SS195: The Crucial Role of Property Managers in Real Estate

SS195: The Crucial Role of Property Managers in Real Estate

Property managers are vital in the real estate industry, acting as intermediaries between property owners and tenants. In this episode, Charles discusses the responsibilities of property managers and how owners can best work with them.

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Talking Points:

  • Property managers play an important role in the real estate industry. Property owners hire them to manage the day-to-day operations of their property and maintain steady cash flow while implementing their business plan. Since rental properties are businesses, the property manager handles a wide range of tasks essential to the overall successful operation of the property. Let’s break down in detail the roles and responsibilities of property managers.
    • Tenant Management
      • Out of all property management roles, I put this one first since this is where most of the property manager’s time and energy is focused, especially with larger properties. Every tenant is a client of the rental property, and some will require more attention than others. Tenant management roles include:
      • Marketing Analysis: Property managers utilize their market knowledge, data, and the performance of other properties they manage to price vacant units competitively.
      • Marketing and advertising: They implement marketing strategies for property owners to attract new prospective tenants through several mediums. The marketing campaigns are structured to reduce vacancy rates by effectively marketing the property and filing vacant units quickly.
      • Tenant screening: Property managers screen potential tenants, ensuring they meet the owner’s tenant criteria, including, but not limited to, credit checks, employment and income verification, and rental history review.
      • Leasing activities: They handle all aspects of renting vacant units, from establishing the rental rate to showing the unit and then finally executing the lease.
      • Tenant Relations: They establish and maintain good relationships with current tenants by being attentive and promptly addressing tenant issues and disputes, leading to a long-term tenant community that consistently renews their leases.
      • Notices and Evictions: Property managers will have in-depth knowledge of the tenant laws in your area, will deliver notices as required, and will work with your attorney to file evictions.
    • Property Maintenance
      • Regular Maintenance and Repairs: This includes tasks like landscaping, cleaning of common areas, and regular servicing of mechanicals, including HVAC, electrical, and plumbing. They utilize their maintenance techs when possible and will only utilize outside contractors when a licensed technician is required. They will also oversee all outside contractors while regularly putting their contracts out to bid.
      • Emergencies: They have a team in place that is available 24×7. This dramatically decreases the owner’s costs because calling a licensed contractor after hours is very expensive.
      • Large Capital Projects: The property managers will not be doing large capital projects They will be available to let you know when a capital project is coming up. For example, they say that the roof will need to be replaced in the next 24 months. You can do it now or wait until leaks begin, or you have 4 old water heaters on their last leg. This helps the owner begin to budget for these projects. The manager will also be available to oversee these capital projects. In certain cases, they may charge a project management or construction fee as a percentage of the work being done, but sometimes, there will not be a cost on smaller projects. These projects, however, are where the asset manager or owner should be stepping in to handle the project firsthand.
    • Financial Management
      • When I hired my first property manager, one of the main benefits was the financial management and reporting they provided. Before hiring them, I was like many small landlords; my bookkeeping was not the best. I used QuickBooks but didn’t really know how to use it. The property manager’s professional and accurate accounting made taxes, refinancing loans, and reporting much easier. When I say financial management, I am referring to:
      • Rent collection: Property managers will collect and record rent payments from your tenants while addressing late payments and delinquencies.
      • Financial Reporting and Budgeting: We discussed the wonders of good reporting above, but budgeting can be very helpful, especially with properties that are being repositioned. In these situations, the vacancies and expenses are typically higher than normal, and effective budgeting helps ensure the project moves forward while all the expenses are paid.
    • Risk Management and Legal Compliance
      • Insurance: Property managers will work with you and your insurance agent to confirm that your properties are insured They will assist with insurance claims and be able to guide you through the process.
      • Minimizing Legal Exposure: They will not be giving you legal advice. However, a good manager will notice situations at your property that could increase your legal exposure, such as incorrectly lit steps, walkways, and hazards that might not have caught your attention.
      • Regulatory compliance: Property managers are ingrained in the local market and know about different laws and regulations changes that could impact your property.
    • Maximizing Property Value
      • A property that is operated and maintained correctly will appreciate faster than a poorly managed property. It will also be easier to rent apartments, renew tenant leases, and raise rents. When property operations and maintenance are executed correctly, it is much easier for the rest to fall into place.
    • Owner’s Representative and Advisor
      • This is another benefit that property owners do not commonly realize until they have a good property manager. The property manager acts as an advisor that you can bounce ideas off of and help solve problems for you. My first property manager, Mike, would help me with the properties he managed. Still, I also discussed other properties out of state that he was not involved with—a great way of getting knowledgeable, unbiased advice.

