Property Management Companies: What do they do?

Matt Teifke,June 20, 2022

Cropped,Image,Of,Beautiful,Couple,Talking,With,Realtor,,Who,IsIf you own property, you must decide if you want to manage it yourself or have someone else do it for you. If you are trying to determine if you want to get involved with this aspect of real estate, you’ll want to know what’s required. 

In this part of the article, we will capitalize on the responsibilities of a property manager so you can figure out if it’s a role you’d like to take on. 

Know the Laws

There are many rules and regulations that apply to rental properties. Here are some examples of the laws a property manager needs to be updated on: 

  •  Rental Application Laws: These include requirements for background checks, credit checks, application fees and Fair Employment and Housing laws. 
  • Security Deposit: This involves how much of a security deposit can be collected, how to determine the amount to be returned and how to calculate penalties.
  • Leases and Lease Terminations: Property managers must know how long leases can be set for and the laws involving termination and violation. 
  • Rent and Late Fees: As a property manager, you must know the laws on how much a tenant can be charged for rent, how late fees are calculated, and when they can be added. 
  • Legally Required Disclosures: It may be a property manager’s responsibility to provide disclosures on mold, lead paint, carcinogens and any sex offenders living in the building.
  • Landlord Responsibilities: The property manager must know what maintenance issues they are responsible for. They must also be familiar with laws regarding when they are permitted to access a private property for repairs. 

Property management laws differ from state to state and may be updated over time. It’s essential that a property manager keeps track of what’s involved to ensure they stay on the right side of the law. 

The question is what does a property management company really do? My wife and I managed up to about 750 homes about two years ago. And we ended up selling the company. So I have a lot of insight and a lot of ways to analyze and think about property management.

Businessman,In,Office,Talking,On,PhoneI think management is really valuable if you have the right people, management is a function of time and to put it simply, I’m gonna lay it out. A property management company oversees all aspects of operating, collecting the rent, handling the maintenance, doing the accounting of a investment property.

It could be single family, it could be multi-family retail office and the different sectors of real estate. The management operations are completely different in some sense, but let’s talk about single family. So when you’re deciding, Hey, do I want to manage my own property? Or what do I want to outsource it? The factor or the thing to think about that’s most important is do I want to really treat this as a business and put time and effort into running this like a business? Typically the rent’s due on the first day of the month and it’s late on the third. 

Management collects all the money and then they put it into an account. They hold the deposit in an escrow account, which is separate. And then they wire the money to the owner about the 10th or the 13th of the month after they do their accounting. They also handle all of the communication with the tenant. Sometimes the rent’s late, so they have to track down the rent.

They handle the maintenance requests. Tenants will put in requests such as a broken window or a refrigerator. Then the management company, whether they have maintenance in house or they use third party vendors will decide how and when to go fix the issues. The issue then they’re gonna determine, is this a tenant charge or an owner charge, meaning does a tenant pay for this?

Or is this something that the owner legally has to pay for? The owner has to have everything in working condition per Texas property code. So you got the rent collections, you got the maintenance, which is a huge aspect of the business scheduling, staying on top of people, making sure they do it properly.

Then the accounting will provide you the 1099 at the end of the year. They’ll track all of the expenses. They’ll return the deposits. Whenever the tenants move out, they do a move out and then inspect the condition of the property to determine how much of the deposit they would give back to the tenant.

Then they work on getting it made ready, maybe new paint, cleaning, whatever that may be. And then they start the process all over again. With, with the leasing process, get the sign, take pictures, allow people to get access. And then you do a move in where the tenants and the property manager.

We’ll walk through the property, detail out every condition that they can. So then they can look at that on the move out for the deposit reconciliation. So all in all, there are a lot of components that maybe will sound simple, but you deal with a lot. You’re dealing with tenants, you’re dealing with maintenance people.

You’re dealing with issues, storms come in, freezes happen. It can be a lot. And the ultimate thing to determine is do you want to put time into it and run it like a business, cuz you don’t want to. Operate it and try to do the best you can. You’re gonna be out on the lake one day. You’re gonna be in a meeting and you got tenants calling you.

Now your tenants are upset and they want to move out. And then you’ve got vacancy and releasing costs. You don’t want that. So you have to run like a business. That’s the biggest advice I can give you. But the management company handles that every management company’s different, there’s some great ones.

