If saving time and stress isn’t enough of a reason to hire a property manager – then how about saving money? What? How do you save money when there’s typically a 10 percent management fee?
Let me share five examples:
1. Owners often underprice their rentals and usually have a hard time waiting for the right tenant when a property is priced at market value. I recently had clients who bought an investment home that would’ve been properly priced at $4,300 per month. The owners decided to manage it themselves and they showed it a few times, but didn’t get any applications and quickly lowered their price to $3,800. By lowering the rent to $3,800 per month the difference amounts to $6,000 per year. Our property management fees to the owner would have been $5,160 for the year saving the owners $840, plus the time/stress of rent collection and coordination of home repairs if they allowed us to rent it at $4300 per month.
2. Hawaii homeowners seem to travel often or are too busy to show a vacant home that they try to manage themselves. Owners have to put off showings until they return home or find time in their schedules. This ends up leaving a rental unoccupied and not producing any income. If it takes an owner three months to find a tenant vs. two weeks with a property manager (and let’s say the rental is $3,000 per month) then the owner is losing $100 a day in income. Two and half months is about $7,500. The management fee for the whole year is $3,600. A homeowner would have about $4,000 more dollars in their pocket had they hired a qualified and competent property manager.
3. Let’s take a look at the mainland owner trying to manage a house from afar. Although off-island owners are legally required to have an on-island manager, many try to save that 10 percent fee by doing it themselves. The problem is that they are just one emergency away from having to shell out potentially thousands of dollars returning to Hawaii to deal with their house emergency. Currently, a round trip ticket from San Francisco is more than $500, it’s more than $700 from Washington DC and from Miami it’s more than $900. Airfares are pretty good right now – these could spike up quite a bit. And who wants to come to Hawaii alone? So you are probably going to double the airfare and may need to rent housing while dealing with the emergency. The home owners will probably incur lost time or business at their regular work while dealing with the emergency. Flying in for a rental problem will take lots of time and money and may also rob owners from taking a real vacation that year.
4. A good property manager will save owners a lot of money on repairs. Property managers coordinate a lot of home repairs. A homeowner who needs an emergency plumbing repair will typically pay a high emergency plumbing rate. Property managers give a large volume of work, throughout the year, to different trades and pricing does not spike for emergencies. In some cases, due to the volume of work received, a contractor will squeeze in a job to help out a property manager. Homeowners are also more likely to be talked into extra work or could be quoted a rather high price and not even know it. A savvy property manager can protect homeowners because they are more in tune with what repairs cost. A recent example that highlights this would be a quote we received to remove asbestos from a condo ceiling. The owner called the same company for a quote and the quote to our property management company was $1,335 lower than the homeowners quote.
5. Realtors have very specialized knowledge and are required to take a real estate course and pass a state exam to work as a property manager. Property management is an area where you need to know landlord tenant code. Homeowner’s risk violating Fair House Rules, being discriminatory or failing to disclose lead-based paint, all of which can lead to a lawsuit. The savvy rental scammers know property managers will evict them efficiently if they don’t pay rent, so they typically prey on homeowners who will often give them second, third and forth chances. It can take homeowners months to get tenants out because they don’t know the proper protocol on how to get a non-paying renter to move out. Homeowners that have had to evict someone, usually hire a property manager the next time – if they even stay in the rental business. The eviction process is one thing that will sour you quickly on being a landlord.
There’s a lot to know when renting a home and owners should get assurances that they are getting a well-qualified, responsible tenant. The best way to do that is to hire a competent, caring property manager. As an added bonus, the home owner that hires a property manager will probably come out ahead at the end of the year on the financial side as well!
Greg Siok, RA, and Cindy Siok, R, own At Home Hawaii where Greg heads up the property management division and Cindy works as Principal Broker while also helping buyers and sellers throughout the year. At Home Hawaii has been in business 9 years and was named among Hawaii’s “Fastest 50” growing companies in 2019.