Property Management Duties and Responsibilities — A Checklist

The Big Picture On Property Management Duties and Responsibilities:

A property manager can make managing rental properties easier by handling the daily tasks so you can focus on other things.
Property managers find tenants, set rent, advertise, screen applicants, and manage lease agreements while ensuring compliance with the law.
They manage repairs and maintenance, do regular inspections, and work with contractors to keep the property in good shape and tenants happy.

“At what point should I hire a property manager?”

Sooner or later, most real estate investors question whether to hire property management to make their rental income truly passive. I did, and I decided that professional management was almost as important as the investment property I purchased.

Over the years, I’ve owned rental real estate in my home state of Texas, Colorado, Nevada, and California. Excluding my first property in Texas, my first act after buying a rental property was hiring a manager. In each case, my results—cash on cash return, tax benefits, and capital gains—all fit the numbers I forecasted with a rental property calculator before buying.

Sure, buying the suitable properties helped. But just as important was the due diligence to hire the right property manager. In each case, I selected a property manager with at least a decade of experience with similar properties in the local market, a cadre of satisfied clients, great business and credit references, and verifiable accounting and administrative systems.

For long-distance real estate investing, I need regular, timely, and complete financial information, which means hiring only the best property managers.

 

What Is a Property Manager?

As any seasoned landlord will tell you, rental properties aren’t nearly the passive investments that many a fast-talking guru would have you believe. They come with considerable labor — labor you can either perform yourself or outsource.

Property managers oversee rental properties on a day-to-day basis. They could operate as a business with many employees or as a single individual.

Broadly speaking, property management includes services relating to:

Tenancy. A property manager recommends rental rates and policies (pets, smoking, guests), identifies ideal tenant characteristics compatible with laws and regulations, and markets the property through the optimum media. They also advertise units and collect rental applications, screen tenants, sign lease agreements on behalf of the owner, collect rent, and handle evictions.
Physical Property. A property manager maintains the property to the owner’s specifications, handles repairs and remodeling as necessary, contracts with essential service providers (utilities, trash pickup, and television and internet providers), and performs regular physical inspections. In the case of larger multifamily properties, they may also provide security services.
Administration. Receipt and disbursements of cash, recurring accounting, financial reporting, retention of critical legal papers (lease agreements, contracts, eviction notices, and other documents for the eviction process), property tax filings, and relations with local and state government authorities.

 

What Does a Property Manager Do? Common Responsibilities

Property management responsibilities can vary, but property managers generally work with landlords in the following ways.

 

1. Comply with Landlord-Tenant Laws

Landlords must follow federal, state, and local landlord-tenant laws. This means property managers must understand those laws and help their clients adhere to them.

For example, federal Fair Housing laws prohibit landlords and property managers from discriminating based on familial status. Sounds simple, right? And yet, landlords have been sued for advertising a tiny studio apartment as “Ideal for a single professional.” It doesn’t matter that a studio apartment isn’t appropriate for a family of six — you still can’t say that when advertising vacant units.

State and local landlord-tenant laws often restrict the amount of security deposit a landlord can collect, when they can charge a late fee, and how much they can charge for that late fee. They may require landlords to open a separate interest-bearing bank account for each security deposit and potentially pay tenants their interest on it.

You probably work full-time in an unrelated field and aren’t an expert on landlord-tenant laws. Your property manager should be.

 

2. Advertise Vacant Rental Units

Property managers market vacant units for rent. In today’s world, that usually starts with online rental listing websites. However, it could still include lower-tech advertising tactics like running ads in a local newspaper or posting flyers in local supermarkets, gyms, and community centers.

A savvy property manager understands the local renter population and where they go to search for a home. For example, in a heavily Hispanic neighborhood, it makes sense to advertise vacant rental units in Spanish in the local Spanish community newsletter or circular.

Again, you may not know how best to reach local residents — but your property manager should.

 

3. Show Vacant Units

Property managers meet prospective residents to walk them through the unit.

They should approach showings as a sales opportunity, not a chore or to-do to scratch off their list. Each prospective renter is exactly that: a sales prospect. It requires professionalism, politeness, and punctuality without any pushiness or obvious selling.

 

4. Collect & Screen Rental Applications

Property managers must review rental applications to find the best-qualified renter as prospects submit them.

That includes running tenant screening reports, such as credit reports and criminal background checks (and eviction history reports), of course, but it goes far beyond that. Screening tenants also involves contacting supervisors and verifying not just income and employment but also the prospect’s character and likelihood of continued employment. It involves contacting current and former landlords to ask what kind of renter they’ve been.

