What is Property Management?
At its most basic level, property management refers to the overseeing of residential, commercial or industrial real estate that is typically owned by a separate entity. As there are countless responsibilities at a rental property that can overwhelm a landlord, a property manager is often hired to make things run more smoothly. Typical types of properties overseen by property management includes apartments, condominium units, and shopping centers. The property manager’s job is to act on the owner’s behalf to maintain the value of the property while simultaneously generating income.
What are the Responsibilities of a Property Manager?
The exact responsibilities that a property manager actually takes on will vary, but there are several typical tasks that property managers are likely to take on. The first core responsibility a property manager may be in charge of is managing rent. This starts at the base level of setting a rent that is reasonable enough to attract customers but high enough to be profitable to the rental property. In order to determine a fair base range, a property manager should consider the competing properties in the surrounding market. This rate can also be adjusted as the manager sees fit.
Once rent is set, an effective system must be put in place to collect rent that includes not only a strict deadline by which rent must be paid, but also penalties if tenants fail to meet this deadline, such as a late fee, to ensure the deadline is honored.
Along with managing rent, a property manager will likely be involved in managing tenants. The first step here is to find tenants through various forms of advertising. Vacancies do not optimize income for the rental property, so property managers should be highly motivated to advertise the property. A property manager should be well aware of what tenants are looking for, putting them in a prime position to create ads or makeover the property to make it stand out.
Once interest has been generated, the tenant screening process can begin. Searching for reliable tenants is a tedious process but yields long term returns. It is extremely vital to ensure you are taking on trustworthy tenants. A typical screening will include a credit check, a criminal check, and a glance into their past tenant history. Bad credit suggests that the prospective tenant is less likely to pay their rent on time, while red flags in the criminal check may indicate they are likely to put the property and its other tenants at risk. By contacting their previous landlords, you can get a more direct insight into what type of tenant they are. Remember, you are looking for tenants who will make rent payments in a timely manner, cause fewer disturbances and damages, and will have a more extended tenancy.
Managing tenants may also include taking care of the leases, including various clauses to protect the owner and a security deposit to cover any unmet parts of said lease. At move out, they should inspect the property and determine how much of the security deposit is needed to fix any damages and clean the unit for the next tenant. If the lease is breached prior to the tenant’s set move out, the property manager will file for eviction and see the process through.
Another central role of a property manager is to maintain safe and comfortable conditions in the rental property through property maintenance. Maintenance should always begin with preventative measures so that you can catch small issues early on before they become expensive problems.
Several maintenance tasks should be included in a regular routine, such as extermination, checking for water damage and leaks, testing smoke and carbon monoxide detectors, and removing the trash. By following a regular routine, you will minimize the number of necessary repairs. When the need for a repair does arise, a property manager will be responsible for fixing the problem or appointing a third party to do so.
The cost of repairs is only one expense that must be considered with respect to the budget as a whole. Property owners tend to rely on their property managers to exercise their judgment on what expenses are necessary in order to stay within the set budget for the rental property.
Understanding the Laws
Furthermore, a property manager should be well versed in the technical issues surrounding the rental property. This includes the laws governing the landlord-tenant relationship, as well as an understanding of how to file taxes for the property. Each of the previous responsibilities we have discussed thus far come with their own set of state and national laws; a property manager should be well aware of these legality concerns as they navigate tenant screening, eviction processes, compliance with safety standards, and more.
Not only does a property manager need to be focused on their own responsibilities, but they are also responsible for supervising other employees and ensuring they are performing as they should be. If any employees are not doing their job, a property manager may be responsible for issuing a warning or firing them.
Do You Need a Property Manager?
Now that you understand more about what a property manager is and what kind of tasks they are responsible for, you might be considering hiring one. Not every property needs one, but a property manager can be very beneficial. If you are considering getting a property manager for your rental property, there are some things you can consider to aid your decision.
The first thing to ask yourself how experienced you are in property management. If you have already managed your property for quite some time and things have been running smoothly, you might not be in need of a property manager. However, if you have just invested in real estate but don’t know how to go about managing the property, a property manager will be the perfect thing for you. Small mistakes can quickly chip away at your investment, so learning as you go will probably be more costly than hiring someone to help.
The next thing you may want to take into consideration is the distance between you and your rental property. If your property is right down the street, it would be relatively easy for you to collect rent on time or respond quickly to any maintenance requests. If you are geographically far from your rental property, on the other hand, you might have a harder time completing the necessary tasks to manage your property. The value of your convenience combined with the actual cost it requires to commute back and forth between your residence and your rental property might be more than it would be to simply hire a property manager.
Do you have the time to manage a property? Managing a property requires a lot of close attention, so if you do not have the time of day to give your property what it needs, your investment might be safer in the hands of a property manager.
Though a property manager tends to be worth the money, they are not free. You should always assess your finances to decide whether you can afford them in the first place and whether the payoff of having a property manager is greater than the cost of hiring them. This question tends to be dependent on the others. If your property is far from home, you have little experience, or are low on time to put into your investment, a property manager will probably be worth the money. If you are interested in property management, we encourage you to look into SITCO!