Property management

[Willis Seng]

How does property management work?

[Richard F.]

In theory, you locate a Property Manager with similar views and a compatible style that you feel is trustworthy-this is going to be a long-term relationship! For a fee, typically a percentage of collected rents, they handle the day-to-day operations of the property. This would include routine inspections, obtaining and qualifying tenants, managing tenant issues and routine maintenance, making mortgage and insurance payments, locating qualified vendors for repairs and capital improvements, then coordinating, monitoring, and paying them. (The PM pays for all of this out of rents collected, NOT out of the management fee). The PM also provides a complete, detailed monthly financial report documenting each of these expenditures and all income. In addition, the PM is the point of contact for legal service, tenants, government officials, utility companies, etc. (This simplifies Tax Time, as well as giving you an accurate picture of what is happening--Learn to Read the report, and do so each month!) If all goes well, each month along with your reports, you will receive a check for whatever is left over!

The management agreement spells out your relationship clearly--read it and ask questions, BEFORE you sign it! It typically limits the amount a PM can spend for routine items without your approval. It also should detail extra cost items, such as coordination fees for larger projects, eviction fees, and other extraordinary expenses.

Ideally, a PM will help you avoid lawsuits and fines due to ignorance of the laws...there are MANY that apply to "Landlords": City, State, and Federal. They will also "hopefully" select the best materials and products, correct advertising medium, and perfect tenants in order to maximize your investment. Just remember, they are only Human, however. This business is far more complex, and has many more variables than people realize. Simply owning your own home does not begin to qualify you as a PM!

Finally, as with most things in life, all of this is usually negotiable. Some PM's will provide more or less services, or tailor their offering to your specific needs. Property Management has been known to be somewhat stressful, they can relieve you of much of it.

A lot is said about unscrupulous PM's, and certainly, as with any profession there are good and bad. Ask questions, visit properties they currently manage, walk your property with them. Be accessible and responsive. If possible, don't use a PM whose "bread and butter" is sales. And don't use a friend or relative as PM, or rent to them!