Whether you hire a third-party property manager or you are the property manager, property management is crucial to the success of any rental property. A good property manager will increase the investment’s profitability while decreasing the owner’s headaches. Their expertise and management skills allow owners to grow their portfolios by stepping back from day-to-day property operations.

Transcript:

Charles:
Imagine you are purchasing a rental property and are now deciding whether to hire a property management company or manage it yourself. You want to save the property management fee but you didn’t become a real estate investor to have another job. In this episode, I will review what property management entails and help you answer that question yourself.

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo, and today we’re going to be discussing the crucial role of property managers in real estate. So property managers play an important role in the real estate industry. So property owners hire them to manage the day-to-day operations of their property and maintain steady cash flow while implementing their business plan. Now since rental properties are businesses, the property manager handles a wide range of tasks essential to the overall successful operation of the property. So let’s break down in detail the roles and responsibilities of property managers.

Charles:
Number one is tenant management. Now, out of all the property management roles, I put this one first since this is where most of the property managers time and energy is focused, especially with larger properties. Every tenant is a client of the rental property and some will require more tension than others. And tenant management roles include marketing analysis. So property managers utilize their market knowledge, data and performance of other properties. They manage to price vacant units competitively at your property. Next is marketing and advertising. So they implement marketing strategies for property owners to attract prospective tenants through several different mediums. And the marketing campaigns are structured to reduce vacancy by effectively marketing the property and filling vacant units quickly. Next is tenant screening. 10. Screening is really how you turn around a property because once you tighten up tenant screening, pretty much everything falls in line, not right away, but months and maybe years down the road as people start paying on time, better you get better tenants than they’re staying longer.

Charles:
So tenant screening is really key and property managers screen potential tenants ensuring they meet the owner’s tenants criteria, you know, and this includes but not limited to credit checks, employment income verification, rental history review, all these different things that they have to make sure line up before they can improve the tenant leasing activities. So they’re handling all aspects of renting vacant units from establishing the rental rate to showing the unit and then finally executing the lease. Tenant relations as we touched on before. And they establish and maintain good relationships with current tenants by being attentive and promptly addressing tenant issues and disputes leading to long-term tenant community that consistently renews their leases, which is the key to being a successful multi-family real estate investor. Next is notices and evictions. So property managers will have in-depth knowledge of tenant laws in your area and they’ll deliver notices that’s required and will work with your attorney to file evictions.

Charles:
Something that you don’t really have to be part of. Number two is property maintenance. So regular maintenance and repairs will be handled by the property manager and this can be done in-house or with contractors. And this includes tasks like landscaping, cleaning of common areas, and regular surfacing of mechanicals, including hvac, electrical and plumbing. And they utilize their maintenance tech when possible and will only utilize outside contractors when a licensed technician is required. And this is super important because it can get very expensive when you start bringing in contractors from outside and they will oversee all those outside contractors while regularly putting the contracts out to bid. Next is emergencies. So property managers, they have a team in place that’s available 24 7 for emergencies. And this dramatically decreases the owner’s cost because they are calling a handyman compared to a licensed contractor. And licensed contractors, especially after hours can be very expensive.

Charles:
Next is large capital projects. Now the property managers will not be doing large capital projects themselves. They’ll be available to let you know when a capital project is coming up. For example, they may say the roof will need to be replaced in the next 24 months. You can do it now or wait until leaks begin, or you have four, four old water heaters on, you know, and they’re on their last leg. And, and this helps the owner to begin the budget for these projects. And the mantra will also be available to oversee these capital projects. So not only if they’re one day or a couple day projects, you’re gonna have them be able to oversee them if it gets into a, they’re a larger project. So in certain cases they may charge a project management or construction fee as a percentage of the work being done, but sometimes there will not be a cost for any smaller projects.

Charles:
And these projects, however, are where asset managers or owners should be stepping into handle the project firsthand. You’re not gonna be pushing off a large renovation to your property manager to have them oversee it. However, if you’re having one property one roof being done on your property it’s something that can usually is done in one day and your property manager can be there to come in the beginning and come in an end and just make sure everything’s fine and they probably won’t charge you any fee. Number three is financial management. And when I hired my first property manager, one of the main benefits was financial management and reporting they provided before hiring them. I was like many small landlords, my bookkeeping was not the best. I use QuickBooks, but I really didn’t know how to use it. I still really don’t. And property managers professional and accurate accounting made taxes, refinancing loans and reporting much easier.

