Property management is a relatively straightforward business area that provides reasonable, ongoing returns on the management of residential, commercial and industrial premises. Property managers make money through service fees, normally as a percentage of the rental price of a property. In this article we’ll explore what’s involved in property management and whether it’s a career or business move that could be right for you.
What property managers do
The main areas that property managers and property management firms are responsible for include:
Generating income from property
. Researching market rates for renting out property and setting appropriate rental prices based on location, desirability, size, facilities, overall condition etc.
. Adver sing property that is available for rental.
. Keeping an inventory of property that is available for rental, together with supporting information.
Managing tenants of property
. Screening tenants to check that they are credit-worthy, have good references, can pay their rent and will look after the property.
. Getting contracts in place with tenants detailing the various roles, responsibilities and other aspects of renting out a property.
. Dealing with issues raised by tenants.
. Carrying out periodic inspections of property.
. Liaising with contractors, tradesmen and other services to repair and maintain property.
. Keeping a schedule of required, ongoing maintenance for property.
. Protecting and preserving the values of property in the portfolio.
Regulations, compliance and management
. Dealing with insurance, regulatory and other legal requirements relating to rental of property.
. Managing property on behalf of either themselves (as a holding company) or private landlords.
Types of property that can be managed
You might choose to specialize in the type of property that you manage. Some of the different areas that you can go into include:
. Residential – Houses, apartments, condos and shared accommodation.
. Student – Housing that specializes in student accommodation in cities with colleges and universities.
. Vacation homes – Property rented out for people when they are on vacation, normally for one to four weeks at a time.
. Commercial offices – Small and large spaces for other businesses and organizations
. Factories – Industrial spaces with specialized areas for production lines.
. Warehouses – Storage locations for businesses.
. Other industrial premises – Specialized or general industrial space.
. Retail – Space devoted to stores and other sales of goods and services.
Ideal skills for property management
Going into property management could be right for you if:
. You like dealing with people – You will often have to interview and screen tenants to make sure that they are right for the property that you are offering. If you do not own the property yourself, you will also need to deal with landlords and other interested parties.
. You can get good deals on maintenance and repairs – Repairs and maintenance will often be one of the bigger outlays that you need to make. Negotiating good deals on repair rates with suppliers will improve your profit margins.
. You don’t mind paperwork – There’s lots of paperwork involved in property management including contracts, leases, insurance, regulations and more.
. You provide good service and value for money – Landlords are looking for a combination of trouble-free renting and value for money. If you can minimize any issues for them and do that at a good price, your business will thrive.
Typical returns for property management
Property managers normally make money by taking a percentage of the rental price on a property. They may also charge set fees based on the first month’s rent and may also ask tenants for fees to process their applications.
. Fees do vary depending on where you’re located. In rural and suburban areas, rates are typically between 8% – 10% of monthly rental costs, so around $80 – $100 a month per property managed (around $1,000 – $1,200 PA).
. Some property agencies charge fixed fees of around $75 to $120 a month ($900 – $1,500 PA).
. Larger cities often charge higher fees for property management; fees in New York can be up to 15% of rent. ($3,600 PA on a $2,00 a month apartment).
Property management can be a lucrative business, although it does require a good portfolio of managed properties to generate reasonable returns. If you can build up a good portfolio, you can easily make several thousand dollars a month and potentially quite a lot more.
American Apartment Owners Association offers discounts on products and services for all your property management needs. Find out more at www.AAOA.com