adminBuying an investment property is just the first step towards building sustainable wealth through a property portfolio. Once the investor acquires the property the next step is to ensure return of capital through proper management so that the property generates a positive cash flow while it also appreciates in market value.
While this sounds simple it actually requires the property investor to take time to look at their needs, expectations and the property that they have acquired. Property management is the art of ensuring that the investor’s needs are met through diligent management of that property. Incomes and expenses of investment property should be properly recorded, accounted for and analysed. This process is critical in measuring if the property is meeting the investors’ initial and ongoing expectations.
Property management is generally defined as the operation, control and oversight of real estate as used in its most broadest terms.
Management indicates a need to be cared for, monitored and accountability given for its useful life and condition. This is the same as the role of management in any business.
Property management is also the management of personal property, equipment, tooling and physical capital assets that are acquired and used to build, repair and maintain end item deliverables. Investment property management involves the processes, systems and manpower required to manage the economic life of all real property/real estate including acquisition, control, accountability, responsibility, maintenance, utilisation and disposition.
A critical and key role of a “property manager” is that of liaison between the property investor or asset manager and the actual tenant/lessee tenant, providing a buffer for those owners who are desiring to distance themselves from their tenant constituency.
Duties of property management include:
1) The full and proper screening or testing of an applicant’s credit, criminal history, rental history and ability to pay. 2) Lease contracting or accepting rent using legal documents approved for the area in which the property is located. 3) Mitigation and remediation regarding any maintenance issues, generally within a budget, with prior or conveyed consent via a Limited Power of Attorney legally agreed to by the property owner.
There are many areas and responsibilities to this profession, including managing the accounts and finances of the real estate properties, and participating in or initiating litigation with tenants, contractors and insurance agencies. Litigation is at times considered a separate function for trained attorneys.
Although a person will be responsible for this in his/her job description, there may be an attorney working under a property manager. Special attention is given to landlord/tenant law and most commonly evictions, non-payment, harassment, reduction of pre-arranged services, and public nuisance are legal subjects that gain the most amount of attention from property managers.
Therefore, it is a necessity that a property manager be up to date on applicable municipal, county, state and federal fair housing laws and practices.
Typical duties expected of a property manager include finding/evicting and generally dealing with tenants, home repair, home improvement, cleaning, garden maintenance, landscaping, and snow removal, to be co-ordinated with the owner’s wishes. Such arrangements may require the property manager to collect rents, and pay necessary expenses and taxes, making periodic reports to the owner, or the owner may delegate specific tasks and deal with others directly.
Where a dwelling (vacation home, second home) is only periodically occupied, the property manager might arrange for heightened security monitoring, house-sitting, storage and shipping of goods, and other local sub-contracting necessary to make the property comfortable when the owner is in residence (utilities, systems operating, supplies and staff on hand, etc.).
Property management can also include commercial properties where the property manager may operate the business, as well as managing the property. Some jurisdictions may require a property manager to be licensed. The property manager has a primary responsibility to the landlord and a secondary responsibility to the tenant.
The relationship the property manager has with the landlord and tenant is crucial in forming the expectations of both parties to the lease since both parties will seek and expect certain rights and benefits out of it.
Property management, like facility management, is increasingly facilitated by computer aided facility management. This is critical especially once the property portfolio reaches a certain critical mass.
Disclaimer: GMRI Real Estate is a property holding division of GMRI Capital which owns, manages, develops and leases out its own property. We do not act as agents for the public or third parties. This article is provided “as is” for informational purposes only as a public service, not intended for trading purposes or advice. Prior to execution of any property/real estate trade, you are advised to consult your authorised financial advisor/real estate agent to verify the accuracy of all information. Neither GMRI Real Estate nor any independent provider is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein.
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Peter Tanyanyiwa
Online Reporter