What Does a Property Manager Do Anyway? Part 1 of 3

Due to the nature of the housing market and the ever-changing economy, many homeowners are finding themselves in new and unfamiliar territory. People everywhere are experiencing job transfers, military relocations, downsizing homes, or just purchasing larger homes and are now having to consider what to do with the home that they are leaving. When they are unable or unwilling to sell, renting becomes a popular option for many. For the homeowner that does not want to manage a rental home themselves, property management is available to assist in more ways than many realize. For many though, the idea and scope of what a property manager does is undefined and sometimes confusing.

Below are the steps most property managers take when managing a home for a homeowner.

The listing: What happens before the tenant moves in?

The Call: Usually the first step in hiring a property manager is the initial phone call or e-mail. Use this time to ask questions about the particular services offered by a manager, their company and policies. This is probably one of the most important steps because the first contact you have with your manager and their company can tell you a lot about who they are. How professional were they on the phone? Did they call you back quickly if you had to leave a message? These questions and others like them can tell you a lot about how the company will communicate with you in the future, and that is the most important thing you can find out early on. If you have problems reaching a company or getting clear answers, be aware of the red flags.

The Appointment: Once you have set up an appointment (if you are still local), the manager or a designated agent will come out to view the property and will generally begin to determine a rental value on the property. It is critical that you use this time to discuss your needs and concerns with a potential manager. The manager will go over the services offered by their company, pricing, suggestions for preparing the home for rent, rental value assessment, and should go over any special considerations for your home. You should be prepared to ask a few questions (or a lot of questions if this is your first time renting a home out).

    1. How much do they charge?
    2. What services are included?
    3. What services are not included, or are included at additional cost?
    4. Where and how do you advertise my property?
    5. How do they screen incoming tenants?
    6. How are tenants able to pay rent?
    7. What happens if a tenant doesn’t make a payment?
    8. When are rent payments made to owner?
      i.     How are those payments made? (Check, Direct Deposit, etc)
    9. How often do they inspect the property?
    10. How do they handle maintenance issues?
    11. What is their contract cancellation policy?

You may have many more questions, and now is the time to ask them. Better now before you sign the agreement than later down the road when there is a problem or misunderstanding. If you decide to move forward with the manager, you will be signing a contract and the manager should begin his process of preparing the home and advertising.

Advertising: Either at the time of appointment, or at a date scheduled by you and the manager, photos should be taken of the home. In the age of Internet advertising a single photo of the exterior is not sufficient. A manager should be taking photos of every room possible, exterior photos of the front and back, and  taking photos of documentable issues (such as cosmetic damages or special features of the home for records sake). This may only be the first round of photos. If you have not yet vacated the house, a second round of photos should be taken as soon as you have vacated the property and finalized preparations for making the property rent ready. Most online websites will allow a minimum of 10 listing photos to be advertised, with many allowing up to 20 or more. If your manager is not taking sufficient photos to advertise and promote your home, they are doing you a great disservice. Once the photos have been taken, the ad creation process begins and the house will be posted online. Take an opportunity to read the ad the manager creates for you. You know the house better than anyone, and the same features you fell in love with when you bought the home are most likely the same features a tenant will want. So point those out to your manager.

Showings: Once the advertisings are running, the manager should begin showing the property. Each company has its own policy regarding how showings are handled and make sure you ask your manager how they handle that process. Some will use lockboxes, others key checkouts, others have designated agents that physically show the property to prospective tenants. During this process, if you are still living at the property, do make sure they house is tidy and as decluttered as possible (in the middle of preparing for a move, not always a simple feat). Do understand though that tenants are usually less concerned about the overall appearance of the home than you probably were when you purchased the home. Most tenants are more interested in size of home, location, and features and can look past your furniture and boxes. This is the opportunity for your manager to “sell” your home to potential renters, and point out the features your home offers. Many owners ask if they should be present during showings, and that decision is generally between you and your manager. Ask your manager if they have a policy regarding this. You do want to be careful to not exchange information with a tenant, as this will lead to tenants circumventing a manager when they need something…that is why you are hiring a manager in the first place.