Charles:
And when I say financial management, I’m referring to number one rent collection. So property managers will collect and record rent payments from your tenants while addressing late payments and delinquencies. So they’re handling all that billing behind the scenes that you don’t have to deal with. The financial reporting and budgeting, you know, we discussed the wonders of good reporting above, but budgeting can be very helpful, especially with properties that are being repositioned. And in these situations, the vacancies and expenses are typically higher than normal and effective budgeting helps ensure the project moves forward while all expenses are being paid. Number four is risk management and legal compliance. Now first part of this would be insurance. So property managers will work with you and your insurance agent to confirm that your properties are insured correctly and they will assist with insurance claims and be able to guide you through the process.

Charles:
And I had this happen with one of my property managers years back with properties I owned in Connecticut. Someone slipped on ice and my property manager, ’cause I hadn’t been through this before explained the process to me of how he’s gonna go about it when he’s interviewed by the by the insurance company and then how I should handle it as well. And it was very helpful. But it’s one of those things that if you don’t know, you don’t really know, it’s not something that you can really ask too many for people for guidance on. The next part is minimizing legal exposure and they’re not gonna be giving you legal advice. However, a good manager will notice situations at your property that could increase your legal exposure such as incorrectly lit steps, walkways, hazards that might not have caught your attention firsthand.

Charles:
And the last part is regulatory compliance. So property managers are ingrained in the local market and know about different laws and regulation changes that could impact your property. And this happened again with a property. I had a different property, but this was years back, different manager. And what happened was that we had a issue with, just like it was older properties, you have fire issues that come through the property like so. And I remember we had the fire marshals, they’re inspecting it and they’re giving a whole laundry list of stuff. My property manager was right there, so they’re giving it right to my property manager of all these things they’re going through. And my property manager, you know, reviews it, reviews it with me. And then he tells me, he goes, you know, let me go back to them and I’ll talk to them.

Charles:
You know, a couple of these things are are, you know, this is really overkill. These things I’ll tell ’em we’ll take care of. And if they’re giving me any more problems, like I have the number to the chief and I can give them a call Now for most people in that market that they don’t have direct contact with the fire chief. So that is something that when I’m paying this, this manager, I am not only having them manage my property, but I’m having them. I’m kind of tapping into all of their sources and their connections. And this goes from handyman and contractors all the way down the line to something like this, which it’s great and it hasn’t come up ’cause we don’t really buy older properties anymore. But it’s something that shows how important property managers can be to a property owner.

Charles:
So number five is maximizing property value. So a property that is operated and maintained correctly will appreciate faster than a poorly managed property. It will also be easier to run apartments, renew tenant leases, and raise rents. Now, when property operations and maintenance are executed correctly, is much easier for the rest to fall into place. Number six is owners, representative and advisor. So another benefit of property owners which you do not really commonly realize, and that’s a whole point of this episode. Some of the things, you know, like collecting rent and sending over someone to fix something when something’s broken, that’s what most people think property managers are. So this is one of the things that’s just that owner’s representative and an advisor, which goes back really to my story about the fire chief. But this is another benefit that property owners might not commonly realize until they have a good property manager.

Charles:
And the good property manager acts as an advisor that you can bounce ideas off of and help solve problems for you. Now, my first property manager, Mike, would help me with properties he managed still. I also discussed other properties at a state that he was not involved with and a great way of getting knowledge and unbiased advice. So whether you hire a third party property manager or you are the property manager, property management is crucial to the excess of any rental property. And a good property manager will increase the investments profitability while decreasing the owner’s headaches. And their expertise in management skills allow owners to grow their portfolios by stepping back from day-to-Day property operations. So I hope you enjoyed, please remember to rate, review, subscribe, submit comments and potential show [email protected]. If you’re interested in actively investing in real estate, please check out our courses and mentoring [email protected].

Charles:
That is syndication superstars.com. Look forward to two more episodes next week. See you then.

Charles:
Have you always wanted to invest in real estate, but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding and didn’t want tenants calling you. Since 2006, I’ve been buying income producing properties and great locations that provide us with consistent passive income. While we wait for appreciation in the future and take advantage of tax laws while we’re waiting and unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out to investwithharborside.com. If you like the idea of investing real estate, if you like the idea of passive income partner with us at investwithharborside.com, that’s investwithharborside.com.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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