Property Management Defined
Property management is the operation, control, and oversight of property available for lease by maintaining and handling the daily activities of a given piece of real estate. Property management can involve finding tenants to occupy the space, collecting rental payments, general upkeep of the property, and maintaining the grounds. Professional property managers can be used for commercial or residential properties, and the property is usually owned by another party or entity.
So what do property managers really do?
Basically, property managers work for rental property owners and act as middlemen between the owner and tenants. They are in charge of keeping up with the daily duties necessary to maintain the rental property and take care of tenants, as well as offering financial and legal assistance. If landlords live in another city or state than the properties they own, or if they simply do not have the time to interact with individual tenants regularly, property managers can be hired to act on their behalf and make sure everything runs smoothly on a day-to-day basis.
But before diving into how hiring a property manager can benefit your business and covering all the responsibilities property managers are tasked with, let’s take a quick look back at the history of how property management came to be the expansive and prosperous industry it is today.
A Brief History of Property Management
Property management is a unique field and relatively new development, not seen formally until the early 1900s. However, there are some distant land management systems that served as early forms of property management, and, though the influence they played on more modern versions of the industry is likely minimal, there are noticeable similarities between the past and present variations.
In ancient Greece (around 500 BC), men who were the equivalent of property managers were hired by the city to oversee and maintain property, as well as to collect rent. There are not extensive records on exactly how this system operated, but the major difference from our current model of property management is that these managers were civil servants employed by the city, not individuals working for private landowners.
At the height of Roman rule (lasting from about 30 BC to nearly 500 AD), land titles were heavily regulated by an intricate legal system, and land negotiations could not be performed without men who had been trained in the law much like today. Most of recorded history deals with the actual transactions themselves, though, and does not detail the methods used to manage the land holdings, so the presence of property managers is speculation at best.
While the predecessors of property management are more abstract, the use of landlords is deeply rooted in history, dating back to the feudal system in medieval Europe.
From the 5th century until the 15th century, the name landlord was quite literal. These nobles and lords were highly-esteemed men who owned a large expanse of land and allowed peasants to live on their property in exchange for their labor. The peasants would work the land for the landlords, and, in return, they were allowed to stay on the land and received protection from bands of pillagers and invading armies.
This system evolved over time, and the last traces of feudalism survived until the early 1900s. At that time, the Industrial Revolution had already begun, bringing changes that would lead to new opportunities for landlords and the emergence of property management as a profession.
Industrialization played a large part in increasing the percentage of the population that lived in the city, which caused a dramatic increase in the demand for rental property used for housing, stores, and businesses. This is when the first real need for some form of property manager arose, though it remained limited to mainly commercial real estate at first.
However, around 1910, there was a shift in the types of housing people were renting from single-family homes, or flats that only houses a few families, to large apartment buildings, and in the early 20s there was a rental boom that financially empowered landowners to seek assistance in managing their increasingly large number of tenants.
During the Great Depression, all of the banks and loan institutions that had helped fund the purchase of property for years were suddenly forced to seize that same property but had no way to properly manage it. They turned to the people who had been previously hired to operate the properties for assistance and advice, placing an even higher importance on their position.
As the need for adequate property management grew, more resources were invested into the research, development, and expansion of the field. It has continued to progress over the years into the organized and comprehensive system it is today. Many landlords could not imagine life without their property managers, and the demand for their position continues to increase.
9 Benefits of Hiring a Property Manager
1. Superior Tenants
Without tenants, your investment property will do you little good. It is critical to find good tenants in order to be successful as a rental property owner, and this is one area in which it is hard to compete with the knowledge and expertise of a property manager.
Property management companies sort through thousands of tenant applications and have fine tuned the screening process. They know what to look for in an applicant, which pieces of information are most important to consider, and the warning signs for the types of tenants you want to avoid.
Property managers also use a consistent screening process for tenants, protecting you from costly lawsuits based on claims of discrimination. By using a property manager, you no longer have to worry about falling victim to rental scams, facing legal action from turned down applicants, and ending up with bad tenants you don’t know how to handle.
2. Fewer Legal Problems
It only takes one lawsuit to tarnish your reputation as a property owner and cause financial ruin.
