Landlord Tenant Q&A
Q. I’ve been investing in rentals for the past 30 years and currently own 14 units in various parts of Oahu. I’ve been managing them myself, but have reached a point in life where I want to start downsizing and spending more time traveling. I understand many property managers are also real estate agents who can buy and sell properties. My thought is to turn the properties over to a professional property manager who can handle everything for me related to the rentals, including rent collection, maintenance, and bookkeeping and at the same time start looking for buyers. Either I or my accountant will always be available to discuss listing the properties or any offers. I realize there will be some fairly complicated tax ramifications to consider. Is this a feasible plan? How would the property manager be compensated for their service and time? I assume we would enter into some kind of contract.
A. I believe the first step would be to conduct interviews with several property managers to find out (1)what services they offer, (2) what are the fees for their services, (3) if their company does real estate sales, and (4) if not, would they recommend another company to handle sales, which you should interview separately. With regard to selling the properties, you will need to enter into a listing agreement with the company you choose.
The relationship with the tenant is key because scheduling showings of the rental can be a nightmare for an agent, whether it’s your property manager or a sales agent.
You also need to keep in mind that when a property is listed for sale, many agents or property managers compensate tenants for inconveniences of showings and open houses with a reduction in rent. In some cases, the tenant may just choose to vacate.
A vacant property has its pros and cons. The “pros” are that it’s easier to show and conduct open houses, the unit/home is always clean, and it appears bigger when empty. The “cons” would include exposure to vandalism, the need for greater attention to appliances and other components due to non use, and loss of income.
Whether selling a property is feasible based on current market conditions would be assessed by the real estate agent but the tax ramifications should be analyzed by your accountant or tax advisor.
All of the above should be reviewed with the property manager and/or sales agent so everyone involved has a better overall picture of the situation. – Darlene Higa (RA)
Answers to questions in Landlord Tenant Q&A are provided by members of the Oahu Chapter of the National Association of Residential Property Managers (NARPM).
NARPM is the only real estate organization dedicated exclusively to residential property management. Its stated mission is to support the professional and ethical practices of rental home management through networking, education, and certification.
NARPM now has a national membership of over 2,000. The Oahu Chapter, founded in 2004, has become the largest in the nation with 166 registered members.
Disclaimer: The answers provided in this column by Realtors address individual cases and should not be construed as interpretations of the law. For specific information on Hawaii State Law, go to http://hawaii.gov/ dcca/areas/ocp/landlord_tenant or contact your attorney.