What does it take to be a property manager, and what should people expect if they start to rent out? We spoke with HGTV’s Scott McGillivray for his thoughts about the rapidly evolving property management industry.
Do people feel more empowered now to rent out their place because of sites like Airbnb?
There has been more exposure. When I started the show “Income Property”, everyone was like, “who cares about rental properties?” It was the first show about renters, and there was a lot of pioneering to be done in terms of selling this idea to people as a good investment. Then it kind of exploded into this almost acceptable form of securing your financial future, which is to consider the option of renting out your house when you’re not there, or have a secondary property or suite in your house. People rent rooms in their houses. It’s almost a common thing now.
Are people in that capacity ready to be a property manager? Is the average person ready to bring people in and know what to do?
There are certain protocols, and if you follow them, you are ensuring a better experience for yourself financially, legally, and liability-wise, and for your tenants. The truth is, a lot of people stumble into this, do it haphazardly, and figure it out as they go. They make a couple of mistakes and have a couple of bad tenants, and if it goes really bad, it unfortunately turns into a bad experience for them. But for a lot of people, they troubleshoot, they solve, they make a few small mistakes, and then they figure out how to rent a basement apartment or a room in their house.
To me, there is some basic training that should be done. You should never say, “Oh let’s post it, rent it, and see what happens,” because you will make mistakes that can cost you $5000, and you don’t want to do that, either.
When I talk about tried, tested, and true strategies about being a landlord, that always includes a tenant application. Always do a credit check and a reference check. Always make sure you have a signed lease with your tenants, that your tenants have insurance, and that your home insurance policy incorporates the fact that you might have a rental unit in your house, and then follow the state laws when it comes to how much rent you can collect in advance and what the damage deposit could be. If you follow that protocol, you’re really setting yourself up for success.
Are property managers going to pay more with insurance, or are they going to pay more local fees because they are renting a property out?
For the most part, your homeowner’s policy will not change significantly or may not change at all if you have a tenant in your house. I would just make sure there are no exclusions for having tenants in your house. But it is important for tenants to have their own insurance, because in most states you can’t insure a tenant’s belongings. They have to insure their own belongings. And then you want to make sure your policy has a liability clause in case the tenant hurts someone on the premises or whatever. So there’s some red tape. You never want to put yourself in a vulnerable position. But it’s not to the point where it’s going to be a dealbreaker. You’re just talking about a very small fee in order to make these things happen.
In terms of getting that property ready, are there one or two investments a homeowner should do to fix something up or install something to make the property more marketable?
Absolutely. I’ll give you a list of a few bonus features that can really increase the rent and give you ROI. One could be like including things like cable or internet. If you include those, you can usually get a premium, because a lot of people don’t want to set up those accounts themselves, and if your home already has it, it could be nominal to extend it to one more person. Things like a dishwasher and in-suite laundry are premium for sure. And if there’s access to outdoor space in some capacity where they can have a patio set or barbecue, that’s a big deal for a lot of tenants. Another recommendation that the novice landlord or investor wouldn’t know that can give you a great help and experience with your tenant is to give them a gift when they move in.
Are people doing renovations like a better kitchen or a second bathroom? What types of things should people be doing in terms of those areas?
Absolutely. We are working on a new show right now where we are going to be doing the right improvements to get you top dollar on rental properties. Realistically, if you do the right renovations on the right budget, you can more than make up for it with the rental rates that you can charge. And a lot of that is the new standard of rental properties. It’s the new normal.
How has the internet helped the homeowners in terms of pricing, listing, and connecting with renters?
The internet has completely changed things. When I first started and wanted to find tenants, I put a classified ad in the newspaper, which seems archaic when you think about it now. Now with the power of information, even social media, if you know how to market your properties properly, there’s an endless resource of potential. It’s a global market. Rental properties are a global phenomenon right now. I have a vacation property in Florida. I rented it in a couple of hours to a couple in Germany. You couldn’t have done that 10 years ago. That could never happen. But now, this is where my tenants are coming from. And it happens all over the world.
How do you know what rate to set it at? Do repeat tenants expect that same rate every year? Do you inch it up a bit?
You’d be surprised: on long-term rentals there are rate hike regulations, so you can only raise the rent by certain minimums or maximums. When it comes to short-term rentals, you’re not usually operating under the same terms and conditions of the landlord-tenant relationship. It’s treated more like a hotel than it is a lease when you do short-term rentals. There’s a lot more freedoms in those policies. One of the beauties is during the peak season, you can charge triple the amount of rent as the low season and it’s considered market rent, so there is no cap on the short-term market. You can also collect the rent beforehand in most cases, so you don’t have to worry about chasing down tenants and rent checks. You pay for your two week block now to reserve it. You’re actually securing your income before you provide the service.
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