself and the agent that brings the tenant to us, because we put it out on the multiple listing service and about a hundred other websites it gets pushed out [00:10:00] to.
So, if a tenant comes with their own agent, the agent gets part of it and my company gets part of it. If somebody calls me off of a sign or through Zillow or Realtor. com, Then it's a reduced commission, because it's just me involved, there's no other agent. Right, okay. In either case, I write the whole lease because we want it written the way we want it written.
And then, from then on, there's a monthly percentage that we take. Off of every single rent? Every month. Okay. While it's occupied. Right. And then the most preferred thing for us is that we get a great tenant. You bought a property yourself and you tell me, I'm planning on keeping this property to be retirement income.
So you bought it, you know, when you're in your 40s and we start renting it out. And we've got Susie living there and we're coming up about month 10th and I call you up and I say, Michelle, [00:11:00] Hey, Susie's lease is up in two months. She's been a great tenant. I've been in the property. She's taken good care of it.
She always pays on time. We've never had a bounce check. If you want to keep her, here's what I suggest we do. We raise an X or we keep her the same depending on what the market is. And if you say great. We offer her a renewal. As long as she renews, we charge you a 100 fee for just the paperwork to do the renewal.
And then we just keep going at our monthly percentage. Susie says, Oh, I'm sorry, I'm not going to be renewing because I got engaged and I'm moving into my fiancé's house. But then we start over and we've got to rehab the house and get everything ready and do the whole commission again. So my goal is to keep people in your house as long as possible.
Because it saves you money. Every time there's a turnover, you've got to do some cleaning, some touch up painting, you've got to turn the power and water and gas on in your name, it just, it [00:12:00] starts to add up. Yeah, it is, it's a lot and it's a lot of legwork.
The Importance of Regular Property Inspections and Maintenance
And so are you going by the properties on a certain time frame to check them out?
We typically get in all of them once a year. And you have to organize that with the tenant? Oh 48 hours notice. And typically most tenants are working, you know, Monday through Friday, nine to five. So what I'll do is, I'll pick a section of town and I'll call, you know, five to six tenants and I'll say, Okay, I'm going to be in the neighborhood on Sunday morning.
Can I stop by between nine and twelve? I only need 10 minutes. And you just walk through all the rooms. Just, oh, and what are you looking for? Are you looking for if they painted, if there's holes in the walls? We're looking for damage. Has the air filters been changed? Have they changed the color of the walls?
We take a list with us and it says, well, Susie's got, you know, a pug and if I walk in and there's a pug and a pit bull, then we have an issue, you [00:13:00] know, do they have the same pets that they were supposed to, or they had no pets and now they've got three dogs. Those are things we need to know about because you can't just do that.
That's a violation of your lease, right? And so then you would charge them, then you would basically charge them if they had more dogs or you'd have to have a discussion and basically it's like, Hey, I got to get approval on these pets from the owner and if the owner says yes I'll allow the pets but I need a pet deposit then we go back to them and say here's the deal and if they say oh well I'm not interested in that I'm keeping the dog well then we serve them a notice that they've got to get out.
Okay and what if they haven't changed the, because this is what always fascinates me, so what if they haven't changed like the air filters? You know, because I think things like that, people don't, I didn't know about it. You know, I was 22 and renting. I didn't know that you had to do any of this stuff. I didn't even know how to change a light bulb.
I mean that you would change a light bulb with the same wattage and, you know, so I can't imagine the stories because I actually cared and was clean. So I can't imagine the stories. Do [00:14:00] you tell them to then change? And I know this is just a little example of something, but do you then tell them to change the air filters or do you carry around a bunch of different sizes?
Uh, I don't carry 57, 000 air filters in my car. It would be impossible, but our lease specifically states that the tenant's responsible for changing light bulbs, air filters need to be changed at a minimum of every other month. It also states under the air filter section that any damaged cause to the air conditioning system By the tenants lack of changing air filters will be deducted from their security deposit.
Okay. And so I just, and you highlight that. Cause I'm just thinking about when I was 22. I mean, I, we show them where the air filter is. All right. Show them how to change it. You know, if it's 12 feet in the air, we show them, you just undo those two screws up there and panel leans down. And, um, but we just had a tenant that moved out and, The owner had supplied them a case of air [00:15:00] filters, so they had the filters.
They didn't change the filter. We charged them to clean the air ducts and the coils on the air conditioning, because they were filthy. So they took about an 800 hit out of their security deposit. Because they didn't change the LFRT. And we sent them the receipts and a notice. You have to send what's called a statement of disposition of deposits, and we sent it to them, and They didn't say one word about it.
