Everything You Ever Wanted to Know About Property Management
Belong on Apr 8, 2022
Thinking about renting out a property you own? Before you do anything, read this guide.
Read almost any article about the generational wealth gap and you’re sure to learn some startling statistics about how much money is held by the baby boomer generation — and how little is in the hands of everyone else.
Much of that wealth came from real estate; homes are the largest asset that boomers – as well as most people – have. And while it’s taking some time, because baby boomers are living longer than their parents, this transference of wealth is creating a new generation of “accidental homeowners.” Tens of thousands – if not more – Millennials and members of Gen X – are inheriting homes, often the homes they grew up in.
Who Needs A Property Manager?
Anyone who is thinking about renting out a property they own could use one, but the kind of people described above – this emerging class of accidental homeowners – truly need the help. The people who weren’t in the market for a house, who weren’t even thinking about becoming homeowners any time soon – who, all of the sudden, might own property in a town they haven’t lived in for years. The people who aren’t even sure what they should do with the property, because they weren’t expecting to own it in the first place. As they think through what to do next, they realize there’s no single obvious choice.
They can move into the house, but that requires uprooting their lives; moving remains one of the most stressful experiences a person can go through, right up there with grieving for a recently deceased parent, which is something many accidental homeowners might still be in the process of doing. Of course they can sell the house, but often there are emotional ramifications to that decision — especially if it’s the house they grew up in.
The third option is to rent out the home, which under the right conditions, can turn the property into a profit center. Much of that decision has to do with the underlying economics – is there a mortgage, what are the taxes, and what is the rental market like in the area. If – taking all that into account – the decision is “yes” - that means our prototypical accidental homeowner will have to become an accidental landlord, which can also be a hugely stressful and time-consuming ordeal.
That’s why Property Managers take center stage, at this moment of transition, in the lives of so many homeowners — and homes. Because they give people the power to rent out their homes without upending their lives.
What Does A Property Manager Do?
Basically, everything that makes being a landlord such a burden and time-suck should be the responsibility of a property manager. If you hire a property manager who does their job properly, the only thing you should have to do as a homeowner is sit on your butt and wait for the rent checks to come rolling in.
(Elsewhere on this blog we’ve talked extensively about passive income, and how employing a property manager is an easy way to ensure the income you earn from a rental property is truly passive, in both the legal and practical senses; if you’re curious to take a deeper dive into that subject, click here.)
The responsibilities of a property manager begin before a lease agreement gets signed, and extend beyond the time when the lease ends.
One thing we will say, though, before we get into the details, is that there is an enormous difference between property managers, in terms of their experience, skills, responsiveness and cost. We built Belong to deliver what the old-school property management industry has lacked.
So as you read through these duties of a property manager, keep in mind these are complex tasks that require a high level of personal attention and technology.
Property managers are responsible for preparing the apartment for moving in (meaning, they fix anything that needs fixing, replace anything that needs replacing, and clean anything that needs cleaning). Then, either in collaboration with a real estate broker or on their own, they find you tenants: they determine the optimal monthly rent, list the apartment, show it to potential residents and field applications. They run background checks on the various applicants, a process which often includes reaching out to former landlords, to confirm they were good tenants. (They also keep any and all documentation and records they receive on file, in case they’re accused of discriminating against an applicant who didn’t get the apartment.) Then finally they pick the best candidates (though of course, the final decision is yours), draw up a lease, and have it signed and notarized. At which point the lease begins.
Any complaints that arise over the course of the lease are in the purview of the property manager. Meaning, if a resident has a problem with the plumbing in the bathroom, they call the property manager; or if, in a multi-unit building, a resident complains that his downstairs neighbor is smoking all the time, or pickling so much herring that the hallway reeks 24/7, they call the property manager.
Property Managers are also responsible for the upkeep of the property: all maintenance requests that come up, the property manager takes care of. They hire contractors, coordinate their schedules with those of their tenants, and pay them on your behalf. Of course, the homeowner has to approve these requests – unless you have given them the ability to make their own decisions; sometimes this is granted up to a pre-approved spending limit.
As problems come up, many homeowners find that their property managers are not responsive enough. This is one of the big reasons for property managers getting fired – along with excessive cost. Belong addresses the responsiveness gap with 24/7 concierge help, standing by.
Beyond taking care of the home itself, property managers collect rent and, after taking their fee, transfer the funds to the homeowner. If they need to evict the tenant for not paying rent — or for any other violation of the lease — property managers will usually take care of the situation, though more often than not landlords are on the hook for paying legal fees.
