Learn What Does a Property Manager Do?
Find out what property management companies do and how they can help you save time, avoid legal trouble, and manage your tenants with ease.
Working with a good property management company removes many rental property ownership headaches. They can save you time, hassle, and even keep you out of legal trouble. But, what what does a property manager do exactly?
Truth is, property managers can be flexible, depending on your needs and budget. They can be full-service, managing every aspect of your rental property. Making your rental more of a hands-off, paper investment. But, maybe you don't mind handling day-to-day tasks, like collecting rent and responding to maintenance issues. You need them to handle tenant turnovers - getting a new tenant in to fill the vacancy. Property management companies can take care of à la carte roles like that too.
Either way, your property management company's responsibilities can, and should be, well defined. So what does a property management company do? Let's dig in…
Manage Tenants (and Prospective Tenants)
After purchasing my first property, it took a while for me to realize the benefits of having a property management firm. I'm glad I finally came around. A property management team alleviates many of the stresses of renting properties.
One of a property manager's biggest roles is managing tenants. Some of the more common tenant management responsibilities are:
- Finding potential tenants
- On-boarding those tenants
- Inspecting your rental properties
- Responding to complaints
- And evicting problem tenants
Handing these headaches off to a property management company will make your life much easier.
Find New Tenants (Marketing, Screening, Security Deposits)
When you depend rent checks from tenants, you need to fill every vacancy fast. A property manager will take care of advertising your vacant units, and suggest ways to make the space more appealing to potential renters. They will collect rental application and run background checks too.
Part of filling vacancies includes screening and on-boarding each new tenant. Property managers will:
- Welcome the tenant to their new home
- Review the lease with the tenant
- Inform the tenant about how to set up utilities
- Perform a walk-through inspection with the tenant
- Hand-over the keys
- Follow-up with the tenant to make sure they have everything they need
When tenants complain about the noise levels of other tenants, my phone doesn't ring – my property manager's does. My property manager handles complaints.
If the property manager can't solve the problem, they defer to me. This is rare, but it does happen. And, it's important that you, as the owner, are aware of major issues.
Now, my tenants get what they need without having to call me away. Freeing up my time for more import things.
Lease End Inspections
When I was managing my own properties, I was in charge of inspecting the unit when the tenant was ready to move out. Property managers can handle these inspections too. They will assess:
- Property damage
- Repair costs to withhold from the security deposit
- Maintenance issues the landlord needs to correct
Then, they will take care of getting the property repaired and ready for the next tenant.
Evicting Bad Tenants
It's stressful to kick a tenant out when they get behind on rent.
They make promises to get it to you next week. You're human. You empathize and want to be nice. So you let them pay late "just this once". Then, they only pay part of what they owe you, restarting the whole cycle again.
Late rent compounds fast - leaving your tenant thousands of dollars behind in the blink of an eye.
Letting your property manger handle evictions is a massive stress reliever. They don't have the authority to let the tenant pay late. And, they aren't going to ask you if it's okay either.
They prepare the documentation needed to evict the tenant. Then hand the eviction over to an attorney.
Property management companies work with attorneys all the time on evictions. They can refer one to you, so you don't have to handle the court case yourself.
It's an unfortunate scenario for the tenant, but your investment is losing money when people fail to pay. Hire a property manager to keep your property raking in revenue.
Manage Your Property
Handle Repairs and Maintenance
There will be times when several tenants put repair requests at the same time. The week before major holidays has always been a busy time for my tenants.
When I purchased my first property, I was stuck doing many of the repairs on my own. I could handle basic repair issues myself, but had to call the professionals, like plumbers and electricians, for complex repairs.
Managing a maintenance tasks and emergency repairs, with my own hands was an uphill battle. And, it could have been avoided altogether.
Property managers will also help you mitigate risk. They can spot maintenance issues before they get out of hand.
Property management companies work with contractors all the time. They can recommend repairmen, pest control experts, and even rental insurance companies. They have often negotiated rates with these contractors ahead of time. This can save you quite a bit of money, and you know exactly what you will be paying ahead of time.
Property managers are there to handle maintenance, repairs and emergencies. Again, freeing you to do whatever you would rather be doing.
Collect Rent and Security Deposits
When a tenant moves into one of my units, my property manager is in charge of collecting the security deposit and first month of rent for the unit.
We hold onto the security deposit to cover any potential damages, of course. However, collecting rent is necessary to keep paying the mortgage on my properties. When someone fails to pay their rent, I don't have to get nervous about going to knock on a tenant's door.