Okay. 'cause they knew, they accepted it. Well, it's, and we also sent them a copy of the lease with it highlighted again, said. They failed to do this. So. I always think about that. Just little things, you know, cause I know when I rented my house, I, um, wrote in there that they had, you know, that my lawn company had to control the water because I didn't want all my plants to die.
You know, things like that. I mean, that can get expensive that you really need to think about. Do you write that into some of the leases about what plantings? Our leases say that, you know, landscapers are coming twice a month. The [00:16:00] landscaping timer is not to be touched by you. Timers are controlled by the landscapers, swimming pools, it's the same thing, don't change the timing on the pool, if you mess up the pool, you're going to be responsible.
Um, we also put a note in there due to experience that said, Hey look, we're subject to monsoon storms in the summertime. So if we have a monsoon between pool visits, the pool guys come in every week and you want it cleaned, you're going to either have to A, pay the guy to come. Or, use a net and a brush and clean it up.
Because, when a monsoon hits, these guys are just overwhelmed. Yes, they are. And they can't keep up. They're already scheduled once a week at all these pools, so they can't be making double visits to everybody. There's just not enough time in the day. For those of you listening from out of Arizona, monsoons are just really big storms that roll through in the summer.
That's how we kind of get our rain. You guys make it, um, I mean, I guess they'd be typical to kind of Florida with all the lightning and everything, [00:17:00] but they roll through at night usually. are in the evening and, um, they just blow a bunch of stuff off the trees and sometimes there's dust storms, so then you get a bunch of dust at the bottom, so it's just kind of a different ecosystem out here, but it's just a really bad storm.
Yeah, the biggest issue is the dust. Yes, because then you have to scrape the sides of the pool and everything like that. Um, okay, so you'd have a lot of things, but it just kind of depends on the property.
Leveraging Professional Services for Optimal Property Management
Right, so if somebody's living in a condo where the condo association takes care of virtually everything outside of their four walls, It's a much different lease than if you're renting a residential single family home from me that has a pool.
So do you charge a different percentage based on a condo and a house? No. Oh, really? Even though the house is more work? There's more work involved. Um, Overall, you know, what ends up happening is you end up with owners that you start out buying a condo and then you decide you're going to buy a house for yourself and you don't want to sell the [00:18:00] condo because you've got a great interest rate so you hire me to rent it out.
Yes. And then a couple of years from now, you say, gosh, we're going to buy a bigger house and we're enjoying so much the money that we're getting from the condo. We're going to go and buy a bigger house and keep house we're in now, we're going to rent the house. So we've just got a set, set of fees, whatever, it's the same, no matter what the type of property.
Well, cause you're just doing a yearly walkthrough. You're not necessarily going by and looking at the pool all the time. No, but all of our properties with pools are required to have, the owners are required to provide a pool service. Right. Which is obviously then covered by the rent. Right. So the owners, we build it in, but the pool guys are our eyes.
So we've got one pool company that takes care of like seven pools for me. And then depending on the parts of town that they don't cover, we have a couple of other guys, but those guys are also our eyes and ears throughout the year. You know, like, I've got this lady, her name's Melanie, so [00:19:00] she'll call me up, she'll be like, Hey, you know, there's something weird going on at this house, you probably need to stop by.
And then she'll tell me what it is, and I'll just miraculously be visiting your house on. Yeah, that's how it was with mine. It was my pool guy and my yard guy, because I trust them a lot. And they'd be like, they haven't answered their door in a month, and I haven't been able to get in there to do anything.
Or, um, they've turned the water off a couple times because they didn't want to pay for it. So yeah, I've had, I had a lot of issues and I just managed my one with, you know, these couple people that I rented from thinking I would get the experience, but I would say that I probably wouldn't do it again. And that's where a lot of our clients come from.
They get frustrated by the, the. Stuff that goes wrong. And I undercharged, I should have charged a couple hundred dollars more just because of the maintenance and things that popped up. And, uh, I should have been. And I felt guilty raising the rates because they were barely getting by. And I felt bad 'cause I've been there before, you know, and I get it.
Uh, but I also needed to [00:20:00] realize that they were renting a house with a pool and a lot of lush landscaping. You know, they were renting pretty nice for their stage and life. They were renting above their means. Yes, yes. And so that's why we require somebody to make three times the amount of rent per month, because when you start getting below that, then that's when people start issues where it's like, Oh my gosh, we have a pool and the water bill was 300 a month because this pool evaporates like crazy and they don't realize how all the little maintenance things with all those nice things.
