The success of a business relationship depends on the parties understanding their roles and responsibilities versus the roles and responsibilities of others. Business relationships fail when the people in them do not respect this simple (and sometimes unwritten) law.
But most times, the real reason business relationships fail is not because the people in them do not want to respect the rules. Most times, the issue is that the rules and roles must be defined from the beginning of the relationship or consistently adhered to.
For business relationships to work, people must know what they are expected to do or give and what they will get in return. This is the fundamental basis for the success of any relationship you are ever going into in your real estate investment journey.
Why property investors need property managers
As a property investor whose portfolio is growing, one of the things you soon realize is just how limited your time and energy are. Your time and energy could be much better than the size of your dreams. At the same time, you are bound by geography; you can only be in one place at a time.
These limitations present a considerable barrier to expanding your real estate holdings. They compel you to restrict the number of properties you buy to what you can effectively manage by yourself. You are also forced to only invest in properties located in cities that are within easy reach.
The only way to break free of these limitations is to hire a property manager to oversee your properties. By hiring a property manager, you free up your time, and you can buy assets in far-away locations. But this is only if you know how to manage your relationship with the property manager.
What do property managers do?
When hiring a property manager for your rental property, the note on which you begin that relationship matters. The first few days and weeks of your interaction with the property manager will define your experience working with them.
One of the first things you would like to establish in your relationship with the property manager (PM) is your expectations regarding their responsibilities. This is because a significant point of disagreement between landlords and property managers is where the PM’s roles start and end.
These issues must be discussed, and you reach a transparent agreement with the PM on what they should do, how they should do it, and how much you will pay them for their services, or else you will have problems later. What should be the responsibilities of the property manager you hire?
Property managers’ responsibilities can loosely be categorized under three groupings:
Marketing and tenant-relationship
Finding new tenants: The PM should have efficient systems for finding quality tenants for vacant units.- Screening potential tenants: Property managers reduce the risk of rent defaults and property damage by excluding the worst renters from a rental.
- Handling Complaints: Property managers create systems for tenants to register their issues promptly and see to them.
- Minimize tenant turnover: They maximize occupancy rates by encouraging old tenants to stay longer and finding new tenants quickly.
- Drafting, signing, and renewing leases: The property manager drafts new leases on the owner’s behalf and signs and enforces them.
- Collecting rent: A competent property manager must have systems to collect rent on time. They should minimize delays and defaults.
- Evictions: If a tenant has to be evicted, the PM is responsible for working with the authorities and overseeing the eviction.
Maintenance and staff management
- Maintenance of property: The property manager oversees the day-to-day
tasks required for the property’s smooth operation. - Arranging for repairs: As the link between tenants and technicians, the PM arranges for repairs to be done to the property.
- Supervising other employees: Everyone who does any work in the building reports to the PM; cleaners, janitors, gardeners, etc.
- Overall Supervision: The PM oversees whatever tasks need to be done in the daily property management.
- Team building: The PM uses their expertise and network to help the owner assemble a team of experts to handle different aspects of the business.
Financial and regulatory
- Setting and adjusting rents: The PM works with the owner to set the rent and also increase the rent when necessary.
- Managing the budget: The PM works with the owner to create the budget but is responsible for adhering to it.
- Following laws and regulations: The PM ensures that the building is up-to-code and state or national landlord-tenant laws are followed.
- Handling taxes: A competent property manager saves the owner money by professionally handling the rental’s tax affairs.
How much should you pay a property manager, and how should those fees be structured? This depends on a lot of factors. If you would like some guidance on handling this aspect of your relationship with your property manager, we can help.
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