How to Manage Rental Properties in Seattle’s Tough Market

Nicki Callahan (00:00)

I’m not sure if it’s to Washington or just Seattle, but there is a just cause ordinance. So you cannot evict someone unless they have violated.

one of the 16 points of just cause four times in a 12 month calendar. And they have to be served a notice each time And then if it’s the fourth time and it’s been a year and two days, the clock starts over. So that’s very challenging. ⁓ Another thing that’s very challenging, I’ll tell you a story during COVID. ⁓

Kristen Knapp (00:13)

back.

Nicki Callahan (00:27)

Nobody, there’s a lot of luxury high-end condos in Seattle and they have amazing amenities. And during COVID, nobody wanted to buy a condo.

So I reached out to some brokers and I said, hey, if your owner is interested, I can rent their condo,

after that lease ends, hand it back to you and then you can pick right up and sell it. During that time, right near the tail end of COVID when everything was shut down, the law changed. And now the law is, in Seattle, you have to offer the tenant a renewal,

Kristen Knapp (02:32)

Welcome back to the Real Estate Pros Podcast. I’m Kristen and I’m here with Nicki Callahan of JMW Group. She’s a property manager in Seattle and they’re a part of Windermere. So excited to have you here, Nicki. So how did you fall in love with the world of real estate to begin with?

Nicki Callahan (02:42)

Thanks for having me.

So I’m actually a third generation in real estate. My grandfather was a developer in Utah ⁓ and he built single family homes right out of high school, well, pretty much out of high school. I moved to Los Angeles to pursue acting. And while I was there, I got in a car accident. I got rear ended and I moved back to Ogden, Utah, which is where I’m from and did physical therapy. And while I was laid up, I got my real estate license. I was just kind of going crazy.

So I got my real estate license and I was there for a while. I was there longer than I expected to be. And during that time, my high school friends were looking for first homes and then my mom’s friends were looking to downsize. And so it was really easy for me to step in because we were third generation in that little town as well. It was really easy for me to step in. I had an automatic sphere and it was really easy. So I did sales for a while and then my mom moved to a little area in Washington called Squim.

and I didn’t really want to stay in the same hometown that I grew up in. So I moved to Seattle and that was a little bit more equivalent to Los Angeles. And so it was much better for me. And I started doing real estate here and I very quickly realized kind of the silver spoon that I had in my mouth in Utah because it was just so easy to do real estate there. I knew a lot of people and it was much more of a struggle in Washington. So I did sales for a little while. I did a couple of flips and then 2008 hit. And so that

sort of stopped me in the flips. And then it was just really difficult. It was really difficult to do sales. I found myself talking people into things that I knew weren’t right for them because I needed the commission. It just wasn’t a really good fit for me. At that time I also became a mom. So I transitioned over to property management and it’s turned out to be a much, much better fit for me.

Kristen Knapp (04:39)

Yeah, and what do you love so much about property management?

Nicki Callahan (04:42)

Well,

as a mom, a single mom, I loved that I could set my own schedule. I loved that as, you know, like in sales, the harder you work, hopefully the more that your income reflects your hard work. So I really liked that.

Kristen Knapp (04:58)

That’s amazing. So now you are rocking and rolling in Seattle. Tell me more about that area and what makes it special.

Nicki Callahan (05:07)

I’ve been a property manager in Seattle for 16 years. ⁓ During the course of that time, I’ve managed over 600 properties. Seattle is probably the most difficult city to be a property manager in. They’re very, very tenant friendly.

Tenants get ⁓ free legal counsel if they decide to sue the landlord. And there’s just a myriad of laws. They’re ever changing and there’s not one central location to go and find out about all of them. ⁓ I always advise people, have,

two options at our company. We have a lease only option where we just place the tenants and then hand it off to the owners and they manage it. Or we have a full management where we place the tenant and then manage it. And a lot of times people think they can just kind of have somebody fill the tenant and then they can take it from there. And unless they’re involved in a landlord group or something, if they have a full-time job, it’s nearly impossible to keep up on all of the laws. So I always advise them, if you’re going to manage it yourself, you really need to be

staying on top of all of the changes in laws and regulations because it’s very litigious in Seattle for sure.

Kristen Knapp (07:00)

Yeah, and how do you stay on top of it if there’s not one centralized place?

Nicki Callahan (07:05)

Well, that’s

the benefit of working in an office as opposed to just doing it myself because we have meetings and the broker, the managing broker of the office, he’s really on the pulse of things and he says these are the laws that are changing, this is what has changed, here’s the updated forms. Just because a law changes doesn’t mean, okay, the law changes. Now there’s updated forms, there’s updated timelines, there’s updated, you have to send it.

