Seattle Property Management Guide: Everything You Need to Know

If you have ever rented an apartment or a home, you know that the property manager is typically the first person you reach out to when you have an issue or question. They are often in charge of collecting rent, showing the property, and sending you the paperwork when you are ready to sign a lease.

Property management services can make things much easier for the property owner because they help to facilitate the more complicated and/or time-consuming aspects of renting and leasing process. A real estate property manager is hired by the owner of a property to be the caretaker and handle day-to-day issues, though the specific delegation of responsibilities can vary by the management firm and the relationship with the owner.

First of all, it is important to differentiate between a property manager and a landlord. A landlord actually owns the property, whereas a property manager is hired by the owner and works as a middleman between tenants and owners.

Property management includes a broad range of services including:

• Setting or recommending rent rates based on the market and the specific property’s area, amenities, and features.
• Collecting rent through various means, such as personal checks, online payment systems, or cash payments directly from tenants. They are also responsible for collecting late fees and issuing warnings to tenants who are late on their rent payments.
• Increasing rent rates and alerting tenants of any changes to the conditions of their rental. Most leased properties will increase rent rates by 1-2% every year based on inflation or to match market rates. Property management companies will typically calculate these changes and provide the notices required to make them enforceable.
• Finding and screening tenants (discussed further below)
• Managing complaints and coordinating with maintenance services to conduct repairs.
• Scheduling routine and turnover maintenance for the property, such as landscaping, interior and exterior painting, pool cleaning, and seasonal inspections of HVAC systems.
• Communicating all important details to the property owner, such as vacancy rates, maintenance projects, and any legal issues.
• Staying current on applicable regulatory changes that can affect the rental property or the rights of tenants.

A local property management group can be very beneficial to a rental income property owner by taking on the stress of managing the rental property.

This lovely city in the Pacific Northwest is quite unique in terms of real estate for several reasons. Having an experienced, local property management service that thoroughly understands this market is invaluable.

Climate Impacts

Seattle is known for its rainy weather, but many people fail to realize the impact it has on housing and renting. Unfortunately, the effects of rising temperatures and sea levels in Seattle mean that many areas could begin to experience severe and permanent flooding.

King County is the largest in terms of both area and population. It covers 2,155 square miles and is home to over 2.2 million people. The metropolitan city center is located within King County and is where the majority of Seattle-area property is situated.

Pierce county has 891,000 inhabitants and covers an area that is nearly 1,700 square miles. While Snohomish is slightly larger geographically at 2,100 square miles, but home to 815,000 people, making it the third largest county in the State, by population size.

Other large population counties in Washington include Spokane, Clark, and Thurston counties/Other counties near Seattle include Kitsap, Thurston, and Skagit counties.

Trends in Population Growth

In 2010, King County’s population grew by 28.6%, and while this rate has slowed down, it is still seeing a fairly steady and significant growth rate. In fact, the region of Seattle is growing at a rate of 188 people per day!

How it all impacts Property Management

Since the Seattle area is steadily growing in population year over year, the Seattle housing market is becoming incredibly competitive and consequently, prices have increased.

Considering that 54% of Seattle residents live in renter-occupied households, there is a substantial opportunity for Seattle real estate investments. Based upon not only the high demand for homes but also the high expectations within those homes, property management requires a significant amount of work and effort. Among those tasks are advertising, screening tenants, and handling rental payments.

Turning to a local property management company is a smart and safe move for Seattle real estate developers wanting to rent out their properties. Property management services can make it far easier to capitalize on the Seattle housing market, without having to worry or deal with the day-to-day labor and liabilities of managing tenants. Indeed, utilizing a property management company is the viable and ideal avenue toward residual income.

Since the intense growth rate of the city of Seattle has slowed down slightly over the past few years, demand is still high while property prices have started to decrease.

Seattle still tops the list among the best cities for real estate investments, and experts are predicting an optimistic real estate market forecast. The median home value is expected to rise as demand continues to increase, creating quite a hot market for investors.

The Washington Center for Real Estate Research claims the Seattle housing market forecast is quite positive – as the availability of homes for sale in the state has grown by 17.6% from 2017 to 2018. However, paired with home prices steadily increasing year after year, it is imperative to find the right opportunity.

There is a lot more to owning rental property than just, well, owning a property. If this type of real estate investment is something you are considering, there are a few things to be aware of before making any major purchases of rental properties.

The Renting Process

While there is some flexibility as a property owner to set rules and regulations on rent, there are specific processes that are required to follow by state and local law. The City of Seattle in particular has a specific Rental Registration and Inspection Ordinance(RRIO) set in place to ensure that any property listed for rent is safe and in compliance with city housing laws.

