Residential property management falls under the branch of real estate related to renting or leasing rental housing. Professionals in this industry perform duties on behalf of the rental property owner while providing services to the tenants and the property. On the surface, this means signing leases and collecting rent for an owner but it also highlights the question, “What else does a property manager really do?”
Property Manager vs. Landlord
While both a landlord and property manager perform similar jobs in this industry, the main difference between these two roles is that a property manager does not own the rental property, while a landlord owns the property he self-manages. Essentially, property managers act as the middle man between the owner of the property and the renter. A rental property owner employs a property management company to maintain their investment so they do not need to attend to daily tenant or property issues.
A property manager must perform all the duties of a landlord but is also responsible for managing money and records for multiple owners, tenants and properties while following federal, state and local landlord-tenant laws.
A property manager’s responsibilities involve the management of rent, tenants, property maintenance and repairs, owners, landlord-tenant laws, business operations, property records and accounting, and taxes.
The Rent
Property managers assist owners with setting the right rent amount that will ensure the property is occupied by quality tenants and that will allow an owner to collect appropriate rental income. An equally important role of a property manager is collecting rent and communicating any rent increases to tenants.
- Setting rent: Property managers are familiar with market rent prices in their area. They understand how to evaluate a property’s features in order to find the best rent price that will help an owner capitalize on their investment and ensure it is always occupied.
- Collecting rent: Property managers create a policy for collecting rent from tenants that can include personal checks, online payments, certified funds, or cash that is mailed, dropped off at a secure location, or picked up in person. Rent collection comes down to which method results in the highest portion of prompt payments with the littlest amount of effort from both management and tenants. A property manager will also deal with late payments, unpaid rent and the process of evicting a tenant due to non-payment of rent.
- Raising rent: Property managers will facilitate legal and appropriate communication with tenants regarding rent increases. They will advise owners on the pros and cons of increasing rental prices in order to match market rates, to pay for property maintenance or improvements, to accommodate tax increases, or to increase profits.
A property management firm should have a clear rent collection procedure that outlines collection policies, late fees, how non-payment of rent will be handled, how outstanding tenant debts are handled and how rental funds are paid out to owners.
The Tenants
One of the primary responsibilities of a property manager includes all tenant-related issues including finding and screening applicants, communicating and enforcing lease terms, managing complaints, dealing with bad tenants and proper handling of tenant funds.
- Finding tenants: A property manager provides the necessary support to market vacant properties in order to find the most qualified tenant for the property. A vacant property is always bad news for an owner, and a manager works hard to get the property rented as quickly as possible to a qualified tenant. They will put out the effort to post For Rent signs, update online rental advertisements, host open houses and communicate with current tenants for qualified referrals.
- Screening tenants: A manager will enforce the owner’s requirements for finding a qualified tenant who will pay rent on time, follow lease terms, and take care of the property by performing legal tenant screening. Legal tenant screening includes evaluating objective qualification criteria like reliable income, employment verification, credit check, criminal background, and positive rental history.
- Enforcing Lease Terms: A manager will review important lease terms with tenants during the lease signing process prior to residency. A manager will communicate appropriately with the tenants if any violations occur, and enforce the consequences during the lease term. The lease agreement should include a policy for how the manager will handle rule-breaking behavior and the consequences for any violations and repeat offenders. A violation may incur a fine, null the contract, or be grounds for eviction.
- Managing Complaints: Deemed as one of the biggest headaches of property management, dealing with tenant complaints can take up a lot of time and energy. A complaining tenant may be voicing concerns about property maintenance or other community-related issues regarding tenants or neighbors. A property manager may require tenants to submit written notifications through email correspondence or an online tenant portal.
- Evictions: Even the best tenant screening can cause a few bad apples to slip through the cracks, leaving a property manager to deal with the legal side of asking a tenant to move out. Evictions are an incredibly lengthy process, and the right property manager will know the correct steps to take to make sure everything is handled appropriately. If the proper legal steps leading up to an eviction are not followed, the lawsuit could be dismissed in court, resulting in wasted time and money.
- Tenant Funds: A property manager collects rent payments and additional fees (like late fees, pet fees, etc.) made by tenants and is responsible for distributing them to the owner or business accordingly. A property manager must follow federal and state requirements regarding trust accounting and tenant security deposits.
The Property
Property managers are charged with the responsibility of the physical management of the rental property in regards to maintenance and repairs, in order to ensure the property remains in liveable condition for current tenants, and attractive, rent-ready condition for future tenants.
- Maintenance: Property managers will perform routine and preventive maintenance for the owner to make sure the property remains in great condition. Managers will perform maintenance tasks personally, via onsite management, or hire a vendor to perform the job. Maintenance can include landscape duties, HVAC servicing, exterior cleaning, animal proofing, gutter cleaning, etc.
- Repairs: Should the property require any home repairs, a manager will communicate the issue with the owner and schedule repairs pending approval. Common property management repairs include plumbing and HVAC system repairs, broken railings, common area light bulb replacement, etc. Repairs can be noticed by management during an inspection or brought to the manager’s attention by a tenant.
- Inspections: A property manager will conduct regular inspections of the rental unit in order to identify any maintenance issues that need to be fixed before they become expensive repairs and to ensure compliance with tenant required maintenance. Rental property inspections may include move-in/move-out inspections, seasonal inspections, and drive-by inspections.
