what is property management

What Is Property Management: Everything You Need to Know

If you’re a landlord or considering becoming one, it’s worth exploring the advantages of hiring a property management company. 

Before making a decision, it’s crucial to have a deep understanding of property management, the responsibilities of a property manager, and the associated costs. 

In this article, we’ll delve into these topics and provide valuable insights about hiring a property manager for the first time.

What Is Property Management?

In simple terms, property management refers to the daily oversight of residential, commercial, or industrial real estate by a third-party contractor.

Property management companies play a crucial role in handling many aspects of your business, including rent collection, repairs, maintenance, move-out cleaning, and more.

Property management companies assist with advertising vacant properties, conducting background and credit checks on potential tenants, scheduling property tours, and drafting lease agreements and other essential contracts. 

Their expertise can be invaluable in managing multiple rental properties, especially when you lack the time or resources to handle these tasks independently.

Benefits of Hiring a Property Management Company

Let’s explore some scenarios where hiring a property management company can be beneficial:

1. You Want to be a Hands-Off Landlord

Many landlords view rental properties as sound investments that generate passive income and potential long-term wealth. If your focus lies primarily on the business and financial aspects of property ownership rather than the day-to-day management, enlisting the services of a property management company can maximize your investment returns.

2. Being a Landlord Is Your Second Job

Supplementing your primary income with rental properties can be an excellent way to boost your earnings. However, if you’re already committed to a full-time job, you may find it challenging to dedicate sufficient time and energy to property maintenance and tenant management. Hiring a property management company can ease these burdens, allowing you to focus on your career while professionals handle property-related tasks.

3. You Have the Financial Means

It’s important to note that property management services come at a cost. However, if you can comfortably allocate 5%-10% of your rental income to these services without compromising your lifestyle, engaging a property management company is worth considering. By delegating landlord responsibilities, you’ll gain more time to expand your business, enjoy quality moments with your family, or simply relax.

4. You Don’t Want to Be an Employer

While hiring individuals, including tenants, to assist you with property management is an option, it introduces the complexities of employer responsibilities. If you prefer to avoid these intricacies altogether, a property management company can provide the necessary expertise and save you the hassle of being an employer.

5. You Participate in an Affordable Housing Program

Managing properties involved in affordable housing programs often entails extensive paperwork and adherence to specific regulations. Property management companies specialize in navigating these programs, ensuring landlords receive entitled financial assistance, providing guidance on tax filings, and helping tenants secure affordable housing.

Understanding the Role of a Property Manager

Within a property management company, the property manager assumes a pivotal role in overseeing various aspects. Acting as the landlord’s representative, the property manager ensures properties are well-maintained, tenants are cared for, and rental income is generated.

Specific responsibilities of a property manager include:

  • Supervising and coordinating building management and repairs
  • Performing light cleaning work
  • Resolving tenant concerns
  • Advertising vacant units
  • Conducting property tours
  • Collecting and depositing rent
  • Maintaining regular communication with the property owner
  • Screening tenants and their pets
  • Processing applications
  • Handling lease agreements and renewals
  • Providing lockout services
  • Managing emergency maintenance
  • Issuing notices of entry
  • Facilitating evictions

By entrusting a property manager, landlords can ensure professional management of their properties and the well-being of their tenants.

Determining Property Management Costs

Property management companies charge fees for the valuable services and convenience they offer landlords. These services contribute to the success of rental properties and tenant satisfaction, which might justify higher rental prices.

To make an informed decision about hiring a property management company, it’s essential to understand the fee structure and associated costs.

Property management fees ‌ fall into two categories: percentage-based fees, flat fees, or project-based fees. Property managers charge leasing fees and monthly management fees.

Leasing fees cover expenses related to marketing, property showings, application reviews, tenant screenings, paperwork processing, and ensuring units are move-in ready. Typically, leasing fees range from 75% to 100% of the first month’s rent.

Monthly management fees encompass recurring services such as rent collection, inspections, maintenance coordination, and overall property management. Typically, monthly management fees amount to 7% to 10% of the unit’s rent.

Landlords can tailor the services they require from property management companies, whether limited to leasing assistance, ongoing management, or both.

Other potential property management fees include vacancy fees, onboarding fees, maintenance fees, lease renewal fees, and eviction fees. It’s crucial to inquire about these additional costs and their specifics when evaluating prospective property management companies.

Tips for Hiring a Property Management Company

When considering property management companies for hire, the following tips can guide you in making an informed decision:

  • Inquire about the company’s current portfolio size and ensure they possess the resources and personnel to effectively manage your properties.
  • Evaluate their inspection process and frequency.
  • Understand their tenant and pet screening protocols.
  • Clarify upfront and monthly payment requirements.
  • Familiarize yourself with any potential additional fees.
  • Assess whether they offer services beyond property management, such as property acquisition or sale assistance.
  • Determine your level of involvement in the management process, including which situations require your attention and the accessibility of required information.

Final Thoughts

Hiring a property management company is a decision that merits careful consideration. Take your time to meet with multiple property managers, ensuring their approach aligns with your expectations. If a property management company exerts pressure or pushes for a hasty decision, it’s advisable to explore other options. By selecting a reputable and reliable property management company, you can confidently entrust them with your business, allowing you to enjoy the benefits of professional property management.

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