in Real Estate Beginner's Posts

Property Management Companies: What They Are and What They Do?

Last Updated on: 2nd February 2023, 06:47 am

Hiring a property management company is probably one of the effective ways to manage your real estate rental business, or is it?

In this, we’re going to cover what property management companies are, what they do, why you need to hire one, when is the best time to hire and which property management company is the best choice for you.

To begin, let’s define what property management companies are.

Property management companies are businesses that manage rental properties of real estate owners. They’re just often referred to as Property Managers.

That’s just it, really. But to continue on…

What does property manager do?

The followings are the tasks and responsibilities performed by a property manager:

  • Advertising and showing the property to potential tenants
  • Screening tenants and processing applications
  • Handling lease agreements and paperwork
  • Collecting rent and security deposits
  • Handling maintenance and repair requests
  • Responding to tenant complaints and concerns
  • Conducting regular property inspections
  • Handling evictions
  • Keeping track of financial records and preparing reports for the property owner

Note that even though a property manager can handle these tasks, the property owner is still ultimately responsible for the property and must budget for property management expenses regardless of whether they choose to manage the property themselves or hire a property manager.

How much does property manager charge?

Property manager typically charges between 5% to 12% of the collected rent each month.

Property managers may also charge additional fees for specific services such as tenant placement, lease preparation, eviction proceedings, or marketing and advertising. These additional fees can be a one-time fee or a percentage of the first month’s rent.

To gain a more comprehensive understanding, let’s take a look at the following additional cost that a property management company may charge:

  • Tenant placement fee: A fee charged for finding and placing new tenants in rental properties. This fee may be a one-time charge or a percentage of the first month’s rent, and it covers advertising the property, showing it to potential tenants, screening tenants and processing applications.
  • Lease preparation fee: A fee charged for preparing and drafting the lease agreement. This fee can vary depending on the complexity of the lease, and it can be a one-time charge or a percentage of the first month’s rent.
  • Eviction proceedings fee: A fee charged for handling the legal process of evicting a tenant. This fee can vary depending on the complexity of the eviction and the time it takes to complete. It can be a one-time charge or a percentage of the rent.
  • Marketing and advertising fee: A fee charged for advertising and marketing the property to potential tenants. This fee can vary depending on the method of advertising used, such as online listings, newspaper ads, or brochures. It can be a one-time charge or a percentage of the rent.

For Example:

Let’s say you have a rental property that collects $1,500 in rent each month.  Then your property manager charges 8% of the collected rent each month. In this scenario, the property manager would charge $120 (8% of $1,500) each month for their management services. Additionally, let’s say the property manager also charges a one-time tenant placement fee of $500 and a monthly marketing fee of $100. In this case, the total cost for the first month would be $720 ($120 + $500 + $100) and each month after that would be $220 ($120 + $100).

What are the best property management companies of 2023?

Property Management Companies that specialize in managing single-family homes:

Property Management Companies that specialize in managing Multi-family Homes:

Property Management Companies that specialize in managing townhouses:

Property Management Companies that specialize in managing apartment communities:

Property Management Company that specializes in managing condos:

  • FirstService Residential

Property Management Companies that specialize in managing Office, Commercial, Industrial and Retail Properties:

 

When is the best time to hire a property manager?

When it comes to hiring a property manager, the best time to do so is when you start to acquire more rental properties and find that managing them becomes too much to handle. However, if you’re just starting out as a rental property owner, it’s generally a good idea to manage your properties yourself and build your business from the ground up. By managing your properties yourself, you can gain hands-on experience and knowledge of the rental market and the specific needs of your properties and tenants. These experiences and knowledge can be used later when you expand your rental property portfolio.

Also, consider how much you can handle managing your properties, and how much time you want to spend on it. If you find it hard to keep up with the daily tasks and responsibilities or if you want more time for other things, it might be a good idea to hire a property manager.

 

This is all the information we can provide for now. We’ll update this post according if needed.
Thanks for reading!
N.G.