Any rental property must be registered with the Seattle government. This registration must be renewed every two years, with an inspection occurring at least once every decade. Property owners are also responsible for hiring a qualified rental housing inspector or city inspector, and are subject to penalties if the premises violate these regulations. It is best to check the RRIO checklist before scheduling your initial inspection to be confident that you are compliant.

Getting Documentation in Order

The Washington Residential Landlord Tenant Act (commonly referred to as the “Landlord Tenant Act”) covers all residential rentals in Washington State, including Seattle. Landlords are required to maintain, at a minimum, the following documentation:

• The specific written rental agreement for the property, with rules that apply equally to all tenants, and a unit condition checklist.
• Records of rental payments.
• Copies of notices given to tenants, with evidence that all legally required notices were properly served.
• Any information or documentation to support a termination of tenancy, such as police incident reports or complaints from neighbors.

This Landlord Tenant Act also states that the property owner or landlord is responsible for meeting certain conditions (such as maintaining the property to pass inspections and installing smoke alarms), as well as responding to maintenance requests in a timely fashion. Tenants are responsible for notifying the owner of any issues, disposing of garbage properly, and refraining from using hazardous materials on the premises.

All of this information (along with other rules and regulations a property owner wishes to put into place) must be stated in a legal document that is signed by both the owner or property management group and the tenants. Some other regulations that may be helpful in the document are:

• Limits on excessive noise or number of people allowed within a unit (to discourage parties).
• Rules on decorations or items on the exterior of the building (including flags, exterior lights, holiday décor, or landscaping).
• Rules for painting walls or drilling holes. Some property owners allow tenants to paint walls if they are re-painted back to an original color before the tenant moves out.
• Limits on pets, such as how many are allowed, specific breed or weight regulations, and types of animals.
• Replacing batteries in smoke detectors.

To ensure that the lease agreement contains all of the required legal information to protect all parties, it is recommended to contact an attorney that specializes in real estate. The failure to specify most rules and regulations will result in tenants who are difficult to manage and could very costly in the long run.

Average Rental Costs

Since Seattle has grown so quickly, rental rates have increased by 3% annually, with the average rent for a one-bedroom home standing at $2,122 – which is over $500 above the national average.

In order to calculate a fair market rental rate for an owned rental property, factoring in the following variables is necessary:

• Age of amenities (such as appliances, overall design, and carpeting or floors)
• Square footage
• Additional property offerings (such as a pool, gym, laundry facilities, and designated parking)
• Location and proximity to popular destinations (such as major highways, popular businesses or shopping centers, and the desirability of neighborhoods)

Average Utility Costs

Utility costs will also need to be factored in. Some property management companies require tenants to pay these on their own by setting up an account with Puget Sound Energy(PSE).

However, this is only possible if each unit has separate meters, gas lines, and water systems. Otherwise, a landlord or owner may want to charge a capped fee that is equivalent to the average utility cost for the unit.

According to the Seattle Housing Authority, a household’s utility costs should vary based on the number of people living in a home. If it is a single unit, utilities are generally priced between $105 to $115 per month, while larger units will pay $260 to $465 for utility charges.

Moving Out

Once a tenant moves out, there may be some additional charges required to repair any damages or to simply cover the damages that go beyond reasonable wear and tear. It should be noted that the Landlord Tenant Act specifies that a tenant cannot be charged for “reasonable wear and tear” resulting from their tenancy, but tenants often can leave substantial damage that will need to be repaired to maximize the potential rental value of the property.

Any damage deposit must be set by the Property Management Company, landlord, and the tenant in the lease agreement. This money is typically deducted from the security deposit that is made before the tenant moves in. The total amount of the deposit is generally equivalent to approximately one month’s rent though regulations in the City of Seattle have capped such deposits at the amount of one month’s rent.

Some of the most common deductions made during move out are:

• Property damage
• Excessive cleaning costs
• Covering any unpaid rent or fees
• Remainders of utility bills

It is essential to inform potential tenants of all potential payments and charges before any meeting. Prospective tenants most commonly ask questions regarding potential deductions from the deposit when inquiring about renting a home. A property management company needs these rules beforehand since they must be incorporated into a rental agreement.

There are many things to consider when buying a home for a rental property. In addition to the appearance and quality of the home’s structure, buying investment property requires a great deal of due diligence.

Collect the Key Market Data

You may be wondering what to look for when buying a house for a rental property. The truth is that there is a lot more to real estate investing than just buying attractive properties and listing them for rent.