Keep Detailed Records
Balancing the books for each of your rental properties is part of doing good business in real estate. Property managers make sure your operational costs and expenses don't exceed earnings. If anything is off, they will let you know.
Keep an Eye on Vacant Units
There's nothing worse than having vacant rental units stay empty for several months. A good property manager will check in vacant units to make sure squatters don't move in.
Prepare and Files Taxes for the Property
A professional property manager can prepare taxes for your investment properties, and they might even be able to file your taxes on your behalf.
Investing in real estate is a risk with plenty of rewards. But, it takes years to be proficient. You will make mistakes. Expensive mistakes.
Experienced property managers are a wealth of real estate investing knowledge. They've seen it all. From crazy tenants, to real estate emergencies and legal issues. You can lean on their knowledge, to save you a ton of headaches.
You can count on experienced property managers to set monthly rent prices. They know the market in-and-out, and can tell you what your unit will rent for to be competitive. This will keep you from over-pricing, or under-pricing your rental. Over-pricing will increase your vacancy rate, and decrease your revenue. Under-pricing will keep your vacancy rates low, but leave money on the table. A good good manager will improve your ROI.
Protect You From Lawsuits
Property managers know the local real estate laws - which are very different in each state. State laws require them to know local real estate laws to get (and stay) licensed.
Inexperienced landlords and real estate investors aren't always aware of these laws. And, a small slip-up could result in an expensive lawsuit. A property manager will prevent you from breaking local rental laws in the first place.
Let You Know When Other Landlords Are Selling Their Rentals
Property managements companies often work with hundreds (or even thousands) of other landlords. They know when one of their clients plans to sell their rental. You can can bet they want to know first - so you can buy it. It's a great deal all around. The previous owner gets a quick sale. You get to add a new unit to your portfolio. And, the property management company gets to keep managing the property. Everyone wins.
Sell Your Rental When You Are Ready
Most property managers are licensed sell real estate as well. As mentioned before, they know many real estate investors that would love to buy your property. So, when it's time for you to sell your rental, your property manager the best person to get it sold.
When Do You Need a Property Manager?
You've read this far, so you must be asking yourself when it's the right time to hire a property manager.
You Live far Away From Your Real Estate Investments
This one is pretty obvious. The further you live from your property, the harder it is to manage. Unload some, or all, of those responsibilities to someone who lives closer.
In my experience, you can handle a lot of tasks from a distance. You can automate rent collection, and call a contractor when something breaks.
You need someone nearby to handle tenant turnovers though. It's very difficult to show the unit when you are 300 miles away. Even if you could, it would eat up a ton of time, effort, and money. A property manager will be well worth the their fee.
You Have Too Many Units to Manage Solo
Managing a few rentals, even from a distance, isn't too time consuming or difficult. Each unit you add to your portfolio, increases the burden slightly though.
At first you are handling a minor crisis once per month. Then, every couple weeks. And, eventually something is coming up almost daily.
I've found the tipping point to be in the 5-10 unit range. Less than five is easy enough to manage yourself. Over ten, and management starts to become a major hassle.
Remember, you don't have to go for full-service management either. You can hand off responsibilities as needed. The more you hand off to a property manager, the more units you can manage comfortably.
You Aren't an Experienced Landlord
It took me a few years to figure out how to manage my properties on my own. If I could do it all again, I would hire a property manager from day one.
The learning curve for handling tenants and managing properties takes years to overcome. Hiring a property management company will compensate for your lack of experience.
You Don't Want to Deal With Legal Issues
Legal issues are tricky. Maintaining properties in different states, makes those laws even easier to violate. Local property managers will keep you from getting into hot water.
Rent Revenue Justifies Management Costs
If you have the means to outsource property management from the get-go, you should. But, sometimes you have more time than money. Plus, managing your own properties is very educational. Especially when you are new to rental property investing.
As soon as that situation flips - and you have more money than time - hire a rental property manager. Buy back your time.
You Want to Run a Business
A lot of us get into the rental business when we realize we can earn extra income from it. We start out treating it as more of a hobby. Advertise the rental. Show the property. Fix things that break. Treat your tenants well... It's not rocket science.
At some point your real estate asset portfolio grows, and you want to spend your time on other projects. It's time to treat these valuable assets as a business. Businesses hire others to get work done, so you can spend your time on more important things.
Congratulations on becoming a serious real estate investor. You're taking a big step from renting out property to running a profitable business.
When you're ready to make life easier, hire a property manager to deal with complaints from tenants.
Property managers free up your time, and reduce your stress, so you can go focus on the things that matter most to you.