Many people like the idea of investing in real estate, but they don’t like the role of ownership. Whether it’s a rental vacation home, a small apartment complex, or an office building, owning a property comes with maintenance tasks and financial responsibilities that can be onerous. to manage. This is especially true if the property is located out of state or if you have another full-time job.
What is a property manager?
A property manager is a person or company engaged to manage the administration, operation and maintenance of real estate on behalf of the owner. Usually these professionals work with revenue properties. But they can be in charge of any type of real estate, including individual residences or residential complexes.
While a property manager might include someone who fulfills a gardener-type role, most are much more than an actual Hagrid. Rather, they are closer to a Dumbledore: like a manager, they manage the day-to-day operations of properties such as apartments and office buildings that have tenants who pay rent or a lease.
What does a property manager do?
The property manager’s individual duties will depend on the type of property they manage and the tasks you assign them. Responsibilities may include:
- Collect the rents
- Advertise and represent the property
- Tenants screen
- Manage tenant turnover
- Sign leases, approve sub-leases
- Verify lease compliance, track tenant deposits
- Coordinate the cleaning of common areas
- Perform building maintenance and repairs (or hire a third party to do so)
- Manage exterior maintenance such as landscaping and snow removal
- Manage books: property income/expense accounting, tax reporting
- Dealing with evictions
- Manage customer communications and vacation rental reservations
What are the types of property managers?
There are several types of property managers.
- Commercial property managers manage office space, industrial facilities, and retail businesses (malls, malls, etc.).
- Multi-family building managers deal with residential real estate: apartment towers, condo development, housing projects, etc.
- Single family property managers are those who manage individual homes or estates. They usually work with multiple owners at a time, many of whom are distant or own many properties.
- If you live in a resort or vacation destination, many property managers will focus on short-term rentals – getting guests for your home during peak seasons. In addition to managing your rental booking, they will also oversee furnishing, cleaning, repairs, and even stocking supplies, and their management fees will be higher as a result.
How are they paid?
Compensation for property managers varies by location, their exact services (the more they do, the more they charge), and the nature of the property: its type (commercial, multi-family, etc.), size, age and location.
Usually this is a monthly fee, a percentage of rental income, rather than a fixed salary. According to the National Association of Residential Property Managers’ “Financial Benchmarks Guide,” most management fees average between 5 and 10 percent of gross monthly rent per unit, but of course this can depend a lot on the area. For example, “In Philadelphia, property managers will charge a monthly fee of between 8 and 12 percent of rent,” says Alex Capozzolo, co-founder of Philadelphia-based Brotherly Love Real Estate.
Although it is usually a percentage of the rent collected, “other forms of compensation may include a fixed fee per managed unit and, in some cases, property managers may also receive a monthly bonus or commission for have met certain performance targets,” says Boris Dorfman, fund manager at LBC Capital Income Fund, a private lender to real estate investors based in Los Angeles.
In some areas, property managers get perks — reduced or completely free rent — for living on the property and handling day-to-day maintenance issues. These people are known as property managers in residence, aka the “super”.
When to hire a property manager
A property manager is a good idea whenever you are overwhelmed with managing your properties yourself or cannot do it properly. “For investors with a larger portfolio, a property manager can be an invaluable asset when it comes to tracking repairs, collecting rent and dealing with tenants,” Dorfman says. “Large properties such as multi-family dwellings require a high level of upkeep and maintenance that cannot be individually managed,” adds Capozzolo.
Even property owners without an extensive portfolio may find a property manager helpful, especially if they’re out of state or too busy managing their work and family life, or naturally unskilled in business finance. Owning an income-generating property is actually owning a business, and filing taxes correctly, keeping the books, and keeping up to date with local regulations is often a job in itself.
Conversely, a property manager may not be a good idea when you can easily manage the property yourself, both financially and literally (no, you don’t mind finding a plumber at 3 a.m. to fix a tenant’s burst water pipe). Or if your situation is relatively simple: a bungalow, a cottage or another simple single-family house, or a duplex of which you occupy half.
It can also be difficult to justify a property manager if your profit margins are as slim as they are. Paying 8 or 10% of your rental income may not seem like much, but you may not be able to afford it if you are already earning little more than the mortgage and maintenance expenses on the property.
How to Hire a Property Manager
Ideally, you want to find a property manager located as close to your property as possible so they can deal with emergencies quickly and inspect the property regularly.
In larger towns there may be leading property management companies you can hire – a preferred option if your property is a large apartment or office building – but in smaller towns hiring someone to managing your property may be your best bet. If you have the space, you may want to hire a qualified tenant or keep a unit available for an on-site property manager in exchange for a reduced rent.
Finding a property manager is like finding any type of professional: referrals, referrals, referrals. Realtors, agents, and real estate agents might know this (in fact, some property managers belong to the National Association of Realtors). If you belong to a local real estate investor group, reach out to your network and ask for names of reputable property managers in your area.