If you’re investing in multifamily San Diego properties, you’ll have different considerations than you might when you rent out single-family homes or independent condos. In an apartment building, you have multiple tenants, a revolving door of people moving in and out, and extra attention needed to maintenance since several different systems and appliances are being used in each unit.
One thing you might be wondering if you’re renting out even a small apartment building is: should you hire an onsite property manager?
Legally, the answer is pretty simple - it depends on how many units you’re renting out.
Before you invest in a multifamily San Diego rental property, it’s important to understand California law and how it pertains to larger buildings.
Onsite Property Management in San Diego Buildings
According to California law, any buildings with more than 16 rental units require an onsite manager. You can work with a professional San Diego property management team for all of your leasing, management, and maintenance needs, but you also need a manager in residence at the building.
When you own a building that has fewer than 16 units, you do not have to follow this requirement, although sometimes a property owner will want to hire an on-site manager or maintenance expert to keep an eye on things and respond to any repair needs that might come up.
With smaller buildings, the decision is completely up to you. There may be pros and cons to having an onsite manager, and it’s important to consider what you’ll be taking on when you have an employee who is living in one of your residential units.
Onsite Management Equals Employment
Putting an onsite property manager into your building means that you’re hiring an employee for your property. According to California law, you’ll need to treat the property manager living there as an employee. This brings you extra responsibilities, liability, and expenses.
Because your on-site property manager is an employee, you are legally required to provide workers compensation insurance. You also have to withhold all required federal and state income taxes from their salary and contribute to social security. Many owners will discount the rent on the unit their onsite manager lives in.
If, as a condition of employment, the on-site property manager must live at the place of employment or occupy quarters owned or under the control of the property owner, then that property owner is not allowed to charge rent in excess of the values set forth under California law.
Pros and Cons of Onsite Management
If your investment property has more than 16 units, you know that your decision is made. You are required to hire an onsite manager for the property. If you’re not legally required to, is it something you should consider?
This will largely depend on the property itself, the tenants you have, and whether or not you’re working with a full-service San Diego property management company already. If you’re renting out six apartments in a smaller building and you’re already working with a reliable property manager, you probably won’t need an onsite person responding to maintenance and tenant issues. It would only take up one of your available rental properties.
If you need some help thinking through what this means for your larger rental properties, please contact us at Mercer Properties. We’d be happy to talk about our experience and offer some advice.