What you need to know about property management
Quick insights
- Property management involves overseeing the day-to-day operations of a residential, commercial or industrial property on behalf of its owner.
- Property managers may handle responsibilities such as screening tenants, collecting rent, coordinating maintenance and repairs and managing property finances.
- Hiring a property management company may save property owners time and simplify day-to-day operations, but management fees and reduced control are potential tradeoffs to consider.
Purchasing a property is a major milestone, but it is also the start of ongoing work. Between routine maintenance, tenant needs and day-to-day details, there is a lot to manage. Many owners choose to work with a property manager, either an individual or a company, to help support those responsibilities. Let’s look at what property management is and how it works.
Defining property management
Property management is the overseeing and managing of residential, commercial or industrial properties on behalf of property owners. Property management can be conducted by a single individual or a dedicated property management company. A property management company is a professional organization that handles the day-to-day responsibilities and operations of real estate investments, aiming to ensure they are well-maintained, occupied and operating as intended.
What does a property management company do?
Property management companies act on your behalf, adopting many of the responsibilities that would otherwise fall to the property owners. Some of these duties include:
- Tenant screening: Property management companies are typically responsible for finding suitable tenants and conducting thorough background and credit checks to ensure tenants are reliable and trustworthy.
- Rent collection: Property managers usually handle rent invoicing, payment processing and any necessary follow-ups for late payments with tenants.
- Property maintenance: This means scheduling inspections, addressing any emergency issues that may arise and coordinating repairs and routine maintenance work.
- Legal matters and disputes: Property management companies may be well-versed in local and federal laws governing landlord-tenant relationships. This may give them the means to handle any legal disputes, eviction processes and lease terminations that may occur on the property owner's behalf.
- Financial management: Property managers may also keep track of income and expenses for the property, providing the owner with regular financial reports and helping with budgeting for future expenses.
Individual property managers
Some property owners might prefer to hire an individual property manager instead of a company. These individuals often provide similar services as a property management company and can provide more personalized service for the owner’s specific needs.
Pros and cons of property management
Working with a property management company might prove helpful in many ways. But, as with any service, there are a few potential pitfalls to consider as well. Let’s examine some of the pros and cons of property management companies to help you make a more informed decision.
Property management pros
- Time-saving: With a professional team handling the day-to-day tasks and responsibilities, property owners may be able to focus on other aspects of their lives or other investment properties.
- Efficient property operations: An established property management company generally has significant experience and resources to manage properties effectively. This may lead to smoother tenant relationships, faster turnaround times for maintenance and repairs, and overall better property performance.
Property management cons
- Fees: The primary downside of working with a property management company might be the cost. Property management fees can vary, but typically include a percentage of the rent collected, lease-up fees and other charges for services like maintenance coordination and eviction proceedings. These fees could affect your earnings, so property owners should carefully consider the cost-benefit ratio when deciding whether to use a property management company.
- Loss of control: Some property owners may also feel a sense of reduced control when outsourcing property management tasks to a third party. While property managers are tasked with acting in the best interest of the owner, some owners may prefer to handle every aspect of their investment themselves to ensure the property is managed according to their preferences and desires.
In summary
What is property management? From managing tenant relationships and property maintenance to helping ensure legal compliance and efficient operations, property management companies can potentially provide several benefits for property owners. However, property management services do come at an added cost. By understanding the potential pros and cons of hiring a property management company, you can make a more informed decision about how best to care for your property. Whether you plan to manage the property yourself or hire a property management company, exploring your financing options can help you prepare for your next investment property.