Yeah. We rented a 3, 500 square foot house and the air conditioning bill was 750. So. What are we going to do? Yeah. And, you know, we tell people, you know, okay, you know, this is a big house you prepared for a large utility. Do you give them examples of what the utility bills are before they move in? So, we don't necessarily know what the utility bills are because they were in the tenants names.
If the owners have been living there, I can get an average like, okay, what did you pay during the [00:21:00] summer and what did you pay during the winter? Cause I think that would be helpful because people don't understand in the summer how much your electric bill goes up. Tremendously. Yeah.
Navigating the Real Estate Market in Arizona
If you haven't been in a house before.
Or if you haven't been in Arizona before. Yeah, that's true. Yeah. A lot of people are just moving here and they don't get it and they get sticker shock. Mm-Hmm . That's true. Okay. And so, uh, what are some things that you think people need to watch out for? Um, when looking for a property manager?
The Financial Benefits of Owning Rental Properties
You know, because I think this is a dream of a lot of people, they would love to have rental properties.
Uh, just because it is one of the last remaining ways I think that you can get depreciation on your taxes and really get a lot of tax write offs. Uh, you know, people, um, that make a lot of money, they're always looking for ways to get write offs. Um, and they often come to me and I'm like, you know, you got to buy property or you can do these investments over here, but you're not going to get as much depreciation on these investments.
You're going to get a lot more if you own a rental property. Um, because not only do you get to write off the house and the expenses, but you get the [00:22:00] depreciation of the house written off. And so a lot of times that kind of rolls over into your, um, current account. Job income that you get to write off, but you know, it'll really lower your taxes.
I guess that's all I'm trying to say. Um, they get the appreciation on the house. Exactly. And it's leveraged appreciation. Yeah. Building generational wealth depending on what they're planning on doing. Real estate, as you just said, is one of the greatest ways for Americans to truly increase their net worth.
Yeah, if you can, yes, if you can start to buy an investment property and do something, or a condo or anything like that.
Practical Advice for New Property Investors
So, what are some things that you think people that, And I know that we've kind of covered this, you know, of the, the emotions, but do you think that there are just certain things that people need to watch out for when they're buying an investment property and thinking about, you know, maybe doing it themselves versus hiring someone?
Well, one of the most important things I think is that the person buying the house truly [00:23:00] needs to understand what the rental market is for the house they're buying. Just because they're buying a house that costs 300, 000 or 600, 000 or a million dollars doesn't mean they're going to be able to make their payment with the rent with the rent.
So they need to be looking at how much are they putting down. They need to consult with their mortgage person to see what is my monthly payment going to be on this house. And if I put another five or 10 percent down, what is it going to do? You don't want to just cover your rent because you're going to need to cover your rent.
You're going to need to cover expenses that come up unexpectedly like. I just had to put a brand new air conditioning system in the property. It was 7, 000. Those, those things come up every few years and if you're not prepared. Yeah. And every time a tenant moves out, I mean, you kind of need to change the carpet or you need to do a lot of the flooring or there might need to be a new toilet or some plumbing issues.
Right. So turnovers, I tell people, you know, you're looking at a minimum of three, up to maybe five to 10, 000, depending on. [00:24:00] You know, if somebody was in your house for 10 years, you're going to need carpet, you're going to need paint, there's going to be other repairs, a lot of just normal wear and tear. If a tenant's there for just a year, a lot of times the carpet can be cleaned and we can just touch up the paint.
It just, it really depends, and it also depends on the tenant. You know, some tenants are rougher on places than other tenants. Some tenants you barely know they even live there, they don't put any nails in the wall. But I had a house we walked in and somebody had hung over a hundred crosses through the house.
That's how mine was. They had hung, um, all kinds of pictures and shelving, like in every, I mean, it was just, yeah, it was everywhere. It necessitates a full repaint, which is a lot of money. Yeah. And what I found is I, you know, I was okay and I definitely had some hiccups through my experience, but then when they moved out, deciding what was normal wear and tear and what wasn't, that was when.
It was glaringly obvious that I had no idea what I was doing and [00:25:00] what I got myself into. And that's why I would never do it again. I mean, that's another reason I would never do it again. Uh, and I would hire someone out, not only just because of the calls and things like that, but, um, I didn't know, you know, I had a broken window.