If possible, it also includes viewing the prospect’s current home to see how they treat it. But admittedly, few property managers go that far on their clients’ behalf.

Meanwhile, property managers must adhere to the law, such as maintaining a fixed set of screening criteria and being able to justify in court why they selected one renter over another.

 

5. Prepare & Sign Lease Agreements

Property managers also handle the legal paperwork, such as preparing and executing lease agreements.

Yes, that includes the lease contract, but it doesn’t end there. They must also include all relevant (sometimes required) disclosures and addenda. Again, that means following federal, state, and local laws. Many states and larger cities require landlords to include specific documents with their leases. Your property manager should know these documents well.

 

6. Collect Rents & Deposits

Property managers collect the first month’s rent, security deposit, and every other cent of income from the renter on your behalf.

For some tenants, the rent shows up in the bank account on time each month through direct deposit. For others, the property manager must call, text, mail late rent notices, and chase down delinquent tenants for every dime.

But that shouldn’t be necessary if they did their job well screening renters.

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7. Pay & Collect for Utilities

Property management companies can pay utility bills on your behalf if the renter doesn’t pay them directly.

Property managers sometimes pay the utilities and then bill renters for reimbursement. Again, collection is a part of their job responsibilities.

 

8. Keep Accurate Books & Accounting

Aspiring landlords don’t realize how painful rental property accounting is.

You have to track and label every expense and income payment. At the end of each year, you need to complete your Schedule E tax forms accurately.

Mess any of that up, and the IRS comes knocking.

Property managers handle nearly all of this for you, keeping your books and providing simplified tax reporting at the end of the year.

 

9. Enforce Lease Contracts

Tenants often push your boundaries to see what they can get away with. It’s human nature.

If they can get away with paying the rent late each month with no late fee, they’ll do it. If they can get away with not paying their utility bills, they’ll do it. And that goes for other lease rules, too — if they can get away with moving in an unauthorized rottweiler, or their deadbeat drug-slinging boyfriend, or an entire family of demented clowns, they’ll do it.

The property manager must defend the lines drawn in the lease agreement. When tenants break the rules, the property manager enforces them. That typically means serving an eviction warning notice immediately and filing in court for eviction if the renter doesn’t remedy the situation.

And showing up in rent court, presenting evidence, scheduling the eviction date, showing up for it with a locksmith and movers… you get the idea.

 

10. Inspect Rental Properties

One way property managers enforce lease agreements is to visit the property in person to ensure the tenant is complying with the rules. But that’s not the only reason for rental inspections.

Inspections also help property managers (or landlords) find problems before they grow into huge expenses. If you find a roof leak early enough, it might cost a few hundred dollars for a patched roof and painted ceiling rather than thousands of dollars to replace a section of roof, drywall, flooring, and the requisite mold remediation.

I like to see property managers inspect all properties every six months.

 

11. Oversee Maintenance & Repairs

Property managers coordinate with contractors for both emergency repairs and regular maintenance.

For instance, they might send an HVAC technician each fall to service the furnace. When renters call about an issue at the property, the manager sends a contractor to repair it.

Ideally, the property manager also negotiates the best possible pricing on your behalf, but don’t count on them actually doing that.

 

12. Coordinate Move-Out

Renters eventually move out, which comes with its own labor on the part of property management.

The property manager must confirm the move-out date, coordinate with the tenant to clean the property, and do a final walkthrough inspection to determine how much (if any) of the security deposit they’ll return. The property manager also sees to any maintenance the unit needs before re-renting, such as painting the walls or recarpeting the floors.

Property managers should also start advertising and showing the property before the unit becomes vacant to ensure the minimum possible vacancy period.

 

13. Analyst the Market & Propose Pricing

Coming full circle to vacant units, the property manager should do market research to determine the fair market rent of the unit. What’s the most you can charge for rent while still attracting quality applicants and filling the unit quickly?

You may not know that as the landlord, but the property manager should.

 

Non-Negotiable Skills That Your Property Manager Should Have

Duties and responsibilities will only be adequately fulfilled with the right skills. So, the skills you need to look for in a property manager are below.

