From rising insurance costs to the complexities of evictions and tenant relations, Tyler Mehl, President of Belmont Shore Land Company, shares his extensive experience and practical advice. Whether you’re a seasoned property manager or a new landlord, this episode offers valuable insights to help you navigate the ever-changing landscape of property management in 2024.
Rising Insurance Costs
One of the hottest topics in property management right now is the rising cost of insurance. Tyler highlighted that many property owners are receiving notices from their insurance companies either canceling their policies or demanding repairs before renewal. This trend is not limited to one or two companies—big names like State Farm, Safeco, and Mercury are all tightening their standards, leading to significant increases in insurance premiums.
In one case, Tyler shared that a condo association’s insurance skyrocketed from $22,000 to over $106,000 annually, causing financial strain on the owners. With such steep increases, property owners are faced with special assessments and increased dues, further squeezing their budgets. Tyler noted that these rising costs are forcing landlords to reassess their operating expenses, which in turn affects the property’s value and net operating income.
Eviction Process
The eviction process has become increasingly time-consuming and expensive. According to Tyler, evictions that once took six weeks are now stretching out to five or six months. Even when tenants do not respond to eviction notices, the process is still bogged down by delays in court and scheduling with sheriffs for lockouts.
This prolonged eviction process adds to the financial burden on landlords. The combination of unpaid rent, legal fees, and the time it takes to regain possession of a unit can result in losses totaling tens of thousands of dollars. Tyler stressed that property owners are often blamed for tenant hardships, but in many cases, they are the ones absorbing the financial impact of lengthy and costly eviction proceedings.
Rent Control and Its Impact on Property Owners
California’s rent control laws have made it increasingly difficult for housing providers to raise rents, even as their operating expenses continue to climb. While rent control laws are designed to protect tenants, they can create financial challenges for landlords who rely on rental income to maintain their properties. Tyler pointed out that even though statewide rent increases of 8.9% are allowed this year, they are not always sufficient to cover the rising costs of insurance, maintenance, and property management.
Moreover, long-term tenants who pay significantly below-market rents contribute to the financial strain on property owners. When landlords cannot raise rents to match market rates, they are often forced to dip into their savings to cover the costs of maintaining their buildings.
Property Maintenance: More Expensive and Complicated
Maintaining rental properties is becoming more expensive due to both the age of the buildings and the rising costs of materials and labor. Tyler explained that many properties need full paint jobs, new flooring, and other significant repairs when they become vacant. In some cases, properties that have been occupied for several years require extensive renovations to bring them up to current standards.
Additionally, new laws, such as the SB 721 balcony retrofit requirement, are placing even more financial pressure on landlords. This law mandates inspections of balconies and other elevated structures, with repairs required based on the inspection results. Tyler shared that the costs of these inspections and repairs can add up quickly, with many property owners facing bills in the thousands of dollars.
The Changing Landscape of Property Ownership
Despite these challenges, both Juan and Tyler emphasized that property ownership remains a viable way to build wealth over the long term. While it may not be as easy to generate cash flow as it once was, the equity and future sales potential of real estate investments still offer significant financial rewards.
However, the changing regulatory landscape and rising costs are making it harder for mom-and-pop landlords to manage their properties. Many are choosing to sell their buildings and exit the market, leaving room for larger corporations to take over. Tyler noted that while corporate ownership may streamline operations, it often lacks the personal touch that smaller landlords bring to their properties.
The Importance of Professional Property Management
As the complexities of property management continue to grow, many housing providers are turning to professional property managers like Tyler to help navigate the challenges. Belmont Shore Land Company, for example, focuses on maintaining strong relationships with both tenants and property owners, ensuring that properties are well-managed and tenants are satisfied.
For those considering property management services, Tyler advises looking for a company that truly cares about the tenants and understands the local market. He also stressed the importance of transparency and setting realistic expectations with property owners.