Every city and state has its own set of laws and housing codes, on top of federal regulations, that impact the owning and management of rental properties, which can be challenging to keep up with. For example, Seattle Rental Housing Code and the Illinois Landlord & Tenant Act both mandate that the locks on a rental property be changed between tenants within a specific time frame.
Property managers are familiar with local regulations and requirements and responsible for staying abreast of any additions to or changes in policy. That way when any updates occur, such as the additional smoke detector requirements added to Texas Property Code in 2011, landlords can rest assured that their properties will be modified in order to comply.
3. Shorter and Less Frequent Vacancies
By improving and preparing your rental property, setting an optimal rental rate, and marketing the property using a wide range of different mediums and platforms, a property manager is able to significantly decrease the amount of time it takes to fill vacancies.
In between tenants, property managers will not only make any necessary repairs, they should also make recommendations for improvements that will increase the value of the rental property and attract higher quality potential tenants. They will also do the necessary research to make sure you have a competitive rental rate, balancing your desire as the owner to make money on the property and the tenants’ goal to find affordable housing.
Most importantly, property managers have a much wider reach than you as the owner in terms of marketing the property. They have more connections and resources that allow them to spread the word about vacancies and find solid candidates more quickly.
4. High Tenant Retention Rate
While you may think any tenant is better than no tenant, it is ideal to keep the same tenants long-term. The tenant turnover process is costly and time-consuming, requiring that locks be changed, repairs be made, the living space be cleaned, and a number of other preparations be made to ready the property for a new tenant.
Losing a tenant also means going through the lengthy and stressful process of finding a new one, which can result in periods of vacancy and no rent payment. Property managers should have special policies they follow to ensure tenant retention. If the company is reputable and well-established, these programs will be time-tested and follow a systematic approach that promotes good relations with tenants and encourages them to stay for long periods of time.
5. More Efficient Rent Collection Process
As a property owner, the rent you collect is your source of income, so your tenants need to know that paying it in full and on time is not up for negotiation. Using a property manager provides a middleman between you and the tenant so that you don’t have to be the bad guy if a rent payment doesn’t show up on time, relieving you of duties like having to chase down missing payments, enforce late fees, and evict tenants if they refuse to pay.
Tenants also tend to take confrontation less personally when dealing with a property manager because they understand that collecting rent is part of their job and nothing more. And, if the situation arises in which you do have to evict a tenant, there are strict legal procedures that must be followed. A property manager is an invaluable, experienced resource to have while going through this process and much more likely to obtain the best possible result from the proceedings.
6. Tax Assistance
Taxes can be stressful, but property managers have experience with the necessary forms that need to be filed and can walk you through any deductions you might be able to claim in relation to your rental property. And don’t forget, all of your property management fees are also tax deductible.
7. Cheaper Repair and Maintenance Cost
Keeping up with maintenance and repair work is essential to keeping tenants happy and maintaining the value of your property. When you use a property manager, you gain access to both the company’s in-house maintenance staff and the manager’s network of licensed, bonded, and insured contractors that have already been checked to ensure they provide quality work at a reasonable price.
The company is also likely to qualify for discounts due to the volume of work they supply. Not only will you pay a better price using your property manager as a resource, you will eliminate the risk of being scammed and can even have your manager oversee the work to make sure it is up to standard.
8. Increased Property Value
In order to protect your investment and avoid allowing minor issues to grow into major, much more costly problems, preventative maintenance is a must. You need to have a written checklist and schedule that you follow, keep detailed documentation of the work you have done, and make regular visits to the property to survey for any repair or maintenance needs.
Property managers handle all of these responsibilities and will even offer suggestions about any modifications, upgrades, and improvements you can make to your property, which can positively impact your rental rates and lower insurance costs.
9. More Freedom, Less Time & Stress
Aside from the business aspect of having a property manager, there are several personal benefits as well. Your property manager will handle most of the daily responsibilities for your property, meaning you can enjoy more free time with significantly less stress.
You will no longer be in charge of dealing with tenants and meeting their various needs, which gives you more time to invest in a greater number of properties and focus more on growing your property investment business. It also gives you the freedom to invest in properties without worrying about location. If you have a property manager, you aren’t tied to living near all of your properties as long as you have suitable means of communication.