Since the Seattle area is such a highly competitive market, you must have accurate data to ensure that you will be able to turn a profit. In the simplest of terms, the amount you will receive in rent must be higher than the overall cost of the mortgage payments, operations, and utilities.

To determine if this is possible, you will need to research information on the specific neighborhood and overall market data for Seattle specifically. This includes data for:

• Average Household size
  • Will your tenants be families with several children or single units?
• Rental market rates
  • What is the average rate for properties of a similar size in the area?
• Occupancy Rates
  • Are other rental properties at full capacity or are there multiple units available?

How Much do Property Management Companies Charge to Manage Rental Properties?

If you are planning on using a property management company to handle the renting process, you will need to factor in these costs.

The service fees will vary depending on the property management company, as well as the requirements for management. For example, if someone is required to be at the property during business hours, the charge will be higher.

Some management services set their rate as a percentage of the monthly rental value of a property – typically between 8 to 12%. Others will charge a flat rate fee.

Understand the Scope of Renovations

You will often times need to factor in renovations when buying rental property – unless things are truly in pristine condition. Even then, you may want to touch up the interior and exterior paint or hire a cleaning service.

However, over time, any building (even a brand new one) will require renovations of some kind. In order to keep your rental prices as high as possible, you must be able to offer desirable rental properties and amenities, like new appliances and modern designs.

When buying investment property, it may not save you money in the long run to purchase a “fixer upper” due to the scope of renovations that will be needed upfront. Properties in good condition will typically require renovations and repairs five, ten, and twenty years out.

In order to determine the costs of renovation, the best practice is to consult a trustworthy contractor to provide estimates for upfront renovation costs, as well as recommendations for additional repairs that will be needed down the road.

Real estate investment metrics can be tricky and overwhelming if you do not understand what they mean. This is another reason why partnering with a property management group is beneficial, as they are responsible for monitoring many of these financial metrics and alerting you (the property owner) of any changes.

These are the most important property metrics that both you and your property managers should be analyzing.

Average Renter Lifetime value

On average, a single-family renting tenant will stay in the same property for three years. While three years is the average, there are numerous variables at play, and it could change depending on the location and cost of the property. A property management company can calculate a highly accurate average rental lifetime value estimate based on data from similar properties in the area. In general, maintaining the same tenant in a unit for multiple lease periods is less expensive, thus creating a higher lifetime value per renter.

Renter Churn Rate

Churn refers to how frequently a unit switches tenants. Tenants who sign shorter leases (such as month to month or six-month periods) will generate a churn rate likely higher than a property that requires longer terms.

Average Days to Lease

Unless a property is located in a highly desirable area or has a long waiting list, there will likely be a window of time between the day a unit becomes available and when the next tenant moves in. Decreasing the average days to lease or duration period where a unit is empty is critical because no income is being generated during this time.

Annual Repair and Maintenance Costs

The cost of maintenance and repairs may vary year-to-year, depending on variables like damage caused by tenants or major repairs that are needed over time.

However, this cost should average out so that you can properly budget for the estimated cost of annual repairs.

Do Property Managers Pay for Repairs?

The cost of annual repairs may be covered by a property management group, if they fall into a certain scope of routine maintenance.
For instance, any issues related to electricity, plumbing, and general repairs may be included in the fee paid to the property management group, while higher costs like appliance replacements might not be.

Other property management groups may have you deposit funds or divert a small portion of the rental income into a trust account managed by the group for things like routine or minor maintenance or repairs.
Each property management group has their own general approach to costs for property maintenance. This should be discussed with the group and made clear before entering into a property management agreement.

Occupancy Rate

Generally, maintaining an occupancy rate at 95% at all times is ideal; however, this number may fluctuate depending on the time of year as well as the market average for the area.

Seattle’s average occupancy rate in 2019 was 96.1%, whereas in 2017 occupancy was 98.1%. Occupancy rates are also expected to increase nation-wide.

Once you have purchased a rental property, made all of the necessary repairs and updates, and registered with the city of Seattle, it is time to market your property.

There are now numerous sites where rental properties can be listed, and according to Statista, the most popular ones are Zillow and Trulia. Other sites like Apartment Guide, Curbed, and HotPads are popular too, along with Craigslist and even Facebook Marketplace.

There are several key elements to creating an effective listing that drives in potential tenants.

Taking Professional Photos

A picture is worth a thousand words; it is imperative that you make the most of your images of a property. Hiring a professional photographer can be pricey, but the quality of the pictures can make a better impression and attract more renters.

