If you have an investment property, rather than handling its day to day operations and worrying about leasing it out, you could hand over all those tasks to a property manager. A property manager or a property management company could take care of most aspects of your investment property for a fee.
Key Takeaways
- Property managers are responsible for the operations, tenancy and maintenance of properties
- Property managers are required to communicate with owners, tenants as well as vendors
- Property managers are involved with marketing, rent-setting, financials as well as repairs for buildings
- You may require a real estate broker license to set up a property management company, especially if you're negotiating rent
What Is a Property Manager?
The property manager is the owner's partner in maximizing the return on investment of the property through the efficient performance of these four functional areas of responsibility. The property management company acts in the best interests of the owner to maintain the property, keep it occupied with tenants, collect rents, budget improvements and maintain records.
In return, property managers charge a fee. How much and how you pay depends on the property manager's business model. Some managers charge a flat fee and expenses, but the most common arrangement is a percentage of gross monthly rent of the unit in addition to expenses.
Note
On average, property managers can charge 7%-12% of the gross monthly rent per unit as management fees. Owners may have to pay for expenses in addition to the fee.
Responsibilities of a Property Manager
In real estate property management, the property manager or management company has four major areas of responsibility:
- Marketing and Financial
- Tenant and Occupancy
- Facility
- Administration & Risk Management
Marketing and Financial
Real estate property management involves an understanding of operating expenses and budgeting. From this information, appropriate rental rates are set, balanced by the current market and what it will support in the way of rents. A firm knowledge of the area and competitive rental properties is required.
Note
The property manager may recommend marketing programs, special promotions and other advertising strategies to the owner in order to maximize occupancy and rental rates.
Regular financial reporting to the owners is required. Understanding financial statements, profit, and loss, income taxes and budgeting are all very important for the property manager. Additional tasks of property managers may include creating an annual as well as a long-range budget.
Tenant and Occupancy
A property manager's interaction with tenants begins with considering tenancy applications and screening tenants. Understanding the needs of the tenants is important for this function. Getting them to move in is only the beginning.
The property manager must then respond to their requests, monitor their activities as regards the lease requirements, collect rent in a timely manner, and continually assess the tenants' satisfaction as regards the property's amenities versus those of competing for rental properties in the area. The unwelcome task of eviction for violations or non-payment is part of this function also.
Facility Management
Property management is also the physical management of the structures and outdoor areas. Landscaping, electrical, plumbing, roof, walls, appliances, and much more are all part of the physical property. The property manager must maintain relationships with contractors and repair companies, budget capital expenditures, and monitor the quality of all repairs and maintenance.
This function ties in with the financial piece, as some improvements will require significant capital expenditures and budgeting for them. It ties in with tenant and occupancy management because it is important to tenant retention to have well-maintained properties.
Administration & Risk Management
This is the files and records part of the property management function. Federal, state and local governments all have some jurisdiction over real estate property management activities. Certain reporting requirements must be met for all of them. Meticulous records for accounting and taxes are a must.
For reasons of liability, all activities and tenant interaction must be recorded and maintained for specified periods. Though also related to financial functions, there are very rigid requirements in most states for the handling of funds paid by renters for disbursem*nt to owners.
Even choosing repair companies can subject you to complaints from owners that you are showing a bias that raises their costs for maintenance.
Note
A vacation area with a great number of rental homes and condos may seem like a good area for a property management practice.
Those considering specialization in real estate property management needs to understand the requirements and have a good feeling about being able to accomplish them all with efficiency and enjoyment. It's not as easy as selling real estate.
How To Become a Property Manager?
You may be able to get a job as a property manager with a high-school diploma but some employers may prefer college graduates. There are also certifications such as Certified Property Manager, that may help improve your chances of earning a better salary as a property manager.
Note
If you want to start your own property management business, many states, such as New Mexico, require you to obtain a real estate broker license, especially if you're negotiating rent.
The next steps include identifying your niche as a property manager, which means deciding whether you want to deal in residential or commercial properties, or if you'd solely focus on vacation properties etc. Follow that up with research about your target markets as well as target customers. Using a business plan to clearly outline all aspects of your business would be a good idea.
Frequently Asked Questions (FAQs)
What do property managers charge?
Property managers can charge in many different ways including flat fee, but the most common arrangement is a percentage of monthly rent. On average, property managers may charge 7%-12% of gross monthly rent.
What do property managers look for during an inspection?
Property managers are expected to do carry out routine inspections of both the interior and the exterior of the building. For exterior inspections, they would consider inspecting landscaping or paint. Interior inspections would include common areas of the properties as well as interior of units, as and when tenants get ready to transition.