Is that normal wear and tear? Was it actually right? You know, so I charged him, but I had to do a lot of research on a lot of this Um, and then when I, the painters came in and they broke a lot of stuff and, um, I wasn't sure I hadn't gone through, um, in detail enough yet to know what the renter had, um, broken versus what the painters had broken.
And so there was just so many things that I did in the wrong order and wasn't sure what was wear and tear. So. Just take it from me and I feel like I knew a lot, you know, just from my business and, and knowing things, but knowing the law when it comes to renters in your property management is really, I mean, it is, there's a lot of minutia in there that you have to know.
Understanding the Legal Landscape for Landlords
Well, one thing, anybody [00:26:00] who's thinking about doing. Doing this and investing in rental property, they should take a look at the Arizona Landlord Tenant Act. It's available online. It tells you what the tenant's rights are and what your rights are, and it's a really good thing to just get familiar with because there are things that can get you in trouble.
And for example, you know, if we evict somebody, you know, if you don't pay your rent, they send you what's called a five day notice. It says you've got five days to pay or quit. Well, most tenants don't just move out. So then we go to court and they, some of them show up in court, some of them don't. They go in front of the judge, the judge says, did you pay your rent?
And they usually come up with a million excuses. And then they get told, well, I'm sorry, you're evicted and you've got a judgment now for X. So it includes the legal fees, the court fees, uh, the service process, late fees and the rent. Chances are you're never going to see that money. Right. That's a lot of [00:27:00] money to be added up versus just paying your rent.
But that gets put on their credit as a judgment. Um, and then they've got five days to get out. If they're still there, then I've got to go back to the court and get what's called a writ. When I get the writ, the constable, myself, and a locksmith meet at the property. The people are there. They've got to grab whatever they can in about five minutes.
And leave. And then they have 14 days to come back and get their belongings if they don't get their belongings. So there's people that don't come back and get their belongings. Right, and then they don't care. Usually what they've left behind is not stuff anybody would want. Okay. So then that adds up to, that adds on to your expense.
I mean, you can put it on their disposition of, uh, deposits. You're going to keep their deposit, of course, because it's going towards the big bill you've got. But you're going to have additional Yeah, but I mean, their deposit is like one month or one and a half months of rent. I mean, that's not going to [00:28:00] cover much at all.
Yeah. No.
Managing Tenant Relationships and Property Maintenance
I mean, a couple thousand dollars is not going to That's why It's important that you vet tenants and one of the things that over all these years that we've really found to prove to be true is that a lot of times a current landlord wants to get rid of a tenant and they'll give a glowing reference.
It's the previous landlord that you talk to that tells you, Oh my God, do not rent to these people. They were horrible. They wrecked my place. They did this. They did that. Those are the people you really want to get a hold of. Okay. The previous landlord. All right. And then just a couple little things that people should think about because the biggest problem that we have with rental properties is water damage from leaks.
And so a couple tips for people and you should do this in your own house too. One is you should get steel braided supply line hoses for your washing machine. [00:29:00] Because the rubber hoses that they sell you with the machine end up bursting and that causes tens of thousands of dollars of damage to your house and your floors.
And then if it floods the house, you've got tenants who are displaced and it just becomes a huge, huge mess. You also, um, probably want to have, when you're going to turn your property into a rental property or when you first buy your house, get all your supply lines checked and your shutoff valves. We routinely just replace them because they freeze up with our hard water.
But being able to shut your water off at each faucet is a big plus. It's an inexpensive way to cause, to save yourself headache.
Insurance and Regulatory Requirements for Rental Properties
Um, and then anybody who's turning their property into rental property, they need to talk to their insurance agent and they need to convert their policy from a homeowner's policy to a landlord tenant policy.
And [00:30:00] that reduces your insurance because you're not insuring your personal property. But then we require all the tenants to have a renter's policy and they need to send us proof of it within 10 days of moving in. If they have a dog, we require 100, 000 worth of dog bite liability because no matter how friendly you think your dog is, every once in a while, those dogs will bite somebody.
And it ends up being a huge problem. Right. And so, and do you, um, often, so you, you actually see the renter's insurance that they're getting and you require them to get it and then turn it in? So they're required to get it and then their, their insurance company's required to send us a notice of the policy and stating the coverage.
Okay. So it'll say, if you were my landlord, the tenant would send me the policy and we have them say, You know, Michelle's an additionally interested party, so that way [00:31:00] we know that you've been named in it and anything that they make a change is so sometimes a tenant will get a policy and then three months later they'll cancel because they don't want to pay it.