There’s some really bad. So I do interviews on them, talk to past clients, look at their reviews and understand how they do all of these components, which I’ve been talking about here. And that’s the best way I can lay out what a property management company actually does. 

Repair Requests

A,Woman,Requesting,A,Sink,RepairA property manager is responsible for getting repairs done on the property including indoor and outdoor areas and housing interiors. Those who work in the industry must get used to getting middle-of-the-night calls from tenants in emergency situations. 

And as much as you may want to go back to sleep, this is not advisable. Ignoring service calls could result in a high tenant turnover which can be even more expensive and time-consuming than if you had responded to the call initially. If issues are ongoing, the tenant can even file a complaint and get you into legal trouble

Repair requests aren’t easy to deal with. On top of the middle-of-the-night factor, you will be getting several requests from different tenants at once. 

If you’ve ever had to wait on a service call, you know how frustrating it can be. You may wait around for them to show up only to find they rescheduled for the next day or  are running late. 

Now imagine that times twenty, or a hundred, or how ever many tenants you are serving. It can get pretty overwhelming.  

Property managers also need to keep costs under control which means shopping around for the cheapest, most reliable service you can find. Most property management companies find a few service people that specialize in various industries such as electrical, plumbing, carpentry and so on. Once you develop these relationships, repair requests become easier to deal with. 

Maintenance Request

In addition to repairs, property managers also take care of maintenance. This includes cleaning, removing trash, doing inspections on heating and electrical, and HVAC systems and so on. Without proper maintenance, the building could require expensive repairs. 

Market Properties and Fill Vacancies

Hand,With,A,Key,And,A,Wooden,Key,Ring-house.,BackgroundA landlord loses money every day a property is empty. Therefore, there’s a lot of pressure on a property management company to fill vacancies. Ideally, they will try to attract new tenants before the existing tenant even moves out. 

Getting new tenants requires marketing like listing the property on rental websites and attracting people to open houses by hanging signs and tying up balloons. It also involves hosting open houses and showing the property until the vacancy is filled. 

The property will need to be in ‘like new’ condition before the tenant moves in. This will take some work for the property management team as homes tend to get pretty ‘lived in’ over time. The condition will vary depending on how long the tenant lived in their home and how well they cared for it. 

Most property management companies will need to repaint an apartment and deep clean it before it changes hands…at the very least. More extensive repairs may include fixing drywall, repairing and even changing out flooring, pest extermination, and the list goes on. 

Security Deposits

Woman,Hand,Money,And,Piggy,Bank,With,House,Model,OnSecurity deposits are another issue involved in the move in, move out process. The property management company will typically provide the existing tenant with a list of things they need to do to get their security deposit back. This will include things like removing all personal items and trash, repainting the walls, returning the keys and so on.

If any items on the list have not been tended to, the landlord may keep part, or all, of the security deposit. The amount they return will be in line with how much they have to spend to get the apartment into ‘move in’ condition. 

If the property requires repairs that exceed the amount of the security deposit, the landlord may charge the tenant for the difference. If the tenant refuses to pay, the landlord may sue for the compensation. 

A security deposit is also charged to the new tenant. This typically equals one month of rent but in some instances, the property management may lower or waive the deposit to get the space rented faster. 

If a security deposit is collected, it must go into escrow so it can be returned or used towards repairs. This ensures that it is not mixed up with other funds. 

Screen Tenants

Getting apartment vacancies filled requires tenant screenings which can be taken care of through a property management team. Tenants are given a background check to ensure they don’t have a criminal record that makes them potentially dangerous. They are also given a credit check which lets the landlord know how reliable they are financially. 

Collects Rent and Handles Delinquencies

Security,Deposit,-,ApprovedAnother responsibility of a property manager is to collect rent and handle delinquencies. Rent is typically collected on the first of the month. Some landlords may allow a few days grace while others consider the rent late if it’s even 24 hours late. 

If the rent is overdue, the property manager may follow up by sending a simple reminder. Automated systems make the process easier as they provide tenants reminders on when the rent is due, when it is late, and it allows for convenient online payments.  

If a tenant is refusing to pay rent, the property management team may have to start the eviction process. This involves going to court and getting a court order for them to move out. Once they get the notice, they will have 30-45 days to leave. 

Dealing with Tenant Disputes

A property manager will often find themselves in the middle of tenant disputes. While they may want to say out of it, it’s rare that tenants will solve issues themselves. 

