What is property management?
Investing in real estate is one thing. Managing your properties is another challenge entirely. A property manager can take a load off to help with the undertaking, from screening tenants to arranging repairs. But with so many types of property management and the varying costs involved, you’ll want to get the full picture before taking on your own property manager.
If you’ve invested in real estate and are asking yourself, “Should I get a property manager?” this is the guide for you. With a more comprehensive understanding of how property management works, you’ll be well-equipped to decide whether you need one or not.
What is property management?
Property management involves the day-to-day running of real estate, ranging across residential, commercial, or industrial properties by a third-party contractor.
The owners of these properties can delegate the daily oversight and routine tasks required to maintain them and preserve their value while continuing to drive income.
Property management can often benefit real estate investors who do not live near the property they have invested in or don’t want to manage. There are different types of property managers, from individuals to full management companies.
What does a property manager do?
As the third party overseeing and managing a client’s real estate, property managers will work to ensure the property continues to garner passive income. Doing so includes a number of responsibilities:
Managing and attracting new tenants
Property is not making money if it’s vacant. As such, it’s imperative that a real estate investor’s property is in use whenever possible. A property manager will not only attract new tenants but help with the renewal of current leases as well.
Ensuring laws and regulations are met
The more properties an investor owns, the larger the challenge is to keep up with the various regulations and laws attached to each asset. This is even more so when you own property in different states, where rules and regulations vary massively. Property management helps alleviate this burden; each property manager you contact will be an expert in the landlord-tenant laws and regulations applied in that specific area or state, so you can rest assured that you follow the rules.
Ongoing maintenance is the nature of the beast in real estate. Whatever the issue raised by the tenant, an investor’s property manager can handle things quickly. A responsive property manager will ensure that tenants are well looked after – and if they’re happy, they’re more likely to stick around rather than take their business elsewhere.
Property managers will also take care of the collection and depositing of rent for their clients. Larger property management businesses may even have electronic systems to streamline the payment process for tenants. Plus, they’ll handle tenants that aren’t paying on time and challenging tasks like overdue collections and evictions.
Who needs a property manager?
A property manager can take a lot of work off the hands of a real estate investor.
Particularly, if you have several properties spread far and wide, it can be almost impossible to manage them all yourself.
However, it will come with a cost, so it’s worth consulting a financial advisor to establish whether it is a viable option for you. If the opportunity cost weighs in favor of contracting a property manager, it will likely make your life easier. But no two financial situations are the same, so the calculation will need to be made based on the specifics of your situation.
How much does property management cost?
The amount you can expect to pay for property management can vary. It may be based on whether a real estate investor is renting residential or commercial properties and their size and location. However, you can expect to pay between six to 20 percent of the property’s monthly rental income. However, this percentage-based fee isn’t the only way property managers charge. Others include:
Maintenance fees: costs incurred when your property manager has to deal with any issues with a property.
Management fees: a flat fee some property managers charge, which can vary between companies or individuals.
Leasing fees: covering the costs of marketing properties to prospective tenants by property managers.
Lease-renewal fees: another cost that property managers might charge for dealing with tenants renewing their lease.
Types of property management
Since there is more than one property type, it makes sense that the same applies to property management. Therefore, while some individuals or companies will specialize in managing one type of property, others will offer a full range of property management services. Types of property management include:
Residential, covering properties like family homes, vacation homes, and apartments.
Commercial, covering properties including public accommodation (hotels, hostels), retail (shopping centers, restaurants), office spaces, and co-working spaces
Industrial, covering properties used for manufacturing, storage, or distribution
Special purpose, covering all manner of other types of properties, including:
Places of worship
Educational facilities (schools, universities)
There are plenty of benefits to be had; property managers can take a lot of administrative work off your hands, as well as the challenges of maintaining the property yourself and dealing with tenants directly. Ultimately, they can open your horizons much further geographically. For example, suppose you have a reliable property manager on hand. In that case, you can feel comfortable knowing they can oversee the smooth running of your property and represent you – rather than needing to be there yourself.
That said, some real estate investors would much rather be in control themselves when it comes to things like choosing tenants and overseeing maintenance. In addition, a property manager’s screening process may not be as vigorous as yours, and the external support they use for repairs might not be your preference. And above all, property management comes with a cost – one that you may feel is too high compared to the money you’re making from your real estate.
It may take expert advice from a financial advisor before deciding whether property management is for you. Find a financial advisor to help with your real estate investments today.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.