Hi. This is Kenneth Ferreira with Ramona Property Managers and today I’m getting the details of when you need a license and what you should look for if you choose to hire a professional property manager.
But first and foremost, what I recommend is everybody that’s in real estate – whether you have goals to be the next big developer, you’re an accidental landlord, or somewhere in between – and this could be controversial, I don’t really care – everybody that’s buying real estate and owns real estate should manager their own property for a period of time, at least a year.
You need to learn what to look out for you and you should understand all the systems needed for good management because it’s a blind spot for a lot of investors. What do I mean by blind spot?
Investors and accidental landlords should understand that good management is not about collecting a check and a deposit. Yes, that’s part of it, but a good investor should experience the issues that happen with properties all the time.
The more that you understand the things that could go wrong with the property and how to overcome them and fix them, it makes you a better well-rounded investor. So that’s why I recommend managing your own property before handing over the keys. This way you have the experience, no one can take it from you and when you hire a property manager there will be a depth and foundation to the relationship based on trust and understanding.
So if you’re managing your own properties, do you need a license? If you are managing your own property or portfolio, then no, you can manage your own properties without having a real estate license.
In the State of California, if you conduct more than 6 real estate transactions per year on behalf of another person, you need a license. So If you’re hiring a property manager, that person does need to have a license. They need to be a licensed agent because they’re going to understand the tenants’ rights, landlord rights, local residency codes and be well rounded with issues of compliance to minimize your liability.
From understanding when a subsidized application must be accepted (not necessarily approved), to whether or not you can evict a tenant for allowing their kids can run through the common area at 8pm on a Tuesday (you can’t), a good property management company is going to recognize potential “gotcha” issues and probably even have an attorney (or two) on speed dial to get through the sticky spots.
They’re going to need a collection company, a list of vendors taking care of maintenance on properties. Water, heat, electricity, flooring, plumbing, the list goes on. And you don’t want someone with just a list of vendors, you want someone with a list of vendors who answer the phone when they call.
You want to make sure leasing and rental agreements are current and updated on a regular basis.
Also at some point, you should ask yourself if this is the highest and best use of your time if you’re doing real estate investing and you’re also a property management company? I actually kind of like it but also you could get to the point where you can’t take it anymore and you have to farm it out or maybe you just bring it in-house.
Another area that you need to be careful of is deposits. In California, you have 21 days after the tenant returns possession to provide a full accounting of the security deposit. Remember, a deposit is not your money…until it’s needed to fix or replace something so you need to make sure that deposits are held in a separate account.
Again though, at the end of the day, everyone should be their own property management company, at least for a short time to better understand the policies, systems, and procedures required to successfully manage a property or portfolio.
Even if you decide not to maintain the status of managing your own properties, guess what you’ve done? You’ve learned it, you can outsource it but you also make sure you understand…and at the end of the day that understanding can save you a lot of money.
