10 Simple Operating Procedures for a Rental Property

1.1 Physical Inspection and Action Required

Before taking on a new property management contract, it’s crucial to conduct a thorough physical inspection. Here’s a detailed breakdown of the process:

  • Preliminary Exterior Inspection: Visit the property to assess the exterior.
  • Interior Inspection: After contract execution, inspect the interior.
  • Tenant Notification: If the property is tenant-occupied, notify tenants about the inspection’s purpose, emphasizing it’s not to check compliance with rental terms.

1.2 Contract Execution and Notice to Tenants

Upon signing the Property Management Agreement (PMA), it’s essential to notify all tenants about the change in management. Ensure they receive information about management personnel responsible for rent, service requests, and general communication.

1.3 Financial Analysis and Action Required

To manage the property’s finances effectively, follow these steps:

  • Request Lease and Rental Agreements: Gather all lease and rental agreements, including recent rent changes.
  • Income and Expense Statements: Obtain income and expense statements for the past two years.
  • Rental Rate Assessment: Check if any rents are below market rates and adjust them if necessary.
  • Rent Increase Notices: Follow California law for sending rent increase notices (30 days for increases of 10% or less; 90 days for higher increases).

1.4 Set Up Accounting and Property Management Software

Create a new “Owner entry” in the property management software system, entering all relevant property, tenant, and rent information.

1.5 Fair Housing Compliance (Owner’s Acknowledgment)

Ensure the property owner signs a “Fair Housing Laws” acknowledgment form, demonstrating compliance with fair housing regulations.

2. Marketing your rental

2.1 Preparing the Vacant Property for Market

After inspecting the property, prepare it for the market:

  • Address Repairs: Make necessary repairs and adjustments to bring the property to market condition.
  • Yard Signs: Order “For Rent” yard signs for the property.
  • Property Signage (5-15 Units): If applicable, post signs with management company details.
  • Marketing Materials: Create marketing materials and rental terms for the vacancy.

2.2 MLS Participation and PM Cooperation

Submit the property to Multiple Listing Service (MLS) and consider listings on LoopNet and CoStar for larger properties or non-residential units.

2.3 Marketing Material and Activities

Promote the property through various channels:

  • Farm Area Marketing: Distribute flyers or postcards.
  • Mailing Lists: Target potential tenants with mailers.
  • Business Community: Share information within professional networks.
  • Real Estate Community: Send direct mail to other licensees.
  • Open House: Host open houses on weekends.
  • Office Promotion: Display property details in the office or window.

2.4 Showing Properties

Arrange property showings for prospective tenants:

  • By Appointment with PM
  • Through Co-op Brokers
  • Managed by On-site Manager
  • Maintain a showing log.

2.5 On-site Manager Duties in Marketing

On-site managers play a crucial role in property marketing:

  • Ensure units are market-ready.
  • Conduct showings and report results.
  • Coordinate with the appointment desk.

3. Renting and Leasing

3.1 Applicant Screening Process

Implement a thorough applicant screening process:

  • Screening Application: Require applicants to complete a screening application.
  • Tenant Screening Service (TSS): Utilize a reliable tenant screening service.
  • Screening Criteria: Follow specific criteria and avoid prohibited characteristics.
  • Income and Debt Verification: Verify income and debt ratios.
  • Credit Report: Assess credit reports and judgments.
  • Tax Liens and Liquid Assets: Evaluate tax liens and liquid assets.
  • Criminal Background Check: Conduct background checks in compliance with fair housing laws.

3.2 Co-applicants and Co-signers

Ensure that co-applicants meet the same criteria as the primary applicant. All other individuals residing in the property should be screened or added to the lease.

3.3 Credit Denial

In the event of a credit denial, provide the required Notice of Denial of Rental Application for Credit Reasons, as per legal requirements.

3.4 Fair Housing Compliance (Accessibility)

Base tenant selection solely on qualifying criteria, avoiding discrimination based on various characteristics. Ensure annual Fair Housing training for all personnel involved in screening.

3.5 Assistance Animals

Accommodate tenants requiring assistance animals, following HUD guidelines and regulations. Avoid breed or size discrimination and do not charge extra fees for assistance animals.

3.6 Rental Agreements and Related Forms

Use California Association of REALTORs® forms for all rental agreements and related documents.

3.7 Lease Negotiations

Generally, adhere to established rent rates and terms, but consider requests for different terms, which should be referred to the property manager for evaluation.

3.8 Tenant’s Letter of Interest

Handle tenant letters of interest with clear policies, including non-refundable deposits and rights to remove properties from the market.

3.9 Property Owner as Landlord, Signature Process

Deliver rental agreements electronically for owner signatures, and, if necessary, allow property managers to sign on behalf of owners temporarily.

3.10 Agency Disclosure/Confirmation

Provide agency disclosure and confirmation forms for lease agreements, indicating that the property manager represents the owner exclusively.

3.11 Move-in/Move-out Process

Conduct move-in inspections with tenants, completing statements of condition forms. Ensure proper handling of move-out inspections.

3.12 Compensation to PM Co-op

Deposit tenant funds into the Trust Fund, ensuring that fees or commissions are withdrawn only after funds clear the bank.

