"I can just lock the front door and walk away from it."
Just as that has been one of the key selling points of condominium ownership, so has the opposite of it plagued the owner of the detached, single-family residence who, for one reason or another, puts it on the rental market.
While the investor in a small apartment complex can fall back on professional property management firms and has the legal ear of organizations like the Apartment Assn. of Greater Los Angeles (see accompanying story), the owner of a single, detached house on the rental market is adrift on his own lonely life raft.
Even when he can find a realtor willing to take on its management, it's still a sideline with the realtor who will bill him for all related expenses--maintenance, advertising, tenant screening and unlawful detainers, if required. And, always hanging over him is the specter of one, two or three months of vacancy when the cash flow dries up completely, but the expenses don't.
This is the curious niche into which entrepreneur David M. Kidd has moved with his Westlake Village-based Secure One Rental Home Management Co.--the closest thing, yet, to the literal meaning of "carefree" landlording. Not only does Kidd absorb the traditional management expenses--including the first $75 a month of maintenance costs including lawn mowing--but the owner is guaranteed his monthly rent as well.
"That's because the owner is leasing the home to me and under written agreement with the owner, I'm subletting it to others. So the burden, and the risk, are on me if the tenant goes sour."
While traditionally rental management fees for apartments range in the 4% to 8% range of gross rentals, Kidd's Secure One fee is considerably higher, and not all homes qualify for listing.
"Since the risk is mine," Kidd said, "there are some neighborhoods--in not particularly good areas--in which I'm simply not interested, and, at the other end of the scale, there may be a lot of houses out there that are certainly worth $5,000 a month in rent but, unfortunately, there just aren't all that many people who can afford them. What I'm looking for, generally, are well-maintained homes in good areas renting in the $900 to $1,300 range."
Under Kidd's five-year agreement (although in the first year the service can be canceled on 30 days' notice) the fee is a flat 15% of gross monthly rental and with 100% of any rent increases after the first year--probably averaging 4% to 5% a year, he estimated--also going to Secure One.
Under his eight-year plan, any and all rent increases are split 50/50 between Kidd and the owner. "In other words," according to Kidd, who has been in the property management business the last four years and holds an MBA from Pepperdine University, "if the gross rental is $1,000, the owner is assured of receiving a net check for $850 a month whether the home is occupied, or not."
Included in the fee: all advertising and related costs, tenant inquiries, property showings, lease negotiations and agreements, periodic property inspections and the first $75 a month of ordinary maintenance and repairs.
Not Too Risky
"Additionally," Kidd added, "our service covers evictions, including attorney's fees, uncollected rents and 100% of all costs of cleaning and interior painting needed to show the house to new, prospective tenants."
While, conceivably, Secure One's approach to property management could be adapted to apartment units, Kidd's clients since setting up shop early this year have been exclusively the owners of one, or at the most two, single-family homes--including one client living in New Jersey.
"The risk to me, individually, isn't really as great as it may look on the surface. If it's a nice home, fairly priced and, particularly, if the tenants have been screened very, very carefully, then the odds on prolonged vacancies are quite low. Nice properties attract nice people."