One of the most popular specialties in real estate is property management. Some agents do not even help clients buy or sell — they only manage properties. Some do a combination of both, managing properties that they have sold to an investor. Because more than 30 percent of the sales in recent years are not primary properties but rentals or second homes, the role of a property manager has become increasingly important.
Fast-paced and filled with stressful situations, property management is definitely a “love it or hate it” career. Managing properties is most suitable for a real estate agent who is organized enough to juggle many duties at once and who interacts easily with a wide variety of personalities.
You'll work with property owners who pay you to manage their real estate. You'll work with their tenants, and you'll work closely with repair people, landscapers, service personnel, and anyone else whose skills are needed to keep the property in good condition.
According to the National Association of Realtors
Why Choose Property Management?
Real estate sales can create an unpredictable income stream and, for some people, that makes for an uncomfortable situation. They like the idea of making more money based on their efforts but they also like the idea of knowing how much to budget for each month.
Generally, property managers have a more predictable income, but it is still based on performance. If you manage twenty homes with an average fee of $75 per month per home, you will have a predictable gross income of $1,500 per month. If you manage fifty homes at $75 per month, your income increases to $3,750 per month. Of course, a predictable income comes with a more rigid schedule than the flexible income and flexible schedule of the sales agent. As a property manager, you will need to be available at the first of the month to collect rents. You will need to be available when there is a vacancy in order to show the properties, and you will need to be available to handle the details if there is a maintenance problem. You will still have moderate flexibility within these guidelines, so if a predictable income appeals to you, this may be your specialty.
Duties of a Property Manager
The main functions of a property manager are to find and qualify tenants, collect rents, and ensure that maintenance is performed and that nonpaying tenants are removed through the eviction process or by other means. Checking on vacant properties to be sure there has been no vandalism, broken pipes, or other damage, preparing the properties for rent, and accounting for money are also part of the duties of a property manager.
Although there are tenant advocates who work for the tenant, a property manager generally works for the owner of the property.
No matter how wonderful the tenant is, your fiduciary duty as property manager is owed to the owner. Property managers are a buffer between an owner and the owner's tenants. As a property manager, you collect rents and deal with people who can't pay or must pay late. You are the person tenants call when something breaks down and you are the one who in turn calls a repair person to schedule a time to fix the problem. You also verify that the job was done correctly.
Some property managers are paid a salary and others earn a commission that is a percentage of the rents collected. The National Association of Realtors
More complaints are filed against property managers than real estate agents working in other specialties. In part, this is because managers work with so many different people, raising the odds that at least a portion of them will be unhappy. It's essential for managers to keep detailed records of transactions and to make sure they are covered by ample errors and omissions insurance.
The rental funds a property manager collects must be placed in a trust account, which is not intermingled with other money. If you work in a large property management firm you might not be directly responsible for handling incoming rents and outgoing payments to service people and property owners. However, you should understand the laws that govern how those funds are handled, so that you can step into that position if required and so you will recognize if someone appears to be handling funds improperly.
Alert More real estate agents lose their licenses after mishandling trust funds than for any other reason. Handle trust funds and keep records exactly as the law requires, and you shouldn't have any problems.
Your state real estate laws dictate how trust funds must be handled. Money held in trust is money that someone has given to you but belongs to someone else. In property management the rents belong to your clients (the property owners), even though you eventually use a portion of them to pay yourself and other service personnel.
Repair and Maintenance Issues
As the property manager, start by ensuring that the home you are going to rent out is in its best possible condition. It may be wise to get an inspection from a licensed home inspector and have all issues handled before starting the process. Ask the home inspector to point out cosmetic items as well as other maintenance issues, such as torn or missing screens. Start with having the owner take care of every defect the home inspector discovers. If the owner is not willing or not able to take care of any defect, the house may still work well as a rental as long as you, the owner, and any prospective tenant note that defect.
Sometimes replacing a cracked floor tile means replacing an entire floor. As long as the crack does not appear to be of the type that will get worse, disclosing this without fixing it can be sufficient.
Photographing the house is a great way to get a detailed record of its condition. If you are using a digital camera, be sure to have the photographs printed so that no one can accuse you of using a program like Photoshop to doctor the pictures later on. Give a set to the tenant and have them sign the back of each photo as approval of the condition and place that set in the file. When the tenant moves out you can easily determine if there was any damage by taking “after” pictures and comparing them. Once again, due to the nature of digital photos, it is best to take the after pictures and print them in the company of the tenant. Taking photos of a house for rental purposes is different from taking photos for enjoyment. You will need to take photographs of the following:
Each and every wall of each and every room
The floors of every room
The ceilings of every room
The interior of the tubs/showers
The appliances, including the interiors of the oven and refrigerator
The exterior and interior of the fireplace or woodstove
Any other feature that is particular to the house
The tenant will also need to fill out a move-in statement. They will make note of anything in the house that needed attention before they moved in. Most states have a form that can be used with check boxes to keep the tenant from forgetting anything. This form needs to be signed by the tenant and by you and kept in your file.
Once a tenant moves into the house, if they pay the rent on time and you don't get any complaints from the neighbors, chances are you will not set foot in the house during their tenancy. This can be good and bad. Some tenants won't tell you when something is wrong with the house. They are worried that you will raise the rent or ask them to move if there is a maintenance issue.
The danger of this lack of communication is evident in the following example. Imagine that a couple moved into a house and paid rent faithfully for many years. During that time there was a leak in the bathroom, which they did not report to the landlord. When they moved out they left the property in excellent condition and at first glance it appeared that they would receive their security deposit back.
Keep a reserve of cash to take care of the little things that may crop up. If you have a heater go out in the middle of winter and the owner lives in another community, you want to be able to get the heat on, even if you can't reach the owner for payment right away.
As the landlord went through the property for his final walk-through, he heard the sound of water dripping. When he went to check it, he discovered that the floor of the bathroom was soft. Upon closer inspection he could see that a leak had been going on for a long time, and that, as a result, the tub was ready to fall through the floor! If the tenant had called when the leak first started, the repair would have been simple. Now it will be an expensive repair and the potential for mold problems exists as well.
What could have been done to prevent this? As a property manager, it is your duty to inspect the properties you manage on a regular basis, even if there is no problem with the tenant. This inspection can occur once every few months, or even once a year, depending on the age of the house and whether or not the tenant calls you about repairs or other issues with the house. Some tenants will call for every little detail that they think needs to be repaired. They may even call for things that are their responsibility such as a burned-out light bulb. As much of a time waster as these tenants appear to be, they may actually be better tenants than the ones who keep quiet — at least you know that the house is being taken care of.