No matter what area you are from, if you own properties they need to be managed. Over time, a property can easily deteriorate. If the deterioration and damage isn’t taken care of, then you risk losing the value of your property and incurring the hefty cost of repairs. Instead of putting yourself in a difficult situation, hiring a property management service is the best thing that you can do to protect your investment. For those who live in the Bay Area, there are dozens of Bay Area property management services. Below is an overview of how choosing the right management service is going to ensure that your property is protected to the fullest.
Collect Rent and Handle Tenants
There are many aspects to property management. One of those aspects is the process of collecting rent and handling tenants. Instead of wasting your own time and making sure that you’re paid in full, the property management service can handle the entire business of collecting rent and dealing with tenants. If there is an issue with the property, the tenants will call the property management service to have the repairs completed. On that note, property management is also responsible for finding vendors to handle day-to-day maintenance, as we’ll see next.
Upkeep and Repairs
When you have a property manager, you can be certain that you’ll have all regular upkeep and repairs completed as needed. Property managers are highly knowledgeable in regard to the best repair companies in the area. As a result, you can be certain that when there is a problem, the best professionals are going to take care of it – and probably at the best price, because the managers likely have existing relationships with companies guaranteeing their best rates. When you have the best professionals handling all of the repairs, the value of your home will be kept intact.
Finally, emergencies can be a big problem when it comes to property. You never know when you might have to deal with a serious leak or a fire in a rental unit. Property managers are responsible for handling emergency calls 24 hours a day and have professional contractors and service people on call, so what could be a major issue for you is just another day at the office for them.
Overall, the smartest decision that you can make for your rental real estate is to hire a property manager.
Summary: Get to know some key considerations in lease management before handing over the management of your property to an unknown company for giving it on lease to tenants.
Having a property and letting it out on a lease is a very tedious process. The jobs that are required to be done for leasing out a property include placing advertisements, screening the applicants, and so on. If you are too busy to take care of basic requirements of leasing out the property to tenants, then do not try. There are a hundred and one companies who can do the job for you and save you all the trouble of handling issues like collecting the rent, carrying repair work and so forth.
Questions to ask
Handing the property over to a completely unknown entity can sometimes be quite disconcerting. Getting to know the company that will manage your property can give you peace of mind though a large number of doubts will remain unanswered. Some of the key considerations of lease management are:
Does the company have a license for managing properties? – It proves whether the company is genuine or not.
What are the different types of properties managed by the company? – It tells you whether your property can be handled by the company.
What are the geographic locations of the properties that the company manages? – It signifies whether your property lies within the company’s jurisdiction or not.
How much experience does the company have in this business? – The experience of the company in this field is a prime consideration.
How much rent will I get for my property? – The company will tell you the expected rent.
How can the quality of a tenant be judged? – This is another important consideration as you have to make sure that you get a good tenant who will pay his rent regularly.
How will the company respond when the tenant fails to pay rent? – You have to sit down with the company and decide on your action plan on a case-to- case basis. An opportunity may be given to the tenant for paying up, but you have to evict the tenant for repeated non-payment.
How does the company handle the tenant’s request for repairs? – The proper procedure adopted by the company can save a lot of your money.
To whom does the company give the repair jobs? – The company should use professionals who do a good job at a reasonable price.
What are the fees for lease? – It is money you have to pay for the management of your property.
Are there any other fees charged? – Any extra fees may be a burden to you.
Is the format of the property a standard one? – It will tell you whether signing the agreement is safe or not.
When can the company start managing your property? – Normally the company will tell you that they can start immediately.
Research on lease management
You can compare the answers to questions given above by a host of other lease management companies and decide which one to select. But some doubts will remain on its operations and on how you will benefit in the end by leasing out the property. You have to do a lot of homework and research before you are sure of key considerations of lease management before going ahead with your project.
Summary: Payment of earnest money shows the seller of a house the earnestness of the buyer in purchasing the property. It also determines the financial capability of the buyer.
The concept money deposit in real estate plays a significant role. When a buyer approaches a seller with the offer of buying a property, the first thing that the seller should do is to ask for deposit money. If the buyer offers to deposit the money, then the seller can be sure that the buyer is satisfied with the condition of the property. It also ensures that the buyer will pay the rest of the money which is the total purchase price of the property to the seller.
Some unknown facts
There are some basic facts that are ignored by both seller and buyer while dealing with real estate matters and earnest money. Some of them are given below for all those who deal in real estate.
Often buyers offer different sellers to buy their properties without depositing any money with sellers. Effectively the buyer is trying to take out the properties out of the market until the buyer can decide which property to buy. This is a losing scenario for the seller as the property has been taken out of the market, and no further prospective buyers can be entertained until the buyer has decided which property to buy. A seller should never accept a buyer’s offer without a deposit.
The amount of the money depends on the laws of the state and the value of the property. Normally 1 to 2 % of the total purchase price on an average. No seller can ask for more than this amount, and no buyer can deposit any money less than this amount.
The deposited money is not held by the seller. Rather it is held in escrow or trust by a real estate broker or by a title or settlement company. Neither seller nor the buyer has access to the money until the deal is over. After the transaction is over the buyer gets the money back, and it becomes part of the down payment for the property.
Some buyers think that the full amount will be returned to them if the deal falls through. Sellers also think that the buyer forfeits the money by not honoring the deal, and the money automatically belongs to the seller. Neither the buyer nor the seller is correct in their assumptions.
If the buyer refuses to buy the property after the title company receives the deposit, then a part of it is deducted as cancellation fees. The rest is then returned to the buyer after both the parties agree on how it is to be disposed.