Well, if we get that, we send them a 10 day non compliance notice. Saying you let your, uh, renter's insurance back. So it's kind of like our cars here. If we let our auto insurance, then they say, well, your plates are gonna expire. You need to put your auto insurance back. Yeah, right. Same kind of thing. And so are you still required to register your house as a rental with the state of Arizona?
It must be registered with the county. On Maricopa. gov. Okay. If you don't, they'll come after you. And basically what happens is you are, pay a higher property tax rate. Slightly. It's not that much. It's not really. Yeah. It's not. Anything to be worried about. Yeah, I wasn't worried about that. But they will catch you, cause I didn't know that.
That was another thing I didn't know. And then I got a letter that said, Hey, it looks like your house is rented. Uh, and I don't even know how they found that out. How'd they find that out? They find it out when your tenant goes to put [00:32:00] the water in their name. Okay. All right. So and the title hasn't changed on the house, right?
So it was a Michelle's name and Howard rented it and Howard put water in his name. And it's like, well, wait a second. Why is it? Howard have water in his name when it's Michelle's house. Yeah. And so then when we moved back into the house, we moved it back. We had to let Maricopa County know that it was not a rental and change it back into a primary owner, whatever owner occupied, whatever they would call that owner.
Yeah. So there are a lot of details. I mean, we have covered, I'm sure just part of the details that pop up with some things. And one other thing real quick is. Most of the cities and towns in Arizona require, um, rental tax to be collected. It's supposed to go out of, uh, go out in 2025, but I don't know. It's a lot of money that the cities will lose.
So we have to get a license for you. We collect that tax every month and we do the returns to the state [00:33:00] every month, which then they send to the cities. Okay. And I mean, even touching on that, I think that, um, I went to a couple of meetings about that and I, I think it's a good thing because renters aren't paying property taxes, right?
And we need to be paying, we need to be paying for if they're using ambulances and fire trucks and, you know, all of the emergency services. Otherwise, cities have no way of paying for these things for the renters. Yeah. And it goes into the general, uh, general fund for the cities. I mean, they're still collecting the.
The property tax from the owners, but yeah, and then we require our owners because of liability, you know They need to make their mortgage payments their HOA payments and their insurance payments because that way they know they got paid And God forbid some reason we Missed the payment. They don't end up in a problem.
Right? 'cause you're still entitled of the house. So you need to make sure your HOA is paid and all that kind of stuff. They could be a lien against your house later on.
Choosing the Right Property Management Company
And [00:34:00] so, okay, so to wrap things up also, what are some things when you're looking at property managers, are there like some red flags to see if people are shopping around for some.
You're just looking for some experience and how many years? I would look for the following. I would talk to them about their experience. I would definitely ask if they own any rental properties because in my experience, people who don't own a rental property don't seem to care as much about how much you're paying for things.
Okay. It's more like if you've done it yourself, then you understand the empathy. The other thing is, um, some companies have their own repair staff. They try and keep busy no matter what, which is not always a good thing. So for us, we, we took on a client with an apartment building and he said, I've gotten charged almost 30, 000 in interior [00:35:00] painting in the last year.
And I was like, Oh my God. Wow. He said, I don't know, every time anybody moves out, it seems like the whole place needs to get painted. And we've had a lot of turnovers in our complex. And the way we do it is we only paint the walls that need to be painted. So you know, it's. It's quite common that people don't have a headboard, so that the wall where the bed is against usually has some oils on it from people's hair, and that wall typically needs to get painted, and if they put a lot of nails in the wall or a big TV mount, those are things that necessitate painting, but.
You know, there may be three walls in the living room that are still perfect shape, so we'll just paint the one wall instead of spending thousands of dollars, we can, you know, touch up the whole house for maybe a thousand to twelve hundred. And these are things, as an owner, I can appreciate because we've got [00:36:00] properties and we don't like, you know, when don't need to do unnecessary work, yeah, just to employ people for the sake of it.
And the other thing is that there's management companies that charge a markup for work they hire from the outside. I don't do that. And any management company that's doing it is legally supposed to disclose it to their clients. There are companies out there that don't. So you really want to, you know, probably look them up on BBB, make sure they're licensed, make sure they don't have any complaints with the Department of Real Estate.