Property Managers also keep all the books; they record how much money is coming in through rent, and how much is going out to contractors and craftspeople; so when tax season rolls around the information homeowners need for their filings should be well organized and easily accessible.
Inevitably, there is a great deal of back-and-forth communication, often via email or phone. Fortunately for Belong’s homeowners much of this communication is handled by their concierge.
That accounts for much of the mechanical activity undertaken over the course of the lease. A good Property Manager will take care of all those tasks with no questions asked; on the other hand, Belong – a great property manager – will attend to the emotional elements that come into play as a new resident goes through the process of transforming the house into a home. They will appreciate the sentimental side of being a resident, and help them fall in love with their home.
How does Belong accomplish this? Through a variety of ways, both big and small. The help might come in the form of assisting residents with aesthetic updates — painting a room a color that’s more them, or helping to install cool shelves for their knick-knacks and art. Or it might come in the form of creating some of that art: for example, in this blog we discuss the practical and emotional reasons why homeowners and Property Managers should consider commissioning a portrait of their home.
In our opinion helping foster the connection between your residents and their home is as critical as making sure the plumbing is in working order. Because when you love a home, you are more likely to treat it well — and the less likely you are to move. And as anyone who owns a rental property knows, it’s that downtime between leases, when no income is coming in, that can really hurt your bottom line and create cash-flow issues. That’s why we work so hard to find residents who will love your home as much as you do – and why we try to cultivate that relationship over the course of the lease.
The Property Manager’s post-lease responsibilities generally resemble their pre-lease responsibilities. That’s just the cyclical nature of the industry: the weeks between the end of one lease are also the weeks before the beginning of the next one.
There is one responsibility unique to this timeframe, however: the return of the former resident’s security deposit. Property Managers inspect the home after move-out, bringing in appropriate contractors to assess any damage that might have been inflicted on the property over the course of the lease; then, based on the estimates provided by the contractors, they deduct the appropriate amount from the security deposit and return the rest.
By and large, any and every Property Manager should attend to the responsibilities outlined above. Their ability to deliver superb service – along with how and what they charge for – is a different story. Figuring out exactly what you’re paying for upfront — and what fees and upcharges are buried in the fine print — is a key part of determining which Property Management Company is right for you.
How Do You Choose The Best Property Manager?
Your instincts might tell you that the first place to look for a Property Manager is Google. After all, as a rule, Google is pretty much the first place to look for anything. But researching Property Managers might be an exception to that rule. Because for years now property management companies have been gaming the Google algorithm, securing placement among the top results not because of their mastery of landlord/resident relations, but because of their mastery of SEO.
Instead we suggest consulting first with any locals you know: obviously property owners and landlords are great people to talk to, but anyone who has contact with Property Managers should have some insight into who’s great, who’s merely good, and who you should avoid. Contractors for instance deal with Property Managers all the time — as do real estate agents and renters. Of course your personal network won’t be as comprehensive as Google’s, but at least in this regard it’s a lot more trustworthy.
Once you have a short-list of potential candidates we recommend doing an informal background check. There are several national trade organizations for Property Managers, the most prominent being the National Association of Property Managers. You don’t have to be a member to be state-certified, but if you aren’t, that’s a red flag.
Finally, when the list has been narrowed down to two or three potential partners, it’s time to conduct interviews. (If a property management company is unwilling to field your questions, that in itself is a red flag — count yourself fortunate that they turned you off before you gave them the opportunity to disappoint you further down the road, when the financial stakes are even higher.)
Elsewhere we’ve discussed exactly what questions to ask, but we’ll offer a crib sheet here.
- Find out who they work with: the number of clients they manage at one time, the number of clients who own only one or two properties, the number of single resident homes they manage. In short, you want to know if they have experience working with an accidental homeowner like you, obviously, but it’s also important to know how big an organization they are.
- Keep in mind, this is one of those situations when bigger isn’t necessarily better: if they have a handful of huge clients who are paying their bills, chances are smaller guys (like you) tend to slip through the cracks. Better to be a bigger fish in a smaller pond when it comes to Property Management Companies.
- Find out how they work: how do they identify the right tenants? How do they find contractors? How do they process maintenance requests? How do they handle rent collection? Evictions?
- Finally, ask about their fee structure.
How Much Does A Property Manager Cost?
This question is actually kind of difficult to answer. Because outside of Belong, the cost of Property Managers can be fairly opaque: the amount quoted upfront is rarely (if ever) the amount you’ll pay, because there are so many hidden fees and upcharges.