Communication: They must be proficient at communicating with people — tenants, owners, you name it.
Organization: Keeping track of multiple properties, leases, and maintenance tasks with minimal to no mistakes.
Financial management: Proficiency in budgeting, accounting, and financial reporting.
Legal knowledge: Up to speed on local laws so you don’t get in hot legal waters.
Problem solver: Handling unexpected issues and conflicts efficiently is important.
Tech savvy: Comfortable with computers and real estate software.
Customer-first attitude: A professional and courteous demeanor when dealing with tenants and property owners.
Time Management: Juggling multiple responsibilities and prioritizing tasks effectively without losing it.
Attention to detail: Spotting the minor issues before they snowball into bigger headaches.
Marketing Skills: The ability to effectively advertise and fill vacancies to maintain occupancy rates.

Property Management Fees

Property managers don’t volunteer their time out of the goodness of their hearts. They charge a fee for their services.

Property management companies usually charge a percentage of the rent collected, usually 8-12%. Some, however, charge a flat monthly fee per unit.

Beyond the monthly management fee, property managers charge a fee to turn over vacant units. Most property managers charge one month’s rent, but you may be able to negotiate this down.

Less scrupulous property managers also charge a slew of other per-action fees, often buried in the fine print of the property management agreement. For more information, read up on property management fees.

 

Factors that Affect Property Management Fees

Based on the services offered, most property management companies provide either services on a la carte basis or a flat fee, depending on their client’s preference. Their prices are also affected by the property’s:

Rent: The most common basis for property management fees is the rent of the property in question.

Size: Typically, fees reflect the property’s square footage and lot size. For example, a 3-bedroom home in a middle-class neighborhood will cost less than a landscaped mansion in an elite community.

Condition: The fees for a newly built or recently renovated property are typically lower than for an older house that is likely to need costly repairs and replacement.
Location: A property management company will consider the levels of rents in a neighborhood, its proximity to other properties managed by the firm, and the stability of residents moving in or out of an area.

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Pros: Why Hire a Property Manager?

Owning rental real estate long-term – letting appreciation raise the property’s value, 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 for hiring 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, 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, freeing them from the tedium and responsibility of the administration.

 

Local Market Expertise

Property managers know the local market beyond doing the basic labor for you.

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 quickly minimize vacancy rates and fill vacant units 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 many 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 rent. 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. Consequently, a real estate investor should enter into a property management relationship with wide-open eyes.

Before hiring 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 were 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.

The 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 losing control and trusting a third party to act in the owner’s interests. Ceding that authority is difficult for most people, especially when discussing 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 ending in court. In addition to any termination costs, the property’s reputation and relationship with tenants might suffer adverse effects.

 

What Are The Types of Property Managers?

When people think of property management, most think of long-term rental properties. However, not all property managers specialize in these properties.

Let’s discuss some of the most common property management specialties. 

Residential Property Managers

These professionals handle rental homes and apartments. They market the rental property, screen tenants, collect rent, and fix things when necessary. It’s their job to keep both landlords and renters happy. Like landlords, these property managers must also know housing laws and be good with people. Without them, many landlords would be lost!

Commercial Property Managers

Moving on to the corporate side, we have commercial property managers. These professionals specialize in office buildings and stores, which is a whole different field from homes. Commercial property managers work with business owners, not families. They also specialize in handling complicated leases and understand business property laws. Their primary duty is keeping the building occupied and the cash flow going.

Multi-family Property Managers

Now, for the big leagues of residential management. Multi-family property managers look after apartment buildings. They’re like residential managers but have wider and more complicated coverage. These real estate professionals often juggle multiple units, shared spaces, and numerous tenants. It’s a tough job that needs serious organization skills. For that matter, they often have a team helping them keep everything running smoothly.

Vacation Rental Managers

Here’s one of the most common ones: vacation rental managers. They handle short-term rentals like beach houses or mountain cabins. It’s fast-paced work, with guests coming and going all the time. These managers must quickly deal with bookings, cleanings, organizing, turning over, and ensuring visitors have a great time. Vacation rental managers are always thinking about the next guests.

Senior Living Property Managers

Last but not least, we have managers for senior living communities. This job takes a special touch. Senior living property managers look after older folks in retirement homes or assisted living places. They need to make sure everything is safe and accessible. It’s not just about the building – they often arrange activities and work with health care providers. Their primary duty is to make life comfortable and enjoyable for seniors.

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 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 communication and trust. You should detail your expectations for the property and your relationship during the meeting. 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 ensure you understand the details, even the small print.

If you follow this process, you should avoid a disaster and have 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 on how 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. 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 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!

 

Do you own out-of-town rental real estate? Do you manage it yourself or use a property manager? Have you considered hiring a property manager?

 

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