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The Time is Right

Why handing the keys to your rental over to a property manager may be your best move


If your portfolio or retirement account has been deflated by dismal Wall Street returns or if you are simply looking to increase your cash flow, now may be the time to look at investing in a rental property. With rock bottom mortgage rates and stable sales prices, the timing couldn’t be better.

Of course, a “good rental” is defined as one where the numbers crunch out ideally how much the purchase price and monthly payments can be offset by rental income. But doing the math is only part of the equation. Successful investors know the key to a good rental unit is finding a good tenant who pays his rent on time. A vacant unit, or a tenant who can’t pay, will quickly turn your asset into a liability.

According to Myrna Matsumoto, vice president of the property management division at Prudential Locations and veteran in the industry, there is a healthy supply of rental units on the market today.

Recent signs that renters have more choices are evident by “no shows” at rental showings or when prospective renters who, after being approved, change their mind because they have found another property to move into.

“One of the biggest mistakes a landlord can make is to rent to the first person who calls on a property. Yet in a renter’s market, that is often the mistake they make,” says Matsumoto. “Landlords become desperate and often resort to doing things in the name of cutting down on vacancy time upfront. But often, this can get them into trouble down the road.”

And when problems do arise, landlords who are too easily swayed by their tenant’s hardship stories forget to treat their rental as a business. But screening for qualified and eligible tenants is just one of the tasks a professional property manager will handle for their investor clients.

Because property management is a full-time job, professional property managers will not only know how to wade through the risky prospects to find the more qualified one, but also be prepared to handle service calls in the middle of the night or on weekends. Additionally, they understand how to deal with difficult or demanding tenants, collect monthly rent, maintain records for tax purposes, coordinate repairs and maintenance, and even pass on to property owners the bulk-rate discounts received from reputable service people and vendors who property managers use frequently.

“Investors are usually professionals, who do not have the time to deal with landlordtenant issues, such as taking emergency calls at nights or on weekends, broken water heaters, enforcing the Hawaii Residential Landlord-Tenant Code or the various problems that can arise,” Matsumoto says. “We have developed a system to deal with issues that are consistent with the state and federal laws and have a long list of reputable resources to call when we need them.”

Property management isn’t for everyone and comes with challenges. The same factors affecting the housing market in general job losses, credit issues and consumer confidence also are affecting the rental market. But for the investor who understands that the role of the property manager is to take the problems associated with being a landlord away, the lure of low interest rates and finding a property to create a positive cash flow is enticing.

Rents have increased slightly in 2011, with new units listed higher than existing comparable occupied units. But these rents are often dropped to avoid vacancies Variables affecting vacancies include rental amount, location, unit condition, timing and tenant qualification.

“If all the variables are met we can rent a unit within a week,” says Matsumoto.

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