Property Management: An Overview
Property management is the daily oversight of residential, commercial, or industrial real estate by a third-party contractor. Generally, property managers take responsibility for day-to-day repairs and ongoing maintenance, security, and upkeep of properties. They usually work for the owners of investment properties such as apartment and condominium complexes, private home communities, shopping centers, and industrial parks.
Their main roles are to manage routine tasks delegated to them by the owners and to preserve the value of the properties they manage while generating income.
- Property management is the oversight of real estate by a third party.
- Property managers are generally responsible for the day-to-day operations of the real estate, from screening tenants to arranging for repairs and maintenance.
- Owners pay property managers a fee or a percentage of the rent generated by the property.
- Every state has its own laws regulating the activities of property managers.
Understanding Property Management
Property developers generally want to move on to the next project as soon as each one is completed. Even if they continue to hold title to the property, they prefer to delegate the day-to-day operations to an outside company.
The responsibilities of a property manager generally involve the following:
- Screening potential tenants
- Drafting, signing, and renewing leases on behalf of property owners
- Collecting rent
- Maintaining properties including landscaping and snow removal
- Arranging for necessary repairs to properties
- Setting up and adhering to budgets for property maintenance
The companies must comply with any state and local landlord-tenant laws and regulations.
Owners pay property managers a fee or a percentage of the rent generated by a property while it is under their management.
Who Needs a Property Manager?
Landlords hire property management firms for a variety of reasons. Some may have multiple rental properties in their portfolios and lack the time or expertise to maintain the properties and deal with individual tenants. Some owners only have an interest in owning rental properties and earning profits from them. When this is the case, they hire professional property managers.
Absentee landlords also make use of property management services. Some property management companies cater to individual landlords who rent out a single property such as a vacation home.
Property owners who participate in affordable housing programs tend to use property management services because their rental properties are subject to complex federal guidelines that require specialized expertise.
Certain real estate brokers also operate as property managers. For example, a broker in a resort town may provide buyer and seller agent services as well as property management services. When this is the case, the real estate broker lists, shows, leases, and maintains vacation rentals for a number of property owners.
Property managers are different from community managers, which deal with common areas rather than individual units and don't necessarily deal directly with landlords.
Property management licensing requirements vary by state. Most states require property management companies to be licensed by the local real estate board, so property owners need to make sure that the firms they hire are properly licensed.
For instance, property managers in Florida are required to have real estate brokers licenses in order to operate in their states. That's because some of their responsibilities are deemed real estate activity. Holding a real estate broker's license allows property managers to list rental properties in the multiple listing service (MLS) and to market the properties by standard real estate marketing methods. Holding a real estate broker's license also allows the property management company to place a real estate board lockbox on a property's door so that other licensed agents can show the property.
Florida also requires property managers to hold a broker's license if they deal with rentals or leases and receive a commission for their services. Property managers who manage the properties they own in the state, however, don't need a license to do so.
Managers in Massachusetts don't require a broker's license. That's because certain duties considered to be real estate activities, such as listing and leasing properties, may be secondary to the main duties performed by the property manager.