4. Property Maintenance and Repairs

4.1 Routine Property Inspection

Implement regular property inspections:

  • Single-Family and Single-User Non-Residential Properties: Perform weekly drive-by inspections.
  • Multifamily and Multitenant Non-Residential Properties: Inspect weekly, including common areas.
  • On-Site Manager Involvement: Collaborate with on-site managers if applicable.

4.2 Custodial Maintenance

Assign custodial maintenance tasks to appropriate personnel, including on-site managers or vendors. Tasks may include trash pickup, cleaning, and landscaping.

4.3 Vacant Off-Market, Back-to-Market Work

On-site managers should oversee cleaning and repairs upon unit vacancy, and expenses should be deducted from the tenant’s security deposit.

4.4 On-Site Manager Maintenance Responsibilities

On-site managers should handle minor repairs and maintenance tasks within their capabilities, such as addressing blockages, leaks, or electrical issues.

4.5 Tenant Request for Repairs or Service

Process tenant requests for repairs promptly, prioritizing based on the urgency and nature of the request.

4.6 Priority of Repair Requests

Establish clear priorities for responding to repair requests, categorizing them based on urgency and potential impact on health and safety.

4.7 Repair/Service Orders and Vendor Selection

Create work orders for repairs and select appropriate vendors. Ensure vendor communication and approval when necessary.

4.8 Emergency Repairs or Service

Define emergency repairs and establish a protocol for immediate response and resolution.

4.9 Scheduled Maintenance

Plan and schedule routine property maintenance, including landscaping, pest control, and HVAC servicing.

4.10 Safety Inspections

Conduct regular safety inspections and document compliance with safety regulations.

5. Rent Collection and Late Notices

5.1 Rent Collection Dates and Methods

Specify rent collection due dates and methods, such as electronic payments, checks, or money orders.

5.2 Notice of Rent Increase

Provide proper notice to tenants when increasing rent, adhering to state and local regulations.

5.3 3-Day Notice to Pay Rent or Quit

Send a “3-Day Notice to Pay Rent or Quit” promptly in the event of rent non-payment.

5.4 5-Day Notice to Quit (Non-Payment of Rent)

Serve a “5-Day Notice to Quit” in cases of continued non-payment.

5.5 Tenant Bankruptcy

Consult with legal counsel in cases of tenant bankruptcy and follow the legal proceedings.

5.6 3-Day Notice to Perform Covenant or Quit

Issue a “3-Day Notice to Perform Covenant or Quit” for lease violations other than non-payment of rent.

5.7 Tenant’s Right to Recession (Crime-Free Addendum)

Notify tenants about their right to rescind in accordance with the Crime-Free Addendum.

5.8 Security Deposit Transfers

Properly transfer security deposits, including interest and any applicable deductions, upon tenant move-out.

5.9 Tenant’s Repair Request Deductions

Document and communicate any repair request deductions from the security deposit.

5.10 Tenant Move-Out and Final Account

Complete the tenant move-out process, assess any damages, and return the security deposit as required by law.

6. Tenant Notices to Vacate

6.1 Tenant Notices to Vacate and Lease Expirations

Receive and process tenant notices to vacate and handle lease expirations.

6.2 Security Deposit Disposition and Final Accounting

Follow the legal requirements for security deposit disposition and final accounting upon tenant move-out.

6.3 Property Condition and Deductions

Assess property condition and determine any deductions from the security deposit.

6.4 Tenant’s Notice to Move-Out (Owner’s Signature Process)

Provide tenants with the necessary forms for move-out notices, including obtaining owner signatures when applicable.

7. Reporting

7.1 Monthly Owner’s Statement and Reporting

Generate monthly owner’s statements detailing property income, expenses, and any repairs or maintenance expenditures.

7.2 Annual Statements

Provide annual statements for tax purposes to both property owners and tenants.

7.3 Quarterly Inspections and Reporting

Conduct quarterly property inspections and provide reports to property owners.

7.4 1099 Reporting

Ensure accurate 1099 reporting for property owners, vendors, and any contractors.

7.5 Budget and Performance Review

Review and update budgets annually, considering property performance and market trends.

8. Record Keeping and Document Management

8.1 Document Retention

Maintain records in compliance with state and federal regulations, including lease agreements, tenant screening reports, and financial records.

8.2 Secure Document Storage

Safeguard sensitive documents and data through secure digital storage and physical file protection.

9. Tenant Education and Communication

9.1 Tenant Communication Protocols

Establish clear communication protocols with tenants, including response times for inquiries, requests, and emergencies.

9.2 Tenant Education

Educate tenants about their responsibilities, rights, and the property’s rules and regulations.

10. Owner Communication and Reporting

10.1 Owner Communication

Maintain open and transparent communication with property owners, providing regular updates on property performance.

10.2 Performance Metrics

Share key performance metrics and financial reports with property owners.

Establishing and consistently following comprehensive Standard Operating Procedures (SOPs) for property management is essential for efficiency, compliance, and maintaining excellent relationships with property owners and tenants. By implementing these guidelines, property management professionals can navigate the complexities of property management with clarity and professionalism.

These SOPs should be adapted to local and state laws and regulations, and property management companies may need to customize them further to suit their specific needs and preferences. Regularly review and update SOPs to reflect changes in laws, industry standards, and company policies, ensuring that property management operations remain efficient and compliant.

10 Simple Operating Procedures for a Rental Property

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