Mistakes are easy to make when you are managing your own property instead of hiring a professional property manager. We are going to share the four biggest mistakes that we have seen self managers make, and perhaps it will help you decide whether you want to try to do it on your own, or reach out to an expert to take care of things.
There are different laws for different states, and one of the greatest mistakes made by self managers is not knowing those laws. You have to pay attention to city ordinances, county regulations and of course federal laws. There are housing codes and fair housing laws to stay on top of. Fair housing tends to be one of the most frequently violated laws in property management. You’re also required to follow the mandates of the Attorney General in both North Carolina and South Carolina. A lot of homeowners don’t know these laws; they don’t know that in North Carolina there is a Tenant Deposit Act they have to follow whether they use a management company or not. When you rent out your house, you have to put that security deposit in an escrow account that is titled “escrow.” You have to keep the accounting and be able to show what has been taken out and why. Lots of self managers get confused about whether you can deduct normal wear and tear from the security deposit. In North Carolina, you cannot do that but in South Carolina you can.
Understanding what you can and cannot do and paying attention to the strict time period are important parts of managing property. You have to return the security deposit in 30 days. You might not know these things and you might not have the time to learn them. When you don’t have a real estate license and you’re not taking continuing education classes and staying involved with the Realtors Association, it can be hard to access this information. We are attending seminars and meetings and conferences all the time, so we have a lot more information at our fingertips than a regular homeowner who has other things to do.
Pricing and Marketability
Property managers really know the area that your house is in and we have a good sense of how the rental market has been performing. A lot of times, a homeowner will think their house is worth more than the neighbor’s house because it has certain features that the neighbor’s house doesn’t. You have to look at the entire neighborhood and compare houses that are very similar to your own. Property managers have access to the Multiple Listing Service (MLS), which means we can see all of the homes available in the area. That information stays on the site forever, so we can compare what amenities and upgrades were added to a home over the years to bring it more value.
Our extensive knowledge about the market and our experience pricing rental homes gives property managers an edge in ensuring your home is advertised with the right price. We know the market area and we know the neighborhoods. Pricing is a balancing act. You have to price it right at the right time so it doesn’t sit vacant too long. You don’t want to underprice it either because then you aren’t maximizing your profits. It might be hard for self managers to see the trends in the market and understand why you should charge $50 more or take the price down just a bit after it’s been on the market for a few weeks without anyone interested in it.
North Carolina is a tenant-friendly state, and the laws regarding security deposits demonstrate that. You cannot charge anything out of the security deposit that pertains to normal wear and tear, even if damage is caused related to wear and tear. There is no real definition of wear and tear and there are no guidelines or bullets provided on how a property manager should distinguish wear and tear from damage. It’s easy for a self manager to make mistakes. You won’t be told when you can charge and when you can’t. That comes with experience. A property manager handling 20 move outs per month and returning those security deposits routinely will know what is normal wear and tear and what is tenant damage. We know what to take out of the security deposit and what the property owner will have to pay for. This is experience that comes from exposure.
The tenant’s security deposit has to be held in escrow. You cannot use it or mingle it with your own personal funds. When the tenant moves out, you have to return it within 30 days. If you aren’t able to do that, send them a letter explaining that you are still assessing the damage to the house, and you will send the deposit as soon as that is done. Be careful about what and how you charge. If you tell them you are charging $500 from the $1,000 security deposit, they are going to push back. First of all, $500 is a lot of money for touch up paint and second, unless there is nail polish or marker on the walls, touching up the paint is simple wear and tear. Scuffs from moving or hanging pictures are considered the owner’s responsibility, and if tenants think you improperly withheld money from the security deposit, they can file a lawsuit or a complaint.
Turn Key Process
Turn key means quickly getting your property ready for a new tenant when an existing tenant moves out. Once the current tenant leaves, you return the security deposit, which can happen within just a few days, depending on what needs to be done at the property. Then, you check out the property. Many self managers think that new carpet and new paint is required every single time you move from one tenant to the next. It’s not. As long as the carpet is clean and looks good, you can keep it for the next tenant.
What you don’t want is carpet or flooring that is damaged, walls that have giant marks or other damage and missing appliances. These are the things you do need to address before a new tenant moves in. We always recommend painting your walls a neutral color. Not everyone is going to want purple walls. Clean the carpets if you’re not going to replace them and just make sure the place is ready.
Waiting on contractors is often a problem for self managers. Property managers have access to contractors that can fix your property quickly and affordably. You always want to use vendors who are licensed and insured. If the person painting your house falls and hurts himself and he isn’t insured, you are going to be liable. Our vendors give us competitive pricing because of the volume of work we give them. We don’t have to haggle or ask for better prices, we get them right away. That’s a huge advantage property managers have.
These are just a few of the mistakes that self managers make. They are bound to happen due to a simple lack of knowledge and experience. If you have any questions, please contact us at Carolinas Metro Realty.