Ultimately, a property manager means you have more time, more freedom, and less stress, and who doesn’t want that?
35 Property Manager Responsibilities
If you are a property owner working with or considering working with a property manager, it is important to know exactly what services you are paying for and what is still considered your responsibility. Remember that the coverage of every management company varies, but there are certain jobs that are standard among most reputable and reliable property managers. Here are 35 of the most common tasks you want to make sure your company is going to perform.
1. Perform an in-depth evaluation of the property with adequate written and photographic documentation.
2. Make recommendations about cosmetic improvements and repairs that will increase the possible rental rate and have the highest return on investment.
3. Research local rental rates and calculate a competitive rate for the property.
4. Weigh the pros and cons to help determine beneficial policies for the property, such as whether or not to allow pets, smoking, etc.
5. Prepare the home to be shown to potential renters, making it presentable both inside and out. This includes taking care of cleaning, repair work, and landscaping to make sure everything looks satisfactory and is fully functioning.
6. Employ marketing strategies created specifically for the given property. There are a variety of different mediums available today, including signs, printed publications, online rental listings, MLS (multiple listing services), and flyers.
7. Work with realtors and leasing agents in order to find a tenant.
8. Talk to and meet with prospective tenants to answer questions and do showings of the property.
9. Create applications that comply with fair housing laws, administering them to prospective tenants and collecting them along with any application fees.
10. Evaluate tenants in accordance with a predetermined set of criteria.
11. Run background checks on prospective tenants to confirm their identity, credit and rental histories, income, and any other relevant information.
12. Notify any tenants who are not selected.
13. Draw up a leasing agreement and review the terms with the tenants to make sure all the guidelines and requirements are understood.
14. Set up an official move-in date and make sure everything is ready for the tenants by that day.
15. Perform a thorough inspection prior to the move-in day with the tenants present and have them sign the report signifying that they are aware of the condition of the property.
16. Rekey the locks to prepare the unit for new tenants.
17. Collect the security deposit and first month’s rent, as well as the subsequent rent payments.
18. Managing rent payments, including tracking down missing payments, enforcing late fees, and providing written pay or quit notices when necessary.
19. In the event of unlawful detainer, filling out and filing all paperwork necessary to carry out the eviction.
20. Represent the owner in court during the eviction proceedings.
21. Work with local law enforcement to coordinate the removal of both the evicted tenants and their possessions.
22. In the event of any legal disputes or litigation, advise the owner on the best course of action.
23. Refer the owner to a proficient property law attorney if legal action needs to be taken or is taken against the owner.
24. Be knowledgeable about and comply with local, state, and federal legislation that applies to the renting and maintenance of rental properties.
25. Inspect the property according to a set schedule to look for any necessary repairs or maintenance, possible violations of the housing code or lease, and safety hazards that need to be addressed.
26. Keep the owner informed and up-to-date about the condition of the property through periodic reports.
27. Maintain financial accounts and handle bookkeeping responsibilities, including making mortgage, insurance, homeowner's association and other payments on behalf of the owner, keeping detailed documentation of expenses, and maintaining historical financial records.
28. Supply the owner with annual reports structured for tax purposes and other required documents like the 1099 form, as well as provide information about any relevant tax deductions available in conjunction with the rental property.
29. Prepare cash-flow statements on a monthly basis that include a breakdown of income and itemized expenses.
30. Create and carry out a policy for preventative maintenance in order to identify and resolve any necessary repairs.
31. Manage and supervise all maintenance work, assigning tasks to either an in-house maintenance crew or licensed, bonded, and insured contractors in order to have the best work done for the most reasonable price.
32. Ensure all outdoor areas are maintained, including trash removal, clearing leaves and snow when necessary, and landscaping.
33. Perform a move-out inspection, keeping adequate written and photographic documentation of the property’s condition after the tenant has vacated the premises.
34. Make a copy of the final inspection for the tenant and return their portion of the security deposit before the date your particular state requires, forwarding the rest to the appropriate accounts to cover the cost of any necessary repairs.
35. In the event of major renovations, advise the owner throughout the process, from recommendations to maximize the project’s return on investment and preliminary cost estimates to hiring the appropriate contractors and serving as the general supervisor until the project’s completion.