Now this, have to send it by certified mail. Now you also have to tape it on the door and not just tape it on the door, but it has to be addressed to each person that lives there. And any one of those things that are skipped, that’s a loophole for the tenant to get out of whatever they’re trying to get out of.

Kristen Knapp (07:41)

Right, I mean it’s always a good idea to go with a property manager, like an official property manager, but even more so in an area like that.

Nicki Callahan (07:50)

Even

more so, absolutely. Yep.

Kristen Knapp (07:52)

Yeah,

and what are some, know, as your, well, first I’ll ask, are you in residential or are you in commercial? Nice.

Nicki Callahan (08:00)

I’m in residential. Yep. So

we do single family homes, condos, town homes. We do have a commercial division, but only one broker oversees that. And most of the other agents in the office are residential. And we don’t do sales. So most of my referrals come from sales agents because they don’t want to step into property management at all because of all of these laws. They don’t have the Arizona emissions insurance for their office to do. ⁓

Kristen Knapp (08:21)

Right.

Nicki Callahan (08:27)

property management and we don’t have the heirs and omissions specific insurance in our office to do sales. it’s a nice convergence of back and forth and referrals. And then we also make note who referred it to us so then we can shoot it right back to them so that they can pick it up when the owner decides to sell.

Kristen Knapp (08:44)

Yeah, yeah, mean commercial and residential are just different. They have their own property management issues. What are a lot of challenges that you have to overcome? Like what are the most common things that you have to overcome?

Nicki Callahan (08:57)

It’s the laws in Seattle. It’s the laws. It’s the 180 days for a renewal. You have to reach out to them and say, we’re offering you a renewal at this increase in price. Now we can only increase it 7%. They just passed that a couple of weeks ago. ⁓ Another thing specific,

I’m not sure if it’s to Washington or just Seattle, but there is a just cause ordinance. So you cannot evict someone unless they have violated.

one of the 16 points of just cause four times in a 12 month calendar. And they have to be served a notice each time and an official serve certified mail taped to the door ⁓ and their lease violations, but they can get away with things four times in a year. And then if it’s the fourth time and it’s been a year and two days, the clock starts over. So that’s very challenging. ⁓ Another thing that’s very challenging, I’ll tell you a story during COVID. ⁓

Kristen Knapp (09:29)

back.

Nicki Callahan (09:53)

Nobody, there’s a lot of luxury high-end condos in Seattle and they have amazing amenities. And during COVID, nobody wanted to buy a condo.

All of the amenities were shut down. Nobody wanted to share an elevator with anyone. So I saw these condos on the sales market just sitting there. So I reached out to some brokers and I said, hey, if your owner is interested, I can rent their condo, kind of get them out of what might be a little bit of a pinch. And then once this is all over,

after that lease ends, hand it back to you and then you can pick right up and sell it. Well, during that time, so I got a lot of business from that, from these high-end condos that were just sitting there. During that time, right near the tail end of COVID when everything was shut down, the law changed. And now the law is, in Seattle, you have to offer the tenant a renewal,

indefinitely, until they say no. Unless you’re moving back in and then there has to be certifications and…

notarized forms and all of that unless you’re moving back in. Even if you want to sell it, it has to be sold then as an investment property. So that really threw a wrench into all these people that were hoping just to get out of the pinch and rent it for a little while. Now they’re a perpetual, you know, reluctant landlord and they never intended that to be. So that’s another thing. ⁓ You can sell a single-family home, but of course you have to ⁓ wait it out until their lease expires. But

condos, townhomes, anything else, you have to continue to offer the tenant a renewal.

Kristen Knapp (11:59)

Wow, I mean there’s so much to keep track of and you’re managing so many properties. How do you stay organized with all of this?

Nicki Callahan (12:06)

I’m pretty old school with kind of Excel spreadsheets and I go through and I make sure that I have everybody’s renter’s insurance and the landlord’s insurance is all set up because we don’t have a whole lot of office support. We have an accounting division that collects the rent and reminds you of things, but unless you’re organized, you know, it could be a real nightmare.

Kristen Knapp (12:29)

So yeah, you have to stay very organized and you have to like keep track of a bunch of timelines as well Yeah, that’s a very hard part of it. So, you know as people are investing in properties or buying properties for themselves what What what separates a good property manager from a not good one?

Nicki Callahan (12:33)

Yes, yep, yep, for sure. Yeah.

