Key Takeaways
- A property manager oversees daily operations of real estate, ensuring tenant satisfaction and property upkeep.
- Property management can be tax-deductible for property owners as a business expense.
- Property managers handle tasks like tenant placement, rent collection, and property maintenance.
- Hiring a property manager is beneficial for distant owners or those preferring not to handle day-to-day operations.
- Understanding state laws on property management licensing is crucial before hiring.
What Is a Property Manager?
A property manager handles the day-to-day operations of real estate, including collecting rent, dealing with tenants, and maintaining the property. Hiring a property manager can save owners time and stress, and in many cases, the cost may be tax-deductible. They often manage different property types, including apartments, retail spaces, and office buildings. Keep reading to learn what property managers do, how much they cost, and the benefits they offer.
How Property Managers Operate: Insights & Overview
Property managers offer an ideal solution for investors who do not live near their rental properties or simply do not enjoy dealing with tenants, toilets, and so on. There are many real estate investors who do not wish to be hands-on about the investment, particularly institutional real estate investors.
The property manager’s responsibilities might include supervising and coordinating building maintenance and work orders, doing light handyman and cleaning work, resolving tenant concerns and complaints, advertising, showing and leasing vacant units, collecting and depositing rent, and communicating regularly with the property owner on the status of the property. The property manager is the owner’s eyes and ears on the property, making certain that issues are being dealt with promptly and the property itself is cared for professionally.
Exploring a Career in Property Management
Property managers typically are not required to have any particular educational background or credentials. That said, knowledge of the local property market is critical when it comes to advising on rent levels and tenant attraction and retention. In addition to receiving a salary or hourly wage, resident property managers often receive free or discounted rent if they are living in a building they are managing. Property management companies can be fee-based or paid a percentage of the income from the building.
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.
Important
Be aware that some states have no licensing or certification requirements for property managers. Before hiring a property manager, know the laws in your state and plan your contract accordingly.
Costs Involved in Hiring a Property Manager
The cost of hiring and retaining a property manager breaks down into a series of “fees” paid by the landlord/owner for various services. These can include an initial setup fee for the account, a monthly management fee, tenant-placement fee, maintenance fee, eviction fee, and early-termination fee. Less common are vacancy fees or a charge to the landlord for maintaining unrented units or properties.
Fees vary by property management firm and depend on the services contracted by the owner. Examples of common fees include:
- Initial account setup fee varies by property manager and could include the cost of notifying tenants of a change in property managers and an inspection of the property.
- Monthly management fee could be a flat fee based on the size of the property or, more likely, a percentage of monthly rent collected, typically 4% to 12%.
- Tenant-placement fee for obtaining and qualifying tenants is typically one half to a full month’s rent (one time).
- Maintenance fee for maintaining the property is often included as part of the monthly management fee.
- Eviction fee if the owner wants the property manager to process evictions—this is generally a fixed flat fee plus court costs, if any.
- Early termination of property manager contract depending on the contract with the manager, but typically is at least one month’s property management fee.
Benefits and Drawbacks of Hiring a Property Manager
The obvious advantage to hiring a property manager is that it removes the need for the owner to be nearby and actively managing the property. This allows a real estate investor to focus on investing in quality properties rather than managing the portfolio of properties currently owned. The downside is that the level of attention and service given to the tenants—the ultimate source of income—may not be as high as that from the landlord working on their personal investment.
This concern about cost is a feeling that real estate investors need to get over if they intend to scale up their holdings. Large real estate investors depend on property managers and usually work with a professional property management company rather than making any hands-on efforts.
What is a property manager’s first responsibility to the owner?
Property managers are, first and foremost, responsible for overseeing the ongoing condition of the owner’s property(s) and ensuring tenant satisfaction. Other duties—such as seeking tenants and managing evictions—depend on the contract with the owner.
What are some things owners should look for in a property manager or management company?
When hiring a property manager or company, first make sure the company and workers have any licenses or certifications required by your state. If your property requires specialized experience, such as with Section 8 housing, make sure your manager is familiar with appropriate regulations. Beyond these, check for a solid reputation: Low vacancy rates in buildings managed by the company, strong policies, and great 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 states. Many states require property managers to hold a valid Real Estate Broker License. Others have their own Property Management License. Still others have no licensing or certification requirement at all.
The Bottom Line
A property manager, as the job title states, is a person or company that manages property for someone else. Property managers are required to have a license in some states; other states have no licensing requirements.
If you are interested in becoming a property manager, first learn about licensing requirements (if any) in your state, then familiarize yourself with potential duties to make sure this is a career field that really interests you. If you are looking to hire a property manager, first decide what duties you want them to perform and what duties you will handle. Then look for an individual or company that can meet those requirements for a price you can afford to pay and one with a solid reputation so managing the manager doesn’t become an all-consuming job.