Look at some reviews. I mean, are you reviewed online, like on Yelp or Google or anything like that? I'm sure there's, I don't have any of that I'm aware of, but what I will always do is I can provide any person who's interested in having me manage their property, three or four of my clients that they can call, question any way they want.
And I always tell people that, you know, if you're gonna get a manager and you're going to have investment properties, [00:37:00] you need to be prepared that we're going to collect your rent and you're not going to have it on the first day of the month. You need to be prepared to make your mortgage payment. Ahead of time and you'll get reimbursed from us on the backend.
So, you know, rent's due on the first, it's late after the third. We typically get it in from our tenants between the first and the third. Then we have to process, it has to go to the accounting department. We wait a day or so for to check to clear, and then we do any disbursements. So if. If we're paying your pool guy or your landscaper or there was a repair bill, we pay all those bills, take out our percentage, and then direct deposit our money.
What if there's a big, so then if there's a big expenditure that is larger than what the rent is, then you would actually ask the landlord for reimbursement, correct? Yes, and we set limits on, based on the property and the owners on, okay, I can authorize a repair up to 500 without reimbursement. Having to call [00:38:00] you.
Um, there's certain repairs that are mandated by law we have to do. So if the water heater goes out, I mean, I'll let you know, Hey, we gotta put a, any water heater in today. But there's not a choice. The Arizona Landlord Tenant Act requires, you know, you have to have any water needs is heating hot water, you know, so those are items that we have to get fixed.
Okay. So, but generally speaking, you know, we're in communication with. Our owners whenever there's something major. But you know, if you've got an electrical switch that stopped working, I honestly am not picking up the phone to call you to say, I sent the handyman out to fix the $49 switch. It's just gonna be on your statement.
Right? But you know, your pool pump went out, which happened yesterday for a property, and you know that's an expensive. Repair. It still has to be done, but I called, gave him a heads up saying, Hey, here's what it's going to cost. And we're going to do this on Wednesday. So, yeah. And I think as an owner, it's hard to trust whether some of these repairs are necessary or not, [00:39:00] especially, you know, like if there's tends to be a lot, then you might start to not trust the, um, the tenant.
And so it's good to have, again, I think it would just be good to have a third party in there that like, no, this happens all the time, or, you know, that just has experience with other properties. Well, the other thing that. I try and do is so we had a younger, uh, tenant in his early 20s call me up. It's like the garbage disposal stopped working.
I need a new garbage disposal. Well, did you press the reset button on the bottom? What is that? Yeah. Okay. Open the cabinet. Get down there, there's a yellow or red button, push that up with your finger. Oh, wow, working now. Great. So, you know, the advantages, I showed him how to fix it. I saved him time having to wait for a repair guy.
I saved my owners probably at least 200. Or more. So it's from a phone call from a phone call. So these are things, you know, I mean, a lot of owners would know to do that too. Yeah. But even if [00:40:00] the owner is busy and at work all day, and then you've got this other thing and you've got kids and you know, I mean, it's work.
The Real Work of Owning Rental Property
And that's the way I describe owning a rental property to people. I mean, it's, it's work, you know, I mean, owning any, any real estate, it is work. It is a job that you're doing. It's not like you just make. You know, make this investment and then it starts to print money. Um, and I think people, you know, and that's why it turns a lot of people off, honestly, is because they're just like, I just don't want to deal with all of that.
Um, but there's certain people that it's, it's wonderful for, but then for others, there, you know, there's other investments and then they want to do more things, you know, with me and. And stuff. So it just depends on risk tolerance. Yeah, it does. And so it's like to get that all of those tax deductions that I was talking about.
It really is some work. Uh, and, but it can be easier, you know, if they hire somebody like you. Yeah. And not to say that you can't do it yourself. Yeah, you could, but I just think this is a great episode so that you can see some of the things you brought up. Some [00:41:00] wonderful examples that are just You know, run of the mill everyday stuff and we didn't even get into the horror stories and all those types of things.
Well, I'm sure we could do that another time. Yeah, we could do that. We could have maybe be a fun one of just, here are the horror stories of Property Management. Here are the worst ones. top five. I have to write my book. Yeah, we could get into that. Well, Howard, thank you so much for being on. I really appreciate you taking the time.
Oh, Michelle. Thank you. It was my pleasure. Yeah. A lot of good information here and Howard's information will be in the show notes. Um, and be sure to, um, tell your friends and subscribe and thank you so much for listening, everybody. I really appreciate the feedback that I'm getting. And, um, I hope this helped you guys in some little way.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.