- Turn-Over: Tenant turnover involves getting a property restored to rent-ready condition in between lease terms, collecting keys and leased property, and refunding the past tenant’s security deposit. A property manager will enforce move-out dates, and charge a tenant accordingly if he has not vacated the unit on the agreed-upon date and time. The vacated unit has to be inspected, cleaned and restored back to the condition it was at the start of the prior lease term. If the property owner wants to make additional improvements to the unit during the time, the manager can help coordinate and oversee the property maintenance.
The Owners
Property managers work directly with the rental property owners they serve and must communicate relevant information in regards to property performance, owner funds, and legal issues.
- Owner Communication: Owners want to be informed about the performance of their investment property. Property managers must actively communicate vacancy rates, income, and expenses related to the property, maintenance requirements, business policies, and any legal issues related to the property. Property managers may choose to email, call or provide online access to a property performance portal, sometimes referred to as an Owner Portal. Property managers may also advise owners about legal issues, setting rental rates, raising rent prices or performing property maintenance/repairs.
- Acquiring new owners: Understanding the types of individuals who own rental housing, helps property managers create usable profiles of their target audience. These profiles establish the needs and wants of individual owners so the property manager can best serve them. A property manager will be able to attract new business and retain clients by appealing to what the owner needs during their buying process for the right property manager.
- Owner funds: Owner funds are usually considered rent payments collected by a property manager from a tenant that is then disbursed to the property owner. In order to properly (and legally) handle owner funds, a property manager must understand the basic principles of trust accounting. Trust accounts for property managers are typically used to keep tenant deposits and rent payments separate from operating capital. A property manager must keep owner funds separate from operating capital and follow state guidelines on the timeline required to deposit owner funds.
Landlord-Tenant Laws
One of the benefits of working with a property manager is their experience and knowledge of landlord-tenant laws. Many states require property managers to acquire proper licenses in order to legally manage rental properties which includes education on landlord-tenant laws. A property manager will also assume responsibility for ensuring compliance with legal terms of a landlord-tenant relationship. Working with a property manager allows an owner to let the “landlord” role of the landlord-tenant relationship fall on the manager. Although a lot of legal issues will be deferred to the management company, the owner will not avoid all legal responsibilities and should review the risks with their property manager and attorney.
- Federal Landlord-Tenant Laws: The major federal laws that affect all landlords and property managers are the Fair Housing Act and the Fair Credit Reporting Act. The Fair Housing Act prohibits discrimination due to race, color, national origin, religion, sex familial status or disability. The Fair Credit Reporting Act dictates the ways in which a property manager may use a tenant’s credit history for screening purposes.
- States Rental Laws: State regulations regarding rental properties and tenant rights typically concern practical matters. These include things like the rights and responsibilities of tenants and managers, what terms and conditions can be set as part of a lease, lease termination guidelines, and how evictions must be handled. State laws can also dictate how much can be charged for security deposits, how those funds can legally be handled, and how property managers must use trust accounts for rental income.
- Learn More: 10 Landlord-Tenant Laws to Remember
The Business
To provide the best services to owners and tenants, a property manager must also run a professional business that follows federal and state requirements for managing rental properties including acquiring proper licensing, maintaining records, obtaining insurance, working with quality vendors, and paying taxes.
- Property Management Licenses: Most property managers must hold a property management license or a real estate broker’s license in order to conduct real estate transactions related to managing and leasing rental properties. Only a couple of states do not have this requirement. Property management licenses and real estate broker licenses are granted by state governments, real estate boards, or local authorities in the state where a manager conducts real estate transactions.
- Learn More: Types of Property Management Licenses
- Property Records and Accounting: A property manager should keep thorough records regarding the property, owners, and tenants. This should include all income and expenses; list of all inspections, signed leases, maintenance requests, any complaints, records of repairs, costs of repairs, maintenance costs, record of rent collection and insurance costs.
- Insurance: Lawsuits related to this industry are common, and failure to have the proper protection in place can leave a property manager’s business exposed to unnecessary risk. Property managers need to have insurance that covers their business, their clients, their tenants and the properties they manage. A well-designed insurance policy will protect managers from liability claims, legal proceedings specific to the industry, and losses caused by perils, like fire, vandalism or burglary.
- Vendor Management: Property managers rely on vendors for a variety of services from repairs during tenancy and turnover to routine maintenance and business tasks. Every property manager should have a list of approved vendors ready before they are needed. Property managers are particularly susceptible to blame by property owners for faulty vendor workmanship or inappropriate vendor behavior. Vendor screening should be included as part of your standard operating procedures and implemented to increase your company’s value, provide an established value-added service to tenants and owners and protect your rental business from liability.
- Taxes: Beyond personal and business taxes a property manager will file for himself, he can assist the property owner with understanding how to file taxes for the investment property or assume responsibility for filing taxes for the property for the owner. Additionally, the IRS requires that property managers file 1099-MISC tax documents regarding any unincorporated vendor that has been paid more than $600 in the calendar year, which includes most of the independent contractors used for property maintenance and repairs.
A career in property management means daily engagement with owners, renters, and vendors to provide excellent services to the rental industry. While individual styles may differ, every property manager should have experience in the areas listed above. With the rental industry booming and the number of renter households growing, there is a high demand for rental properties and the professionals that provide value to the industry.
This article was originally published on November 10, 2015