Screening: Once a potential tenant has decided to move forward and rent your property, the manager will take an application from the tenant. There is usually a fee paid by the tenant to the manager to compensate the manager for the report and time expended by the manager. Traditionally, the manager will complete a report on the tenant that encompasses many different facets of the potential tenant.

      An application usually includes (but is not limited to):

  1. Credit Report and FICO Score
  2. Criminal Background Search
  3. Previous Landlord Reference
  4. Eviction History
  5. Sex Offenders Search
  6. Employment Verification
  7. Income Verification

Once this report has been completed, the Manager will then make a decision based on the information received. In some cases the manager may reach out to you for a final approval based on the findings from the report. Understand that due to fair housing regulations, property managers cannot discriminate against any protected class and must look solely to the results of the application. Check with your property manager for a listing of the criteria a tenant must meet or exceed in order to pass an application. If the application is approved, the tenant will be contacted and a holding deposit will be requested for the property. Once this holding deposit is paid, the house will be removed from the market for a period of time. During this time, final preparations will be made to get the house ready for a tenant to move in.

Leasing: After the application has been accepted and the holding deposit has been received, the Manager will begin preparing the move in documentation for the tenant. This includes the lease agreement, inspection documents, preparing the utility transfer for the tenants, and ensuring that the house is ready for the tenant to move in. The lease agreement is THE most important document that will get completed and will be signed by the tenant and either you or the manager on your behalf. Make sure your manager is using a lease agreement prepared by an attorney that will protect you from potential liability that can be caused by or brought up by a tenant. Once signed, the manager should be working with you to finalize your move out, ensuring the house is clean and ready for move in, keys are made and ready for tenant pick-up, and that final inspections are completed on the house once it has been vacated.

Fund Collections: Before giving the tenant keys to the property, the manager will convert the holding deposit into a Security Deposit, as agreed upon in the lease agreement. This is typically equal to 1 month’s rent or more depending on the results of the application. The manager will also ensure that the first month’s rent has been collected (in certified funds) along with any additional fees owed by the tenant prior to move in (pets fees, etc). Keep in mind that if the tenant is not moving in on the first day of the month, proration of rent may be in order and depending on how your manager collects rent, a full month may or may not be collected up front. Once the funds have been collected and accounted for, the tenant will be given keys to the property and allowed to move in. The utilities should be switched into the tenants name at this point, or be in the process of being switched over. Final documentation will be given to the tenants, including any special instructions about the house, inspection checklists, and a copy of the executed lease agreement. Congratulations, your property is now officially rented.

IMPORTANT CONSIDERATIONS FOR AN OWNER DURING THE LISTING PHASE:

  1. COMMUNICATE – If you have questions, don’t hesitate to ask your property manager. It’s better to handle situations before they turn into problems or misunderstandings.
  2. MOVING OUT – You should be prepared to have the house and carpets professionally cleaned when you move out. Property managers demand that tenants do it when they leave, its only fair they move into a home that was given the same considerations.
  3. ACCOUNTING – One of the big “surprises” owners bring up the most to us is how much money they will be receiving in the first few months. Keep in mind that the first and second months of the rental period are usually the leanest in terms of payments to owners. You will have deductions from any maintenance reserves, rent proration, up front leasing or advertising fees, and any expenses from preparing the house for rent.

Check back for part 2 coming soon, which will cover the responsibilities of the property manager DURING the lease agreement, as well as part 3 detailing the responsibilities once a tenant begins the move out process.

Written by RE/MAX Infinity

Jason has been involved in Real Estate since 2005 where he quickly became a multi-million dollar producer within his first full year. He graduated from the Realtor Institute a few years later and then went on to achieve his Broker’s License in 2009. In 2008 he was asked to start up and lead the Property Management Department. He served on the Board of Directors as President for the local chapter of the National Association of Residential Property Managers for 2014 and is readily available to meet and speak with clients.

Written by RE/MAX Infinity

Jason has been involved in Real Estate since 2005 where he quickly became a multi-million dollar producer within his first full year. He graduated from the Realtor Institute a few years later and then went on to achieve his Broker’s License in 2009. In 2008 he was asked to start up and lead the Property Management Department. He served on the Board of Directors as President for the local chapter of the National Association of Residential Property Managers for 2014 and is readily available to meet and speak with clients.