Property management is the legal responsibility of real property and the performance, management, and oversight of property owners. This includes property that has been purchased with the intent to turn it into a business, whether for personal or business use. This also includes property that has been acquired by any means other than an open market purchase. It also consists of all real property owned by a government entity such as schools, churches, roads, parks, and wildlife refuges.
Real estate managers are responsible for addressing the problems associated with tenants. These include maintenance of the property, scheduling rents, evicting tenants, keeping the premises safe, collecting late fees, maintaining records of repairs and replacements, and many other duties. The primary responsibility of a residential Property Management is to conduct background checks on prospective tenants to determine credit history, suitability for financing, character, stability, and reliability of potential tenants. Residential property management firms also conduct title searches to verify ownership and ensure that any liens against the properties are legally settled. Most residential property management firms also perform pest inspections, property taxes, inspections of mechanical systems, and safety and building code compliance.
Many property owners believe that they can save money by avoiding the services of property managers. However, if they choose to manage their own properties without professional help, they will be held personally liable for the negligent actions of their tenants. It is often difficult for non-household tenants to understand why they are being asked to pay higher rent rates, while neighbors are getting lower rates. In addition, property owners who attempt to manage their own buildings may not have the expertise necessary to ensure that building security is improved or to monitor building conditions. Thus, some property owners who attempt to manage their own buildings may not be receiving a better service than traditional property managers.
Traditional property managers are those who sign contracts with property owners. They are paid a fee based on the value of the property and their performance in terms of maintaining the building and its vacancy rate. Some property owners prefer to retain property managers on an annual basis, but others may prefer to fire property managers during an especially troublesome time. Property managers generally earn a fixed monthly fee for providing services.
Some property management fees are negotiable, while others are non-negotiable. A non-negotiable fee means that the fee cannot be changed without prior notice. Often, this notification period is one month. For long-term leases, property management fees may be set at the start of the lease or annual, whichever is greater for the property owner. Property managers are often hired to take care of a property’s vacancies, so the fee structure may vary according to the number of vacancies that occur during any given year.
Another type of property management fee is property maintenance. Property maintenance is charged for all types of damage that occur on a property and that require the expertise of a property maintenance or landscaping company. These companies are responsible for repairing fences, pools, decks, steps, tiles, cracks, pools, and other items on a tenant’s property. The fee is also often determined by the length of time it takes for a company to fix any problems that occur. Property owners can usually negotiate this fee down with their tenants, but it is better to have a written agreement to reduce disagreements over this issue later.
There are also two-percentage-based fees and seven-percentage-based fees. Two percentage-based fees are applied once a month and are intended to cover the cost of a security system, a water heater, air conditioning unit, sewer and septic system. Seven percentage-based fees are paid once each year, and they cover a variety of costs, including utilities, rent collection, maintenance of the property, repairs, depreciation and insurance. Tenants typically do not pay any fees at all. Property owners can adjust these percentages down if they see fit to their situation.
As mentioned in the beginning of this article, most people prefer traditional property managers to independent contractors. Although many property managers provide a combination of both services, it is still a good idea to research and shop around for the best overall price and service level. When it comes to commercial real estate, dealing with a property manager has many advantages, including the ability to gain access to professional property management teams and the experience of seasoned property managers. Property owners should always research and evaluate any option, including the costs associated with managing their property.