You can of course take the photos yourself (or ask the property management group to). However, it is highly recommended to use a professional camera over a cellphone.

You may also want to consider using a wide-angle lens to capture small rooms at a better angle.

Creating a Highly-Detailed Listing

The more information you include on a listing, the better.

Potential renters or tenants can dispense with many of their questions, expectations or concerns based on the initial listing in determining whether or not they are interested in the property, such as parking, pet policies, or laundry facilities.

Providing as much information as possible creates a built-in filter so only the most interested prospective tenants reach out. List out details that will matter the most to tenants, such as:

• Room dimensions
• Details about the neighborhood and proximity to popular locations like grocery stores, bus stops, schools, and highways
• Additional amenities, such as community pools, gyms, and common areas
• Features within the unit, like hardwood floors, granite countertops, and modern appliances
• Detailed information on regulations like pet policies, utility charges, and other rules specific to the property
• Tenant screening criteria

Knowing Who You Want to Rent to

Having bad tenants will eat into your profits – as they cause damage to the property and deter other future tenants from moving in. For that reason, create a listing that caters to the type of tenant you want to lease to.

For instance, if you would prefer to rent to families over college students, it is best to advertise the aspects of the properties that are kid-friendly, such as local parks nearby and proximity to schools.

You should also be crystal clear on things that will immediately disqualify an applicant, such as past evictions or previous noise complaints from past rental properties.

It should be noted that the City of Seattle expressly prohibits using criminal records from being used in the screening process and landlords can be penalized for inquiring about criminal records in the advertising or application process. Skilled Property Managers can generally identify bad tenants based on other factors that can be more representative of likely tenant behavior

Understanding the Basics of Internet Marketing

While you don’t need to be an expert (or hire one for that matter), you should understand the basic concepts of online marketing when creating a rental listing.

Start by researching some relevant keywords that can be included in your posting, such as “three-bedroom apartment in Greenwood” or “studio with AC and parking.”

You can find the local keyword searches with a quick dive into the Google Keyword Planner.

Marketing the Community

Remember that you are not just marketing an apartment; you are representing the rental community as a whole; use this to your advantage.

Be sure to include information on shared spaces, such as game rooms or outdoor seating spaces. Post pictures throughout the property rather than just the available unit. You want to really give potential tenants a feel for the overall community before they schedule a viewing.

You may even want to include a street view option via Google Maps so people can take a look at the neighborhood without going in person.

Once you have attracted potential renters, it is time to narrow down the options until you find the tenant that will be moving into the unit.

A decision not to rent to certain individuals based solely on their race, religion, sexual orientation, disability, gender identity or criminal record is strictly prohibited by law. This also protects potential tenants from discrimination. Additionally, the City of Seattle prohibits using criminal records in the course of screening tenants.

To prevent discriminatory liability, it is important to base a decision on an application, unbiased facts that support that decision. However, there are legal ways property owners can disqualify or qualify specific tenants to ensure that only reliable and trustworthy tenants move in. The best way to screen tenants for a rental property is to have a set of objective requirements with clear disqualifications to avoid any legal issues.

Require an Application

In the initial application, it is best to require tenants to include accurate information on:

• Current job (including duration of employment)
• Employer information (contact information to superior or manager)
• Income (either yearly salary or past paystub)
• Previous landlord information
• Personal references (typically, these cannot be immediate family, but they can be ex-roommates or co-workers)

A potential tenant providing the above information should be enough to establish income verification and history; information regarding reliability; and any prior history of renting (for better or worse).

Under law in the City of Seattle, applications should be screened in the order that they are received. It is recommended that applications are timestamped to avoid screening in the wrong order.

Run Credit Check

Once an applicant submits their application and meets the initial requirements, a credit check is often required.

This will let you know whether or not a person pays their bills in a timely manner or has experienced any bankruptcies. This will also alert you if a tenant still owes a previous landlord any back rent. This can certainly be a reason to disqualify a renter.

The best credit check for tenants is Experian. It offers an accurate report and updates rental payment histories every 24 hours. This service is also free to property managers and potential tenants are charged $14.95. Other credit check sites that are often used by landlords include RentSpree and TransUnion SmartMove. Many Property Managers have go-to screening services that provide similar details.

Run Background Check

Many property management groups and renters will also conduct a background check to review a tenant’s criminal history. In the City of Seattle, this practice is expressly prohibited, but it is not in other cities in Washington. However, civil litigation history, which can include evictions, is allowed for screening purposes

This information may or may not automatically disqualify a tenant, however, many property managers do not allow tenants with a history of violent offenses. Landlords and property managers must also notify a tenant (in writing) about the exact reasons why they were denied based on the copy of the background report.