There’s so much. There’s so much. You know, everybody starts at some point. You know, everybody starts at some point. I would just say, if you’re going to use a newer property manager, make sure that they’re organized. Make sure that this is what they want to do, that they understand the business, even if it’s gonna be a little bit of trial and error in the beginning, but you don’t want somebody to have on the job training with your property.

Kristen Knapp (12:49)

Yeah.

Nicki Callahan (13:16)

because of the laws and the implications, the legal implications, the financial implications. You just want to make sure that they’re studying, even if they’re new. And I would also say, kind of the standard for Washington is we charge to place a tenant one month’s rent. And the tenant pays their first month’s rent to Indomir as a commission. And then we charge 10 % of the rent per month for managing the property. Now there are some quote unquote,

bargain companies that will go in and they’ll charge, you know, hundred dollars a month and no placement fee. What these companies I’ve found are doing are just loading up on properties. They’re just loading up because people are going there. They’re saying, it’s cheap. I’m going to go with them. Well, what happens then is things fall through the cracks. They have so many properties to keep track of. And really you do get what you pay for.

And if you want the individual attention and you want people to keep track of your properties, to keep track of the maintenance, to keep track of if your gutters are cleaned, if your furnace is serviced, you need to go with somebody who you’re paying that amount to keep track of it because these bargain people aren’t going to do that.

Kristen Knapp (14:28)

Absolutely. And you know, you were kind of mentioning it, but I feel like working with a established group that’s vertically integrated is a huge benefit. Can you talk more about that?

Nicki Callahan (14:38)

Absolutely, absolutely

it is. If we have a question that my managing broker is very, very intelligent, but if we have a question that we don’t know, he has a landlord tenant attorney he reaches out to. Some of our forms are overhauled by attorneys. If you’re with a smaller place and they’re not going to do that, they’re not going to have that level of attention. And then again, if the tenant has free access to legal counsel and if there’s a loophole, they will find it.

Kristen Knapp (15:47)

Yeah and there’s a lot of national groups as well. imagine you guys are in the sweet spot where you’re a big company but you’re still local.

Nicki Callahan (15:51)

Yes.

Absolutely. There are national groups where if they list a home, they’ll put a lock box on it and they’ll tell the tenant, here’s the code, walk through the property and let me know what you think. So they never even meet the tenants. They never even talk to the tenants. It’s all online. I would never give somebody the key to a property. You don’t know who these people are. Here, go on in. They could, you know, bring their pots and pans and start squatting. Who knows? You just never know.

Kristen Knapp (16:17)

Thanks.

Yeah.

Nicki Callahan (16:25)

So it’s great to have hands-on, it’s great to be local. We have a local reputation, we know the area, we know, ⁓ you know, you’re right on the edge here for U-Dub and you’re renting a five-bedroom home. You might want to know that if there’s roommates, we can’t turn them away. So you might have students here. So that should kind of shade how you’re going to purchase a rental property if you’re going to do it in that area or if you’re okay with having those type of tenants.

Kristen Knapp (16:54)

Yeah.

Nicki Callahan (16:54)

And you get that from local. You don’t get that ⁓ from a national property manager. They don’t know the area and the demographics.

Kristen Knapp (17:03)

Right, and I mean, I feel like that’s crucial. That’s so important, especially when you’re managing property that you have a lot of money in.

Nicki Callahan (17:06)

Yes. Yeah.

Absolutely, yep. There’s a lot of reluctant landlords that have moved and don’t want to sell their home or want to keep it for their kids later on down the line. And it’s a real big difference dealing with people that want to be landlords and then people that are just reluctant landlords and don’t want to give up their primary residence ⁓ yet. It’s very difficult to deal with, ⁓ to explain.

to the reluctant owner landlords. You have to budget for maintenance. There are going to be repairs. This is how the screening process works. We can’t cherry pick. In Seattle, there is a law and it’s first in time, first in line. You need to, when you’re advertising a property, put out the minimums, the minimum credit score, the minimum income, if you accept pets, and then the first person to apply that meets those minimums has to be given the opportunity to sign the lease.

And sometimes the owners want to cherry pick and you just can’t. You just can’t. And when I say cherry pick, I don’t mean cherry pick going against fair housing. I mean, ⁓ we don’t want to rent to attorneys. A lot of people don’t want to rent to attorneys. ⁓ We don’t want to, ⁓ this person makes more money than this person. Well, but your minimum was this and they meet the minimum. So cherry pick in that way. I used to, honestly, I used to cherry pick. I used to cherry pick because I do my own showings.

Kristen Knapp (18:09)

Right.