When dealing with disputes, it’s important to stay neutral. Keep your tone professional and get to the point. It’s wise to follow the DEARMAN pneumonic that requires you to Describe, Express, Assert, Reinforce, Stay Mindful, Appear Confident, and Negotiate. 

Keep track of progress of the dispute by writing everything down. This will be helpful if things escalate to a legal level. 

If in doubt, check the lease. As a legal document, it can help you determine who is wrong and who is right. 

Financial Analysis

A property management company will have an accounting staff to keep track of a landlord’s finances. They will provide a second set of eyes for you to determine how your property is doing in terms of ROI. 

 

Should I Hire a Property Manager for My Building? 

Real,Estate,Agent,With,Client,Or,Architect,Team,Discussing,ProjectMost property management companies charge landlords between 8% and 12% of the rent they are charging. When you consider how expensive real estate is, this can be quite a bit of money. Many landlords may prefer to keep the cash in their pocket. 

But hiring a property manager can be worth it in the long run. 

Here are some of the benefits a property management team can provide:

Saves Time and Money: You may think that going to DIY route will save you money, but that’s not necessarily so. Property management teams have the skills to make repairs in a timely manner. They know the ins and outs of what it takes to run a building and can accomplish tasks quickly and easily. 

They also have previous relationships with repair companies so they don’t need to spend a lot of time researching services that may or may not be reliable. 

If you try and take on tasks such as hiring service people, or worse yet, making repairs yourself, you’ll find your errors set you back moneywise and timewise. You’re better off hiring a property management company in the first place. 

They Allow You to Work Remotely: If you are a real estate investor, you may set your sights on different areas that are looking profitable. It’s impossible to manage properties around the country or around the world without a property management team. They will give you the flexibility to branch out and build your investments. If you own a small building that you live near to and can handle small repairs, a property management team may not be necessary. But you will definitely want to hire one if:

  • You Own Multiple Properties or Have Multiple Rental Units: The more properties and units you own, the more you will benefit from your property management company. 
  • You Don’t Live Near Your Property: if you don’t live near your property, it’s best to have a property management company nearby. 
  • You’re Not Interested in Hands-On Management: Some property owners get pleasure out of dealing with their tenants and caring for their buildings. Others see their properties as investments. If you fall into the latter group, hiring a property management company is the way to go. 
  • You Don’t Have a Lot of Time to Spare: Managing a property is a lot of work and it will take up a good amount of your time. If you’re a busy person, a property management company will oversee your building maintenance so you can prioritize your time as you see fit. 
  • You Can Afford It: Hiring a property management company isn’t cheap. If you don’t have the funds to spare, you may want to wait until you have made a considerable profit off your property before hiring a team. 
  • You Don’t Want to Be an Employer: If you manage your own building, you may have to hire a staff for maintenance, administrative tasks and other duties. This will require you to handle payroll and develop an employer-worker relationship. A property management company is an independent contractor and they will eliminate the hassles that come with being an employer. 
  • Your Property Belongs to an Affordable Housing Program: An affordable housing program involves the landlord receiving grants, tax credits or a low interest loan in return for allowing low income tenants to lease in the building. To maintain this situation, the building must comply with certain standards. It’s advisable to hire a property management company for an affordable housing program situation as they will understand what it takes to keep the building compliant. 

 

How to Find a Good Property Management Team

Contract,For,The,Sale,Of,A,New,Home,(lorem,IpsumYour property management team will have a lot of responsibilities. You can ensure yours is reliable by:

  • Asking a colleague for referrals
  • Checking online directories such as The Institute of Real Estate Management’s Membership Directory or the National Association of Residential Property Managers. 
  • Thoroughly interviewing property management companies before making a hiring decision. 

Property management companies take care of several difficult tasks. They may not be right for every landlord, but they should be considered by investors who don’t have a lot of time to care for their properties. Good luck making the right decision for your investment. 

About the Author

Matt Teifke has touched every area of real estate. He is the Founder of Teifke Real Estate (TRE), TRE Homes property management, Longhorn Construction & Development and TRE Property Solutions. As the Principal Broker of TRE, he employs over 140 agents and staff. Matt also holds a Masters in Real Estate, Valuation, Analysis, Investment from Texas A&M University.

If you have questions about property management, please reach out to Matt here.

Last Updated: 6/21/2022

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