September 4, 2014

Hatteras Island Real Estate:
Property management


When I recently checked with the Dare County appraisal department, there were more than 9,000 real estate parcels on Hatteras Island. About 70 percent of these were improved (built upon), and it is estimated that around 2,400 of the residential properties are used as vacation rental cottages. Most of these homes are professionally managed by property management companies, while a smaller percentage are managed directly by the owners.

If we took all of the rental cottages from the smallest to the largest and made the assumption that the average rental income was in the range of $1,900 per week for 21 weeks each year, you can easily see that rental homes are a major contributor to the island’s economy. In addition, rental income makes it financially affordable for many families to realize their dreams of owning a home on Hatteras Island.

Somewhere in the course of talking with prospective buyers, real estate brokers are usually   asked about the property management process and how it works.

There are a number of real estate firms on Hatteras Island that for a fee will provide a comprehensive property management program for homeowners. Services include advertising the cottage, scheduling rentals, cleaning, maintenance and all necessary accounting. In its simplest form, once you decide to make your property available for rental, the company you choose will take care of just about every aspect of the rental process for you, according to your personal preferences and instructions.

When homeowners desire professional assistance in managing their property, they engage the services of a property manager. In North Carolina the property manager must be a licensed real estate broker. The roles and responsibilities of both the property manager and the owner are described in a document called the property management agreement. This contract between the homeowner and the real estate company addresses such things as the property manager’s fee, the process for handling reservation payments, the payment of rental income, and the extent of the property manager’s authority. On Hatteras Island there may also be a clause which reviews property management issues specifically related to hurricanes.

The fees that homeowners pay for property management services vary among companies. There is no industry-wide standard for property management fees. As a general guideline, property management fees are usually related to the amount of rental income that a cottage generates. The higher the rental income, the lower the property management commission. When evaluating property management fees, it is important that owners understand how the fee for their cottage was determined and what services, if any, are subject to the payment of the property management commission.

Let’s explore in more detail some of the services that property managers provide.

One of the first things that homeowners usually want to know is what rental rates they should charge for their cottages, and how much total income they can expect. Working together, the property manager and the homeowner establish the weekly rental rate for the house with variations in the rates for seasonal fluctuations in the number of visitors to the island.

The property manager then makes a projection of rental income for the entire year. This estimate takes into account the rental histories of similar properties, the location of the cottage, the number of bedrooms, its condition, any special amenities it may have, such as a private pool or game room, and whether or not pets are allowed.

Once the rental income starts flowing, deposits are sent directly to owners’ bank accounts, or checks are sent to the homeowner by mail on a monthly basis. Homeowners also receive a statement which lists the rental income by tenant, expenses that may have been deducted and any other accounting transactions that have occurred since the last report. Most of these reports are now made available online. In addition, the property manager provides year-end summary statements and 1099 forms to document rental income for tax purposes.

Homeowners may also express an interest in the advertising exposure that their cottages will receive. Historically, the most visible advertising source for the majority of property management companies has been their rental brochure. This catalog displays the properties that are available, rental rates for the various seasons and a brief description of each cottage.

While still a very important promotional vehicle, rental brochures in recent years have started to fall behind Internet exposure on company websites as the main source of reservations for rental homes. Advertising in newspapers and magazines is also in some cases quite extensive. Companies advertise in publications in both the United States and foreign markets.

Cleaning of the cottage and maintenance are two other services provided by property managers, although payment for these services is handled in different ways by different companies. Weekly cleaning after a rental guest departs is either included as part of the property management fee, or it is a charge paid by the rental guest. Fees for linens when they are provided in conjunction with the rental of a cottage are handled in a similar manner. Special services such as spring cleaning, winterization, and pest control are billed directly to the homeowner.

Maintenance on the cottage is coordinated by the property management company. However, the homeowner is responsible for these expenses. For example, if the air-conditioning system breaks down, the rental firm would have the problem fixed, but the owner would be responsible for paying the cost of repairs.

Utility expenses are customarily paid directly by the homeowner to the utility company. Owners also pay their property taxes and insurance on their homes either directly or through their mortgage companies.

One of the questions that prospective buyers frequently ask their real estate agents is, “How does it work if we want to personally use our cottage when it is not being rented?” When homes become part of property management programs, the owners are not precluded from using their cottages for personal use. All they have to do is place an “owner block” on the times they plan to use the property for their personal enjoyment.

It is my impression that the quality of property management services on Hatteras Island is quite good. The rental management companies are staffed by folks who diligently look after the interests of their homeowners and care about the needs of their rental guests. When you look at the benefits to be derived from property management and the important role it plays in providing relatively carefree ownership of vacation homes on this unique and beautiful island, property management is in many ways synonymous with peace of mind for owners who choose not to manage their properties themselves.

(Tom Hranicka is an associate broker with Outer Beaches Realty. Questions, comments, or suggestions for future articles may be sent to Tom Hranicka at P.O. Box 237, Avon, NC  27915, or e-mail to [email protected] )
Copyright 2014 Tom & Louise Hranicka.  All rights reserved.

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