Our Homeowners page features a useful chart that compares the way Belong charges to how typical Property Management Companies charge. We offer this not only to toot our own horn, but also, to give you a sense of what kind of hidden fees and upcharges you should be on the lookout for in the interview process. You shouldn’t necessarily eliminate a company because they charge you for some of these services: it’s critical to know though exactly what you’re paying for — and what you’ll be paying for in the future.
Not only is it critical to get an understanding of the issues outlined above: it’s also critical that you get a sense of the kind of personalities you’ll be working with — how open and honest and transparent they are when it comes to their business practices. Remember: property managers and opacity often go hand-in-hand (outlier examples like Belong aside). The more open and frank your interviews are, the more trustworthy the companies will tend to be.
Self-Management: The Alternative To Working With A Property Manager
If you don’t live in one of the cities where Belong is operational, and you can’t find any property manager you can trust — or if you’ve read this article (and the others we’ve been linking to) and concluded that you’re willing to take on the responsibilities of managing your property — you might end up deciding to self-manage your rental home.
Self-managing is complex and full of unexpected twists and turns – particularly if you are an accidental homeowner and have no experience at the game. But if you have the right kind of personality and do all your due diligence, it isn’t impossible.
The type of people who make great self-managers are incredibly organized, incredibly patient, and are tenacious when it comes to follow-through. They’re jugglers, who can keep a thousand balls in the air, because they know where all those balls are, where and when they’re going to fall, and they don’t get overly nervous or anxious about the situation they’re in.
There are two under-appreciated qualities a person must have to successfully self-manage their own property: they must be excellent schmoozers — good at making friends and getting people to help them. That’s because it really takes a village to manage a property: you need to have handymen and craftsmen and contractors and tradespeople on your side, who are willing to help you in a pinch, and — maybe most importantly — who you can trust to do the work without charging you extortive sums of money.
Remember: property management isn’t only about managing a property — you also have to be able to manage people.
The second under-appreciated quality is that you need to have a significant amount of time on your hands. And flexibility. You think the property belongs to you, but you end up belonging to it, when you choose to manage it yourself.
Even if you don’t have a typical 9-to5- job you will likely find that property management exerts a huge amount of pressure on your schedule. That’s because self-managing likewise isn’t a 9-to-5 job. Problems can pop up with the building at any time of day, on any day of the year — Christmas, New Years, Thanksgiving — whenever. And of course, no matter what, when you’re self-managing a property the responsibility for it falls on you. Which means you have to be on call 24 hours a day, seven days a week, 52 weeks a year.
There’s also something of a kudzu effect when you’re self-managing a property; even the smallest problems end up taking more time than you expect they will, because of all the coordination they inevitably require. Even if it’s a job a handyman can take care of, you still have to sync up his calendar with that of your residents. Which means to accomplish even the simplest fix requires an endless stream of emails, text messages, reminders, and confirmations.
That’s why the calculus is so complex when deciding whether or not to self-manage your own property. On the one hand, self-management means more money and more control; on the other, it takes much more work and much more time. And the tax implications of self-managing might mean the money isn’t even that much better, if the income no longer qualifies as passive according to the IRS.
If you’re still trying to decide which option is right for you, we suggest doing a serious self-inventory. Ask yourself if you have the patience to deal with needy residents who might reach out to you at all hours of the night; the organization to not only keep track of all the financial information you’ll eventually be responsible for, but also to coordinate repairs on a near daily basis; and the tenacity to follow up with countless professionals, and to follow through with unpleasant tasks that make you feel awkward (for example, asking for rent from a resident who’s behind several months).
If you think you’re up to the task, then by all means, give self-management a shot. Otherwise, consider Belong.
How Is Belong Different?
Belong is the 21st-century solution for the accidental homeowner, a technologically advanced, fully automated property manager that never forgets how important the human touch is. That’s why each homeowner — and each resident — is assigned a concierge that will help manage any issue that might arise over the course of the lease.
That’s also why Belong goes out of its way to find you residents that will love your home as much as you do — and treat it with respect and care. We go above and beyond the normal vetting process when finding you renters, interviewing every applicant to ensure they feel the same way about your home that you do
In an industry known for its opaque business practices, Belong is a tonic: you know exactly what you’ll be charged for upfront, and the little nickel-and-dime stuff that other property managers gouge you with, Belong offers for free.
What’s more, in a world where it’s hard to get contractors to show up, let alone find talented ones – Belong has taken the extra step of hiring contracts who work exclusively for them. They are vetted, tested and meet very high standards. And their services are available without a mark-up.