Nicki Callahan (18:32)

If somebody walked in and they said, I love this place. I’ve been looking for a place just like this. Can I put a little garden in the back? I mean, and they loved it. I love you. You meet all the minimum requirements. That’s great. The next person walks in also meets minimum requirements. Will the owner paint? Will the owner do this? What about this? I’m going to go with the person that loves it. The person that’s going to be easy. The person that seems like they appreciate it and are going to take care of it. Well, that option is gone with the first in time, first in line.

Kristen Knapp (18:50)

Thank

Nicki Callahan (19:02)

law.

Kristen Knapp (19:03)

Wow, and everything is just changing all the time. You have to stay on top of it. That might go away soon.

Nicki Callahan (19:06)

Yes. Yeah.

Yes. Yes. If an owner tried to rent their own property and didn’t know that, that’s a lawsuit. Yeah.

Kristen Knapp (19:17)

Right, exactly. So

you’re not only helping people, but you’re also keeping them compliant. Yeah, you’re saving them a lot of money down the road. And what would you say to someone who maybe is interested in property management or maybe wants to add an integrated property management company in their existing business? What things do you wish you learned earlier in your career?

Nicki Callahan (19:22)

Compliant, yeah.

Absolutely.

Unlike sales, where you deal with an owner, you walk them through, you sell their property, and then maybe you send little gifts every once in a while to keep top of mind, with property management, you are tethered to these owners for years. I’ve managed some properties for eight, nine years now. And it is a relationship business, probably even more so than sales because it’s ongoing and some owners I don’t talk to until it’s renewal time.

and I say, hey, it’s up for renewal. But other properties have a lot of problems, have a lot of tenant problems, have a lot of maintenance issues because they’re older and you are in constant contact with the owner. So it is a relationship business. if you don’t, at this point in my career, in the very beginning, I would take whoever because I needed to build my portfolio because it is commission-based. And until you have a portfolio, it’s tight, it’s really tight.

I would take anything. Now at this point in my career, if I get a bad vibe or somebody snaps at me or whatever, I say, I don’t think I’m the right property manager for you. I can see if I can find somebody else in my office, but it’s not gonna be me. And that has given me so much freedom and so much peace to know who I’m gonna click with and who I’m just not. And I’m gonna save them a big headache as well. So we’re not butting heads for years. That’s a ⁓ really important part to know if.

if an office is thinking of adding property management and also for the new property managers, you’re gonna have to bite your tongue a lot in the beginning to build up your portfolio. And then later on, you can choose.

Kristen Knapp (21:20)

Yeah, no, I think that’s a really good thing to call out. Yeah, I imagine, because it’s a relationship business, but unlike sales, you’re not necessarily helping someone through a really happy time in their life. You’re probably seeing them at a bad moment in their life if something’s broken or whatever, so they’re angry. So you have to learn how deal with that.

Nicki Callahan (21:39)

Yeah,

it’s a real balancing act because you need to fix things for the tenant. Obviously it has to be, you know, habitable, but then you also do need to watch the bottom line for the owner. So it’s a balancing act and sometimes what tenants complain about doesn’t need to be fixed. But other times when the owner is saying, I don’t want to do this, you have to do that. Yeah.

Kristen Knapp (22:01)

Right, right. Well,

I mean, yeah, all the more reason to get someone experienced like you. Please tell everyone where to find you. ⁓

Nicki Callahan (22:08)

Sure, so for property management, it’s Nicki at Windermere.com and I am doing a new ⁓ digital course for property managers and it is called Landlord Logic Learning Lab and that is going to be launching for Seattle next week to kind of help the people that want to try and manage their own properties sort of ⁓ illuminate the laws and mandates that are in Seattle and that is info at LandlordLogic.com.

Kristen Knapp (22:36)

That’s amazing. So you’re helping people with all the knowledge that you’ve gained along the way.

Nicki Callahan (22:42)

I’ll tell

you, a lot of times when people come and they just want me to place the tenant and I do that and I tell them there’s a lot of laws, here’s the RCWs, you should look them up. Six months later, they’re calling me. So this happened and so I can’t really say you only hired me to place the tenant. I help them as much as I can, but I think that this workshop, this digital course is really going to lay out everything current to date that people are going to need to manage their own properties in Seattle.

Kristen Knapp (23:08)

That’s amazing. Well, that’s awesome that you have that available. So I encourage everyone to check that out and check out Nicki, email her. Thank you so much for being here. Awesome. And thank you everyone for listening and we will see you back next time. Bye.

Nicki Callahan (23:16)

Thank you so much for having me.