What Wikipedia Doesn’t Tell You About What Property Management Companies Do

What is Property Management?

Property Management is the bread-and-butter of real estate investing. Often, investors look to diversify their portfolio by adding rental properties before recognizing the difficulty associated with the process. Property Management companies are in place to relieve investors’ pain points and help with the 3 T’s: Tenants, toilets, and troubles.

Property Management is a third-party process of overseeing and managing the day-to-day operations involved in real estate investing; this includes commercial, residential and land real estate. The goal is to positively impact an investor’s portfolio by aligning values and maximizing rental income.

Property Management companies are successful because they have strategically developed core competencies to deliver the best services. These include:

Technical Systems: Staying up to date on new innovations and technology to improve business operations. For example, providing online payment options
Managerial Systems: Having a flexible workforce that works towards serving the goals of investors, tenants, and the business
Industry Skills and Knowledge: Knowledge of local markets, laws and regulations
Values and Norms: Treating investor’s rental properties as if they were our own

** It is important to note that core competencies are unique to each property management company, and answers may change depending on different circumstances.

Now, what do Property Management companies actually do?

Set Rental Amounts

The process begins with setting rental amounts. No longer are the days when the following formula determines rent:

Monthly mortgage payment + Taxes + Expenses + Approximate monthly property taxes + condo fees (if applicable)

Instead, a thorough analysis of the local market, specific neighbourhoods, and what properties of a similar type are renting for determines rental amounts. Additionally, rent may be affected by demand on a seasonal basis or increasing/declining economic conditions.

Market Properties and Source Tenants

Property Management companies list properties online to fill vacancies and for potential tenants to view. Due to Covid-19 and more Millennials and Gen Zers entering the rental market, property management companies are moving towards more online options to market properties. These include:

Virtual 3D tours or YouTube videos
High-quality pictures
Social media presence to gain brand awareness to market properties
The ability for potential tenants to text property management companies’ questions regarding properties
Facetime or online video call tours with a Property Manager

If the potential tenant is interested in a property, they can contact the Property Management Company to discuss the following steps.

Tenant Screening

Tenant screening is the process used to evaluate prospective tenants by performing background checks and verifying credentials. Tenant screening involves:

Ensuring the contact information provided by the applicant is accurate and matches further details provided in the application
Requiring picture ID to verify the applicant’s identity
Having the applicant provide their current address and find out why they are looking to move
Determining if the applicant is financially responsible by performing credit checks, looking into employment details, and confirming the applicant’s monthly salary
Having the applicant disclose if they have any pets, children or if they are planning to move in with a roommate
Requiring a co-signer for applicants moving out for the first time or applicants with a unique circumstance
Contacting landlord references to confirm the applicant’s details and become aware of any red flags

Tenants screening is done with good intentions and is used to minimize delinquencies and find high-calibre tenants. The goal is to maximize rental income for investors by matching them with premium tenants.

Show the Property and Place Tenants

Due to Covid-19, Property Management has had to adjust the showing process. Maintaining the health and safety of the individuals involved and limiting contact within the property is of utmost importance to Real Property Management Professionals. Therefore, only approved applications can view the property in person.

Once the approved applicant has viewed the property:

The Property Manager determines if the applicant is a good match for the company and the investor
The applicant evaluates if the property is a good fit for them and their personal situation
Once all of these checks have passed, a lease is sent out, and a move-in date is scheduled

Collect Rent and Pay Investors

One of a Property Management company’s primary responsibilities is to collect security deposits and monthly rent from tenants. In some situations, a tenant may need to pay rent late. It is the tenant’s responsibility to communicate their request before the rent collection day. Additionally, this provides the Property Management company with an opportunity to catch defaulting tenants and handle delinquencies.

Once the rent has been collected, investors are paid using the following formula:

Rent – Property Management fees – Maintenance costs (if applicable) = Investor’s proceeds

Manage Move-Ins, Move-Outs and Evictions

The beginning and month-end are busy times for move-in and move-outs. Potential investors may even fear investing for this reason alone by thinking, “How will the property look? Do I have enough turnaround time? How will I manage this?”

Have no fear; Property Management companies handle the entirety of the move-in and move-out process! From cleaning the property to scheduling a time to conduct move-out reports, property management companies take care of it all. As an investor, just sit back, relax and collect your investor’s proceeds every month!

Manage Tenant and Investor Records

Managing tenant records is a practice Property Management companies have in place for security. Records are used to keep track of tenants and ensure that properties are being maintained. Records include:

Tenant and investor applications
Lease agreement
Tenant correspondence
Move-in and Move-out inspections with photos
Rental charges

Maintenance Requests:

One of the main reasons Property Management companies are hired is to manage maintenance requests within rental properties. These include:

24/7 maintenance hotline
Having a reliable and vetted vendor network for maintenance requests
Handle emergency repairs
Managing the day-to-day operations of properties and ensuring tenants are maintaining the property
Prepare maintenance budgets, control costs, and create expenditure reports to track investors’ money
Regular inspections

Conclusion

Rental property investing is a rollercoaster with unexpected twists and turns along the way. As Julie Chen, host of Big Brother, says every season, “expect the unexpected.” Property Management companies are put in place to minimize the potential of the unexpected occurring.

If anyone has questions regarding our services or properties please contact us at professionals@realpropertymgt.ca