What is Involved in Property Management?
Property management companies or individuals are responsible for overseeing everyday operations for various types of real estate. Owners and investors will hire a property management company to handle properties when they are otherwise unavailable, or unwilling to manage the property on their own.
The good news is that if you hire a property manager, the cost is typically tax-deductible against the income and profits that come from the property. If a realty investor doesn’t want to deal with the day-to-day proceedings of real estate investment, property management is the answer.
Types of Property Management
Many think of apartments or condos when they hear about property management. There are actually four main types of management:
Residential property managers are responsible for single-family homes, vacation properties, multi-family residences, apartments, condos, and even manufactured homes. While this may be the most familiar, most spaces you’ve been in also likely work with property management companies.
Commercial property managers are responsible for places like retail properties, offices, and co-working spaces. Industrial property management is responsible for manufacturing, warehouses, and distribution facilities. Special-purpose properties consist of theaters, arenas, resorts, senior care facilities, schools, universities, and churches.
Property management companies have four primary responsibilities:
- Occupancy – making sure units are steadily occupied by tenants and renters
- Facilities – maintenance of buildings and/or units to keep them ready for tenants
- Marketing – deciding on promotions, maximizing occupancy, and financial know-how
- Administration – filing and keeping records along with meeting lawful requirements
Property managers are responsible for maintaining the property, keeping the property occupied, collecting rents, budgeting for property improvements, and keeping records. To be successful as a property manager, attention to detail is critical and requires a quick response time to tenant issues.
Occupancy, for example, is more than just getting people moved in. It’s a much bigger picture that includes…
- Responding appropriately to tenant requests
- Monitoring activities
- Ensuring lease requirements are fulfilled
- Collecting rents
- Regularly assessing tenant satisfaction
- Handling evictions as necessary
While property managers must take care of the occupants and tend to their needs, property management also means maintaining…
- the property’s structures
- internal systems
- appliances (if applicable)
The best property managers have contractors available on-call, along with repair companies available at a moment’s notice. Problems can pop up at any time! Property management companies must also have repairs and replacements in their annual budgets, to stay lawfully compliant with tenant laws.
For marketing to be successful, property managers need to understand both budgeting and operating expenses. Understanding and applying that information makes it easier to create a marketing budget that aligns competitively with area rental properties.
Examples of marketing can include…
- Advertising strategies
- Marketing programs
A well-rounded property management company will be well-versed in profit, loss, financial statements, and taxes — in addition to understanding how it’s all related to marketing.
Administration is primarily comprised of record-keeping. There are specific laws set forth at the state, federal, and local levels that must be met, so having an eye for detail when it comes to documentation is critical.
Some of the records include…
- Tenant interactions
- On-site activities
- Utility payments
- Handling of funds
- Owner disbursements
- Consumer complaints
- Disciplinary actions by the real estate commission
For liability reasons, every interaction between tenants, their complaints, and how funds are handled when they pay rent must be documented. A paper trail is crucial to property management issues that can come up when a tenant is not happy about something.
Additionally, keeping records about owner disbursements adds to the credibility behind the way funds are tracked should that ever come into question. In addition to files about utility use and billing along with any existing disciplinary actions, these records should be available to tenants if they request this information.
Property management doesn’t require that managers have specific credentials or backgrounds, but there are a few things you want to take note of when it comes to the local area market. Managers are expected to know…
- How to attract tenants
- Techniques to maintain occupancy
- Current local rent levels
When you decide you need a property management company, it’s a good idea to evaluate the pros and cons.
- Pros – having a property manager means you can focus on your investment or business instead of managing the property.
- Cons – you need to trust that your manager will give your tenants the same amount of attention you would.
If you’re a buyer who wants to invest in real estate but also wants a more hands-off approach, property management might be your best option. For sellers, having a property management company handle the property is also appealing. It means that the transition can be seamless from the seller to the buyer without much change at all.
Having a property management company can be crucial for those interested in rental properties, especially if you have more than one property. Large-scale investors tend to work with property management companies because it’s more efficient to have someone else deal with the daily issues. It’s worth considering if your goal is to increase your real estate portfolio without the extra hassle behind being an active landlord.
Effective property managers are capable of dealing with tenants, complaints, problems, marketing, and budgeting. They’re essentially jacks-of-all-trades types of people. Managers don’t necessarily have a formal educational background, but that doesn’t mean they won’t do a good job taking care of your property.
The property manager or management company you choose to work with will also depend on the type of property you own or plan on purchasing. Before choosing one, it’s a good idea to get recommendations from others in the area, especially if you’re newer to the real estate industry. Network with others to find someone or some company that would be a good fit for your needs.
Buyers and sellers have different needs compared to owners, so never be afraid to ask around or contact a local real estate agent. They’ll be able to help point you in the right direction. If you have questions, contact Belle Maison Realty to learn more about the property management process.