This background report can also provide information on a tenant’s employment history, proof of income, and evictions.

Interview the Tenant

Best practice tip: Ask a potential tenant questions face to face, over the phone, or via an online application to get a better feel if they would be a good fit.

Some good questions to ask would be:

• Do they smoke (cigarettes or legal cannabis)?
• Do they have pets? If so, how many, what breed or size?
• Do they have frequent guests?

Beyond the property management company, there are plenty of vendors you might need to partner with such as cleaning services, maintenance companies, and pool cleaners. These vendors need to be trustworthy and reliable. Hence, when searching for these partners, be sure to account for:

• Licensing and insurance – Ask to see their Certificate of Liability Insurance. This will cover any injuries that may result from the work while on your property.
• Availability – It is best to have vendors on-hand that are available on a moment’s notice, especially if they are providing emergency repair services. Just be sure that they offer a window of time (such as within twenty-four hours or three business days) and that this time frame is enforceable.
• Reputation – Always do your research and check out customer reviews from multiple sources (not just the ones on the vendor’s own website).
• Pricing – Be sure to get an itemized list of prices per service or an hourly rate charge. Don’t just trust estimates – get it in writing before hiring a vendor.

Many property managers have go-to vendors for routine services and can sometimes obtain such services at a discount due to volume. This can be an items of discussion when searching for a property manager.

As you can see, there is a lot that goes into managing and maintaining a rental property.

It can honestly be a full-time job that requires a lot of attention – not something that really appeals to all real estate investors. Therefore, you should consider whether or not it would be best to hire a property management company.

Pros and Cons of Self-Managing Your Rental Property

Whether you choose to partner with a property management company or self-manage, it is imperative that you are well-versed in the local laws related to leasing property.

Landlord Tenant Laws

The government of Seattle has listed guidelines for renter’s rights and responsibilities – as well as landlord or property management responsibilities. This protects both parties by giving landlords the right to evict tenants that are not abiding by the guidelines, while also protecting tenants from wrongful evictions.

Renter’s Rights & Responsibilities

Tenants are obligated to:

• Properly dispose of garbage
• Exercise care in the use of electrical and plumbing fixtures
• Promptly address any damages
• Provide reasonable access for inspection, maintenance, repair, and pest control
• Maintain smoke detectors
• Refrain from storing dangerous materials on the premises
• Follow all agreed upon rent charges and utilities

Tenants must also be notified of the sale of a property, increase of rent, or notice of eviction without just cause within a timely manner. These timeframes are set by law and landlords should consult an attorney as to what timeframes apply.

They are also protected against discrimination, and have the right to a “livable dwelling.” Property managers and landlords are liable for any damage or injury that occurs if the premise is not up to standards.

Landlord’s Responsibilities

The landlord or property manager is required to:

• Maintain the property in accordance with state and local codes
• Provide locks and keys to the property
• Provide the necessary facilities for heat, electricity, water, and garbage removal
• Keep common areas clean and free from safety hazards
• Control pests and continue to inspect and prevent infestations
• Make repairs when requested by the tenant
• Keep all systems in good repair
• Provide written notices of fire safety procedures and provide working smoke detectors in units and common areas, as well as visible plans for evacuation in case of emergency

Property managers and landlords are required by law to notify tenants for termination of leases, evictions with just cause, or the sale of the property within a timely manner.

Seattle has a “Just Cause” Eviction ordinance, limiting the circumstances that a tenant can be evicted. These “just causes”i include, but are not limited to: not paying rent, routinely paying rent late after a service of a notice to pay rent or vacate, not complying with the terms of the lease, creating “waste or nuisance”, violating set rules related to illegal substances or alcohol, or engaging in illegal activities on the premises. Consult an attorney before pursuing any eviction action.

The real estate market in Seattle is certainly growing – and there is a lot of opportunity for investments in rental properties in this city. But don’t dive in head first without knowing exactly what you are getting into.

Partnering with a trusted property management service is a wise move for many investors to make – but this is a choice that every property owner must make for themselves.

If you have any questions on the services we provide – or about property management in general – please reach out to our knowledgeable staff. We look forward to hearing from you!

Disclaimer:

the above materials are considered for marketing purposes only and do not constitute legal or financial advice. None of the above statements should be construed as creating a client relationship. Consult an attorney for any legal questions you have.

https://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-households-are-renting-than-at-any-point-in-50-years/