Normally a buyer can get back the full amount if the seller thinks during the early stages of the negotiations that the deal is going to fall through. If the seller agrees to the return of the full amount to the buyer, then the deposited amount is released to the buyer without the deduction of any cancellation charge.
Agreement is the best policy
There may be a lot of disagreements during negotiations. But if the property does not change hands and the deal does not go through then it is better for both the seller and the buyer to end the negotiations in an amicable note. Failure to reach an amicable settlement will result in the earnest money being held in escrow for a longer time and more legal complications for both the seller and the buyer.
Summary: Money used as maintenance expense for rental properties increases the value of the property and can be deducted from tax in the same year or over the following years.
Having a rental property has a lot of advantage for the owners. Spending money for all kinds of repair jobs or maintenance can push the value of the property when it is sold in the market. A second advantage is that the money thus used is deductible from tax paid in the same year. The money can also be deducted from the tax that you pay in the following years as depreciation in proportionate amounts. The cost of maintenance is considered as business costs and can be deducted from the tax only in the current tear.
Cost of maintaining the property
There are various kinds of maintenance expense which an owner of a rental property has to bear. Some of the common maintenance costs that are related to rental properties are given below:
Painting – this is normally a huge expense that the owner of a rental property has to bear. The rent of the property depends on its condition. The interior walls and the exterior walls all have to be regularly painted to keep the property spic and span so that the rent does not go down. The exterior walls lose their coat of paint faster than the walls in the interior of the building as they have to withstand the rain, snow and the hard sun. The cost of material, tools and labor all are a part of the total cost incurred for painting the doors, windows and walls of the property. The painting job has to be completed by fall so that you may be able to get tax relief when you submit your tax return for the same year.
Cleaning – Cleaning various portions of the property at different times is a must. The job of cleaning the interior floors, walls and ceilings have to be done during the time when one tenant leaves and the next tenant arrives. You may also have to clean the drains and the sewers to avoid any drain or sewage backup in the future. The drain pipes on the roof may also have to be cleaned before the rains set in. Whatever cleaning job you do yourself or get done by professional companies, never forget to keep the receipts for all the expenses you have incurred for labor, materials equipment and travel. All these costs get deducted from the tax that you pay for that financial year.
All kinds of repair – You have to categorize the various kinds of repair activities into business expense and capital improvement. A Capital Improvement is an expense that increases the longevity of the property and thereby increases the value of the property. For example when 10 percent of the roof tiles are replaced the expenditure falls into the business expense category. But if all the tiles of the roof are changed then the expenditure is a capital improvement. Business expenses can be deducted from tax in the same year while expenses for capital improvement can be deducted from the tax over a certain period of years.
Lawn – Expenses incurred for the mowing of lawns and trimming of trees and shrubs are all considered as part of property maintenance and fall into the category of business expenses. A whole new landscaping job falls under the category of capital improvement.
Miscellaneous expenses – There are many small repair jobs that you have to undertake.The repair of broken pipes, replacement of plaster which has peeled off from the wall, repair of broken door and windows is required to keep you property in good condition. All these are business expenses, and you should always remember to keep the receipts of your expense even if it is minor.
Benefits of a rental property
You are benefited from the rental property in two ways. Firstly you can earn some money by giving it out on rent. And secondly, you get a tax relief from the maintenance expense that you make for the maintenance of the property.
Summary: Living in Bay area apartments nowadays have become a luxury in itself because of rising rent prices. The rent prices have risen considerably from what they were ten years ago.
The apartments in the bay area have become fashionable and luxurious in the past few years. The charm of living on the coast, the proximity of the beaches, the beauty of the Pacific Ocean has attracted a large number of people from different parts of the country to buy apartments here. In addition to all these features, the transport facilities in the area are fantastic, prompting people to choose this area for their homes. Spacious rooms, designer gourmet kitchens, full-sized bathrooms, patios and balconies facing the wide expanse of the ocean have become the hallmarks of the apartments in this area. Special areas dedicated to recreation and leisure are sources of fitness and relaxation that are enjoyed by people living in this area.
Rise in rent figures
The Bay area has seen rents rising phenomenally as people scrambled to find a place to live in this area. The following examples show that the rent prices of Bay Area apartments have touched an all time high:
A third quarter report says that the renting process of apartments in the bay area has risen by almost 11.4 percent with average rent paid by a resident being approximately $2,234 every month. It is the highest average attained by rent prices during the last twenty years.
The rent of a studio apartment has risen almost by 12.5 percent and the average stands at about $1,931 which is being paid by tenants every month.
Tenants have to shell out about $2,562 on an average to live in an apartment that has two bedrooms and two bathrooms.
A single mother had to move to the outskirts of bay area because the rents were lower than the approximately $2,499 rent she had to pay for her apartment in the bay area. She has to spend most of the time in travel as the place her workplace is far away from the place where her son goes to school. Friends of this single mother had moved to neighboring states as they could not afford to pay the rent for an apartment in the bay area.
A couple had to move to another area because of the rise in rent prices in the area she used to stay. They were thinking of moving back when they got raises in their pay, but, unfortunately, the rise in rent was so high that they had to abandon their plans. The rent they pay now is about $1,600 per month.
Tenants are thinking of taking up extra jobs to pay the rent if they want to stay in the bay area.
Buying an apartment in this area has become a prohibitive task. It has become almost impossible if closing costs, maintenance costs, insurance, taxes and other costs are taken into account. The persons who can afford to buy an apartment here are trying to move into rented apartments that are much cheaper for them.
No sign of respite
Though there has been a lot of construction of new apartments going on, the rent prices of Bay Area apartments have remained steady and had not come down at all. The average occupancy has remained at approximately 96 percent whereas the rent has varied from 95 to 100 percent of what it was.