What is a property manager?
A property manager is a person or company who is hired to oversee the day-to-day operations of a real estate unit. Property owners and investors typically hire property managers when they are unwilling or unable to manage properties themselves.
The cost of hiring a property manager is often deductible from the income generated by the property. Apartment complexes, shopping malls, and business offices are common types of commercial properties managed by property managers.
Key points to remember
- A property manager is a person or other entity that is hired by a landlord for the purpose of overseeing and managing the day-to-day operations of the property or properties.
- The property manager acts on behalf of the owner to preserve the value of the property while generating income.
- As a qualified business expense, hiring a property manager may be tax deductible for investment property owners.
Understanding Property Managers
Property managers offer an ideal solution for investors who don’t live near their rental properties or simply don’t like dealing with tenants, toilets, etc. Many real estate investors are unwilling to participate in investing, especially institutional real estate investors.
The property manager’s responsibilities may include supervising and coordinating building maintenance and work orders, performing light DIY and cleaning work, resolving tenant concerns and complaints, advertising, l posting and renting vacant units, collecting and depositing rents, and communicating regularly with the landlord about the status of the property. The Property Manager is the owner’s eyes and ears on the property, ensuring that issues are dealt with quickly and that the property itself is professionally maintained.
Property management as a career
Property managers are generally not required to have any special education or credentials. That said, knowledge of the local property market is key when it comes to advising on rent levels and attracting and retaining tenants. In addition to receiving a salary or hourly wage, resident property managers often receive free or reduced rent if they live in a building they manage. Property management companies can be fee-based or paid as a percentage of building revenue.
Those interested in a career as a property manager may want to first consider enrolling in one of the best property management courses to ensure they fully understand the field.
Be aware that some states have no licensing or certification requirements for property managers. Before hiring a property manager, know your state’s laws and plan your contract accordingly.
The cost of hiring a property manager
The cost of hiring and retaining a property manager breaks down into a series of “fees” paid by the landlord/landlord for various services. These may include initial setup fees for the account, monthly management fees, tenant placement fees, maintenance fees, eviction fees, and early termination fees. Less common are vacancy fees or fees charged to the landlord for maintaining unrented dwellings or properties.
Fees vary by property management company and depend on the services contracted by the owner. Here are some examples of ongoing charges:
- Initial account opening fee varies by property manager and may include the cost of notifying tenants of a property manager change and property inspection.
- Monthly management fees could be a flat rate based on the size of the property or, more likely, a percentage of the monthly rent collected, usually 4% to 12%.
- Tenant placement fees to obtain and qualify tenants is usually one-half to one full month’s rent (once).
- Maintenance costs for the upkeep of the property is often included in the monthly management fee.
- Eviction costs if the landlord wants the property manager to handle the evictions, it’s usually a fixed fee plus court costs, if any.
- Early termination of the trustee contract depending on the contract with the manager, but this is usually at least a month’s property management fee.
Advantages and disadvantages of hiring a property manager
The obvious benefit of hiring a property manager is that it eliminates the need for the owner to be nearby and actively manage the property. This allows a real estate investor to focus on investing in quality properties rather than managing the portfolio of currently owned properties. The downside is that the level of attention and service given to tenants – the ultimate source of income – may not be as high as that of the owner working on his personal investment.
This preoccupation with costs is a sentiment real estate investors must overcome if they intend to increase their holdings. Great real estate investors depend on property managers and usually work with a professional property management company rather than making hands-on efforts.
What is a property manager’s primary responsibility to the landlord?
Property managers are, first and foremost, responsible for overseeing the ongoing condition of the landlord’s assets and ensuring tenant satisfaction. Other tasks, such as finding tenants and handling evictions, depend on the contract with the landlord.
What are the things owners should look for in a property manager or management company?
When hiring a property manager or company, first ensure that the company and workers have the licenses or certifications required by your state. If your property requires specialist experience, such as with Section 8 housing, make sure your manager knows the relevant regulations. Beyond these, look for a solid reputation: low vacancy rates in company-managed buildings, solid policies and excellent customer service are “must haves”. Finally, make sure the contract you sign is transparent and that you understand all parts of the agreement.
What are the licensing or certification requirements to become a property manager?
Licensing and certification requirements are set by the states. Many states require property managers to hold a valid real estate broker’s license. Others have their own property management license. Still others have no licensing or certification requirements.
The essential
A property manager, as the job title suggests, is a person or business that manages property for someone else. Property managers are required to be licensed in some states; other states have no licensing requirements.
If you want to become a property manager, first find out about the licensing requirements (if any) in your state, then familiarize yourself with the potential jobs to make sure it’s an area career that really interests you. If you are looking to hire a property manager, first decide what tasks you want them to perform and what tasks you will manage. Then look for a person or company that can meet these requirements at a price you can afford and has a solid reputation so managing the manager doesn’t become a tedious job.
