What Does a Property Manager Do? 13 Common Responsibilities

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Pros: Why Hire a Property Manager?

Owning rental real estate long-term – letting appreciation raise the value of the property, taking advantage of landlord tax deductions, earning rental cash flow and letting tenants pay down the mortgage – can generate significant wealth and passive income. But it can start to feel like a full-time job after a certain number of properties.

Consider the following reasons to hire a property management company.

Delegate Work

On the most basic level, property managers take on most of the day-to-day headaches of owning and managing rental properties. They handle property inspections, background checks, move-in checklists, chasing down wayward tenants for rent payments, and every other hassle associated with owning rental properties.

That makes your rental properties close to passive investments. You can enjoy the rental income without the hassles of fielding phone calls or screening tenants or overseeing maintenance issues.

Full-service managers also handle your bookkeeping. Regular accounting and financial reports keep owners fully apprised of their investments, thereby freeing them from the tedium and responsibility of the administration.

Local Market Expertise

Beyond doing the basic labor for you, property managers know the local market.

They understand the market forces at work including new real estate developments, zoning changes, transportation issues, legal or regulatory changes, and everything else that affects local pricing.

A good property manager knows how to minimize vacancy rates and fill vacant units quickly with top notch tenants. They help you maximize cash flow by charging the highest rent possible without increasing vacancy rates.

Network of Contractors & Support Personnel

Property managers maintain relationships with a wide range of tested, trustworthy vendors and contractors. That includes everything from low-cost handymen to specialists like electricians, roofers, plumbers, HVAC servicers, and beyond.

In many cases, they negotiate with contractors for discounts or service preferences that they pass through to the properties they manage.

Privacy & Not Being On Call

Brian once had a tenant show up at his home at 9:00 at night. You don’t want that.

Landlords who personally manage their property often become close to their tenants and lose their objectivity when confronted with a tenant issue, such as late or delinquent rents. A property manager keeps renter relations on a professional level.

Cons: Why Not Hire a Property Management Company

Like other professionals, not all property managers are created equal. The quality and types of services they offer vary widely, even in the same real estate markets. As a consequence, a real estate investor should enter into a property management relationship with his eyes wide open.

Before deciding to hire property management, consider the following drawbacks and risks carefully.

Cost

Property management fees are not trivial. In my case, I only purchased houses in desirable locations that required little remodeling and likely to rise in market value.

My due diligence included the likelihood of reaching rental rates equal to 200% of a 30-year fixed-rate mortgage payment within six months of purchase. For example, I required a minimum monthly rent of $3,000 on a property purchased for $300,000, knowing that I could arrange a 30-year mortgage with a monthly payment of $1,200. Rent of $3,000-$3,200 monthly (about 1.0% of market value) was sufficient to cover expenses like vacancy rate, property taxes, repairs and maintenance, property insurance, property management fees, and rent default insurance.

Loss of Control

The advantage of hiring property management is outsourcing the responsibility, decisions, and work. However, hiring a manager means a loss of control and the need to trust a third party to act in the owner’s interests. Ceding that authority is difficult for most people, especially when you’re talking about assets worth hundreds of thousands of dollars.

Risk of Legal Liability

Property managers are human and far from error-proof. They can make mistakes that cost you dearly, such as failing to adhere to Fair Housing laws. The “hold harmless” clause in most property management contracts, limiting the owner’s ability to seek redress, means you have few options when property managers mess up and cost you money.

Termination Troubles

If relations between the property owner and the property manager deteriorate, things can get messy, even winding up in a court. In addition to any costs of termination, the reputation of the property and relationship with tenants might suffer adverse effects.

Types of Property Manager

Most of us think of long-term rental properties when we think of property management. But not all property managers specialize in long-term rentals.

Some specialize in short-term vacation rental properties, such as Airbnb rentals. These short-term rental managers charge more for their services, because it requires more work. They constantly turn the unit over, and communicate with upcoming, current, and former guests. With each turnover they must clean the property, change the linens, and otherwise prepare it for new guests. These specialists operate in the hospitality industry, not just the property management industry.

Other property managers specialize in extended stays or medium-term rentals, such as three-to-six months. These often serve travel nurses and business executives required to spend months at a time in a location.

And, of course, commercial property managers oversee commercial properties. Commercial property management involves its own skill set, from negotiating triple-net lease contracts to ensuring that commercial tenants don’t make irreversible changes to the rented units.

For that matter, commercial property managers often specialize in one industry. That might mean self-storage facilities, or restaurants and bars, or industrial properties, or retail. Each type of property comes with its own unique quirks, and property managers must know their specialty well.

How to Hire a Property Manager

The decision to hire a property manager is just the first step in a process that can make or break your investment. The right manager should make your life easier, not harder. Take the following steps to find the best manager for you and your property.

1. Identify Potential Candidates

Seek recommendations and references of property managers from real estate owners in the area where the property is situated. Companies like Roofstock vet and certify local property managers – start there.

2. Research Each Candidate’s Credentials

In addition to the local Better Business Bureau and Chamber of Commerce, some states require a Realtor or Real Estate Broker license or a Property Management License to offer property management services. Many are members of the National Association of Residential Property Managers or the Institute of Real Estate Managers, both of which operate with a Code of Ethics and Standards of Professionalism.

3. Interview Prospective Property Managers

Knowing who will work with your property and having good relations is critical to communications and trust. During the meeting, you should detail your expectations for the property and your relationship. The interview is your opportunity to ask questions about their service, such as:

- “How will you screen applicants?”
- “How quickly do you respond to a tenant complaint?”
- “How, how often, and what information will you provide me?”

Some owners suggest making out a list of questions to ask a property manager before the interview to be sure you do not miss anything.

4. Review Property Management & Lease Contracts

Remember, a property manager represents you to the public and tenants for better or worse. Be sure you are comfortable with any materials that will be available to the public. Before you sign an agreement to hire a property, invest in a lawyer’s time to be sure you understand the details, even the small print.

If you follow this process, you should avoid a disaster and wind up with a competent manager who will meet your needs.

Final Word

Outsourcing property management is not for everyone, especially those who own nearby properties and the time and experience to oversee their investment personally. At the same time, investigating external management might give you ideas to improve your own practices and cash flow.

Be sure to account for property management costs in your real estate cash flow forecasts, before buying an investment property. Regardless of whether you hire property management, it still involves a labor cost, even if you’re the one picking up that labor.

Remember, your time has an inherent value, so weigh the cost against the amount of time you think managing your rentals will cost you. When in doubt as a new real estate investor, consider managing your properties yourself – it will make you a better rental investor in the future!