Questions to Ask a Property Manager
Selecting someone to manage your property is a weighty decision that needs to be carefully considered and well-informed. Before you decide to join forces with a property manager and their company, there are a series of important questions you should ask to ensure you’re choosing a manager that will best suit your needs and be an asset to your investment.
The questions can be broken into 7 main categories:
Below you will find sample questions for each of the 7 categories, but keep in mind that this list is not exhaustive. If you have additional questions for a particular management company, be sure to have them answered before choosing who you want to hire. You will be working very closely with your property manager and entrusting them with your investment, so you are entitled to know anything and everything when weighing your decision.
- How long have you been a property manager or property management company?
- Which types of properties have you managed in the past or are you currently managing?
- Have you had any experience managing (insert your type of property) before?
- How many properties are you managing at this time?
- Do you think you have ample time and resources to successfully take on my property in addition to the other properties you are managing? If so, why?
- Are you licensed as either a real estate broker or property manager?
- Do you have any certifications related to property management (RMP, MPM, CRMC)?
3. Legal Knowledge
- What is your level of familiarity with local, state, and federal laws relating to tenant relations and property management?
- How well do you understand the federal fair housing laws?
- How knowledgeable are you about:
- Building and safety codes for the type of property I have
- Collecting and storing security deposits
- Pet policies
- Lease termination
4. Finding & Keeping Tenants
- How long does it usually take to fill a vacancy? How long do you think it should take?
- When are you available to show the property to tenants? Are you willing to be flexible to accommodate their availability?
- What outlets do you use to advertise a property and find tenants?
- How long is the average tenancy? What do you think is the appropriate length for a lease?
- Have you ever had to evict any tenants? If so, how frequently and what were the circumstances?
- What is your method for collecting rent each month? What forms of payment do you accept?
- Do you allow any sort of grace period for collecting late rent? What are your late fees and how strict are you in enforcing them?
5. Services & Fees
- What fees do you charge and how much are they? Is the percentage collected based upon the amount of rent collected or the amount of rent due?
- What services are included in your management fees? What services will cost me additional fees?
- What stipulations or guarantees are included with the fees? If a tenant breaks the lease or has to be evicted, will any portion of placement fees be returned to me?
- Is income put into a separate account specifically for my property? Who has access to these accounts?
- How will I receive my money and how frequently? Is there a specific day of the month and what are your available methods of payment?
- Where are tenants’ security deposits held? How much do you require tenants pay as a deposit?
- What is your procedure for returning the security deposit when a tenant vacates the property? How do you determine and deduct for damages?
- Do you provide monthly expense and income reports?
- How often do you inspect the property and what types of things are you looking for?
- What are your methods for maintaining the property? What, if any, preventative maintenance will you perform?
- What is your standard practice for handling repairs and maintenance problems? Do I have to put any money into a repair fund upfront?
- Will you notify me before responding to any maintenance requests or only for requests that exceed a specific amount?
- In the event of an emergency, are you at liberty to make necessary repairs? What defines an emergency?
- How long do you take to respond to tenants’ service requests or complaints?
- Will I receive an itemized report of all expenses?
- What resources are available to you in regards to repairmen and contractors? Do you have an in-house maintenance team? What requirements must independent contractors meet before being hired to do work on my property?
How Mr. Rekey Supports Property Managers
Most property managers work on several properties and have enough responsibilities to keep them going nonstop. Of the many tasks they have to juggle, maintaining security on their properties and looking out for their tenants’ well-being are among the most important. Here at Mr. Rekey, we understand the tremendous amount of responsibility placed on property managers, and we love to support them by providing specialized locksmith services that meet their security and locksmithing needs.
Mr. Rekey is America’s Largest Residential LocksmithⓇ, and we have rekeyed more than 3 million locks across the country since we first began in 1995. After 20+ years in the locksmith industry, we have the experience and expertise to offer high-quality service at an affordable price.
Whether you are a property manager in need of a reliable locksmith to perform lock changes between tenants, or a homeowner just looking to tighten your home security, Mr. Rekey can provide the service you need for a price that’s hard to beat.