Avoid Being Scammed, Hire a Property Manager!

Many landlords refuse to hire a property manager because they don’t want to pay the management fees. But take a look at this article: Fremont Rental Scam. The minimal fees charged by a property manager could have saved these landlords tens of thousands of dollars. No tenant screening process is full proof and a property manager’s policies and procedures can’t prevent all potential losses. But as a property manager, here are some things Park One Properties would have done differently to prevent these landlords from being ripped off:

How we can help

First, rarely will we accept a pre-printed credit report from a prospective tenant. It is too easy nowadays for scammers to produce a fake report. We typically require any applicant for a rental property to allow us to pull a credit report ourselves. This helps to assure it is an accurate and current report. The report includes all previously known addresses of the applicant and a search of court records for any prior evictions.

Second, we require each prospective tenant to provide a copy of their id. The name on the id must match the name on the credit report as well as all the other documentation we require from the applicant such as pay stubs, income statements, etc. The address on the id must match one of the addresses provided on the previous address report.

“It is too easy nowadays for scammers to produce a fake report.”

Third (and this is a big one) we NEVER hand over keys to a tenant until we have received the first month’s rent and the security deposit in “good funds”. We typically receive this in the form of a cashier’s check, but will also accept a money order or wire transfer. We are sometimes willing to accept a personal check, but only if there is at least 2 weeks between the time the funds are provided and the time the tenant will receive the keys. This allows us ample time to deposit and clear the check. BTW, we also require the tenant to provide proof that they have obtained renter’s insurance before giving them keys.

Fourth, we do not accept “promises to pay” that allow tenants to string out late rental payments. We are very proactive about rent collection and take quick action by issuing a “Notice to Pay Rent or Quit” as soon as legally allowed. This notice is the legal first step to a forcible eviction and serves as a loud “shot across the bow” by letting the tenant know we are serious about collecting the rent and willing to evict them if necessary.

Knowledge is power

Finally, we are very knowledgeable of the legal eviction process (aka Unlawful Detainer process) and can move through the process very quickly. Many landlords lose precious time just trying to figure out the process. After months of trying they are sometimes forced to start over because their Notice to Pay or Quit, Lease, or other relevant documentation was not prepared correctly or not served on the tenant correctly. When required to evict a tenant for non payment of rent, we can typically have it completed within 30 to 45 days. We once successfully evicted a tenant for non payment of rent in 21 days.

As property managers, we can’t guarantee that we can prevent any and all losses to a landlord. But because of our established policies and procedures, experience, and knowledge of the legal system, we can guarantee that a landlord’s chances of suffering a loss are greatly diminished by hiring us. No one is crazy about paying fees. But the minimal fees charged by a property manager are peanuts compared to what a landlord could lose because of a bad or fraudulent tenant.


The Proposed CA Assembly Bill 1059 is Bad for Small Commercial Property Owners

I recently found out via Costar that a new assembly bill (Assembly Bill 1059) has been proposed that would ban dual agency for commercial properties in California.  This can be really bad for owners of small commercial properties.

Dual agency occurs when a real estate broker represents both the buyer and seller, or both the landlord and tenant, in a commercial transaction.  Even if two different agents from the same brokerage represent the buyer and seller, or landlord and tenant, separately, this can still be considered dual agency.  As a property manager, I work for many individuals, families, or small groups of investors who own small to medium size commercial properties.  Part of my responsibility to the owner is to lease any vacant units.  Many of the commercial units in these properties are small.  Because of that the lease amount is lower and the subsequent commission paid to a real estate broker representing the tenant would be minimal.

For example, suppose there is a 600 sf retail commercial space listed for lease at $1,500 per month.  Suppose this space gets leased at that rate for 3 years.  The total amount of rent paid over the term of the lease will be $54,000.  If the commission charged to the owner is the standard 5%, the commission paid would be $2,700.  The listing broker (the one representing the owner) and the broker representing the tenant would then split this commission and receive $1,350 each.

For the listing agent, this amount might be sufficient for the effort involved.  But is it sufficient for the effort required by the tenant’s broker?  Absolutely not.  Because every tenant’s needs are different and because commercial properties vary so greatly in size, condition, location, quality, and other features, it is actually quite a challenge to align a tenant with the right commercial space.  The broker representing the tenant has to research, preview and show the tenant a multitude of properties before finding the right one.  This process could take 3, 6, 9 months, or even longer.  And then the broker has to put in more time to negotiate the lease and assist in preparation of all the paperwork.

Because the effort is large and the compensation is small, most commercial brokers are not willing to represent a small commercial tenant.  Hence, most of the calls coming into a broker that is listing a small commercial space will likely come directly from the prospective tenant.  And most small commercial spaces are ultimately leased by the listing broker directly to the tenant.

If AB 1059 passes and the listing Broker of a small commercial space is not allowed to also act as the broker for a prospective tenant, given what I have described above, how will the property ever become leased?  If no brokers are willing to represent small commercial tenants because the small compensation does not warrant it, and the listing broker cannot represent the tenant, then what happens?  Imagine if the listing broker of a small commercial space receives a call from a prospective tenant wanting to see the property and must tell that prospect “I am sorry, but it is illegal for me to represent you.”  It would make it very difficult for this space to get rented, and the ultimate loser becomes the property owner.

There may be situations related to commercial property sales, or leases of larger commercial spaces, where features of this legislation might serve the public well.  But when it comes to small commercial properties, I think this bill will hurt property owners.  Unless it is modified to more appropriately consider the needs and concerns of small commercial property owners, I will be asking my state representative to vote NO on this bill.

To read more about this proposed bill, check it out on Costar  Info on AB 1059 from Costar


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