Property management is the control and operation of real estate, personal property, equipment, or physical assets. It is most often referred to in relation to the lease or rental of the property, in which a property manager handles the maintenance and day-to-day activities surrounding the property. In rental houses and apartments, this would include seeking occupants, and collecting rent payments on a regular basis. To explore this concept, consider the following property management definition.
Definition of Property Management
- Property management is the control, oversight, and operation of real estate, personal property, equipment, or other assets belonging to another.
What is Property Management
Property management is a manager’s oversight of a property, on behalf of the property’s owner. The owner pays the property manager to handle day-to-day management tasks. Property managers are commonly used to manage a variety of real properties, such as apartments, homes, and commercial buildings. Laws governing property management vary by state. Property management is especially beneficial to owners of more than one property, and to owners who live far away from their properties.
Real Property Management
Real Property is any property that is attached to a piece of land, including the land itself, and any buildings standing on the property. Real property management pertains to overseeing rental property including apartments, houses, and commercial buildings. A real property management company acts on behalf of the property owner to ensure the property is taken care of, repaired, and leased out to bring a profit to the owner.
Real property management may also entail the overseeing of the natural resources on a property, such as oil, gas, and timber. In many states, property managers must be licensed real estate brokers in order to list properties, collect rent, and perform other real estate-related tasks.
Example of Real Property Management
Brad owns several apartment complexes and residential houses. He does not have the time to manage, maintain, and keep track of all of his tenants. He hires a property management company to take on the responsibility. The real property management company begins overseeing all aspects of the properties for Brad. The tenants will now make payments to the property management company. The company will also address all issues, including renting out units, screening tenants, and taking care of accounting for the properties.
Commercial Property Management
Commercial property management involves supervising industrial and commercial properties on behalf of their owners. Such properties include office buildings, retail space, storage facilities, and more. Like residential property managers, commercial property managers take care of the day-to-day operations of the properties that are rented as commercial or retail spaces. The commercial property management company is also responsible for ensuring the properties are occupied, preparing leases, and accepting lease payments.
The commercial property management company acts as a liaison between tenants of the properties and the owners, and takes steps to ensure the properties, as well as the businesses leasing them, meet local and state codes.
Property Management Company
Using a property management company has a number of benefits, even though it can be costly for property owners. Allowing a professional management company to advertise vacant properties, vet potential tenants, and ensure leases are written well to protect the owner’s interests makes it a great investment, especially for owners of multiple properties.
The primary advantages of retaining a property management company include:
- Higher quality tenants
- Lower turnover of tenants
- Fewer legal problems
- Reduced stress
When hiring a property management company, the property owner should check client reviews, ask about the company’s experience, and interview the company to ensure it is a good fit. In many places there are quite a few choices when it comes to management companies, so it may pay to be picky.
Property Management Tasks
Property management tasks differ, depending on the needs of the property owner. In general, property management tasks involve all everyday duties necessary to maintain and manage a building or other rental property. Tasks that are commonly taken care of by a property management company include:
Determine a Competitive Rental Rate
Property managers inspect the properties under their care, and evaluate similar properties close by to determine a competitive rental rate that will attract quality renters, while providing a profit for the owner. After the initial evaluation of a property, the manager may make suggestions to the owner about repairs or upgrades that would increase the value. A property manager may also weigh the pros and cons of allowing pets, if the property is residential.
Market the Property
In order to keep any property rented, someone must market the property where quality tenants are likely to look. The property manager generally ensures the property is clean and attractive, so that photos posted in advertisements will catch the attention of would-be tenants. Advertisements may be posted in the local newspaper, as well as on rental websites and online classified ads.
Property managers are responsible for screening tenants. This may include:
- Verification of the applicant’s identity
- Performing a background check
- Performing a credit check
- Verifying the applicant’s rental history
Preparing for Tenant Move In
When a tenant is selected, the property manager draws up a lease agreement, and reviews the contract, as well as the rules with the tenant. The manager then ensures the agreement is property executed and collects first month’s rent and deposit.
Property managers are responsible for collecting rent from each tenant on a regular basis. They are responsible for keeping careful records of rents received, providing receipts to tenants, and for tracking down late payments.
Property managers are also responsible for evicting tenants who break their leases. This entails notifying the tenant of the eviction process as required by law, filing the appropriate documents with the court, and providing the necessary documentation and testimony at court to obtain an order of eviction. When evicting tenants, the property manager must coordinate with law enforcement officers when ordered to remove the tenant from the rental property.
Managing the finances of a rental property is an important property management service. These responsibilities include making mortgage or other payments on the property, maintaining careful records, documenting maintenance and repair expenses, and providing annual reports to the property owners.
Maintaining the Property
Property managers are responsible for maintaining the properties under their care. This involves ensuring preventive maintenance is done, and having repairs made as necessary. In many cases, maintaining the property also requires landscape care and maintenance, and even snow removal. This does not mean that the mangers themselves perform these maintenance tasks, as they generally hire landscape professionals, handymen, and contractors.
Overseeing Tenant Move Out
When a tenant moves out, the property must be inspected, a closing statement prepared, and a copy given to the tenant with a refund of all or part of the security deposit, if appropriate. The property must then be cleaned, and repairs made, before it can be put back on the market.
Property Management Plan
Typically, when a property owner hires a property manager, he meets with the manager to create a property management plan. The plan outlines the owner’s needs, and the terms and conditions of the property management contract. Because each property is different, property management plans differ, though the following sample covers the most common items on such a plan.
Example of a Property Management Plan
[NAME OF PROPERTY MANAGEMENT COMPANY]
Owner hereby employs Manager to manage, control, rent, lease, and operate the above-described property. Owner hereby appoints Manager to act as his agent, and attorney-in-fact, with full authority to do any and all lawful things necessary to accomplish his duties under the Agreement, including the following:
I. Property personnel plans and staffing arrangements
II. Plans for determining residential eligibility
III. Plans for achieving and maintaining full occupancy
IV. Rent collection plan
V. Maintenance and repair
VI. Program for setting up and maintaining adequate records
VII. Plans for security and risk management measures
Signature of Property Owner
Signature of Property Manager
The above example property management plan is an outline of the important issues dealt with by many property managers. It may be desirable to fill in more details for each section, or to delete sections that do not apply.
Information for Property Managers
The laws of each state govern property managers and property management companies. There are sources that host information for property managers. The National Association of Residential Property Managers offers information, training, and association with others in the real property management field. The National Property Management Association offers information, education, and certifications for those involved in the management of equipment, materials, and other movable assets.
Related Legal Terms and Issues
- Contract – An agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.
- Jurisdiction – The legal authority to hear legal cases and make judgments; the geographical region of authority to enforce justice.
- Real Property – Land and property attached or fixed directly to the land, including buildings and structures.
- Tenant – A person, company, or organization that occupies property or land that is rented from a landlord.