Property Management - Research Paper Example

Introduction Investing in real estate is a worthy venture especially if it brings in huge profits in the long-run. However, if not properly managed, the investment can go down the drain. It is thus very important for the owner of the property be it a residential building, commercial estate or industrial building to decide whether to manage the property by themselves or hire the services of a property manager. Just like other businesses need efficient management, so do properties. The good news is that the owner can manage the property especially if it is a single property but if he/she has many properties, it becomes difficult to manage. Furthermore, it requires a lot of skills to handle properties and tenants. As such, studying property management becomes crucial. The aim of this paper is to discuss what property management entails and whether it is worth studying in the first place. Property management is defined by Beirne (2006 p. 3) as “the practice of growing the intrinsic value of the asset while paying down the financing by operating the property on rental income.” This means that the property in question should be able to generate revenue enough to cover all expenses and provide profit for the owner in the end. Profit is mostly generated when the owner completely pays mortgages or building costs. For Burrell (2006 p. 13) property management refers to “care and maintenance of leased or rental property by or on behalf of property owner.” This means the responsibility of taking care of the property can be delegated to a property manager so that the owner can take on other responsibilities. The main goal of property management is to ensure that the property operates strictly from cash flow or income minus expenditure including any financing costs such as interest and principal and also ensure that the conditions and performance of property is maintained. This may seem a simple task to accomplish but as we shall discover, it requires a lot of skills just like managing any other firm. In managing the property, the owner gets involved with many groups of individuals such as the tenants, architects, suppliers of repairs and maintenance materials, the repair and maintenance personnel, government officials and insurance agencies among others. As such, the property manager whether it is the owner or a hired professional requires various skills such as people skills, problem solving skills, marketing, finance, research, communication, insurance and management itself (Burrell 2006 p. 13). This is because the manager is required to advertise the property to get potential tenants and screen them for suitability hence marketing and communication skills are vital. The manager also encounters conflicts with tenants or suppliers and has to deal with rogue tenants. If he/she does not have people skills as well as problem solving skills, he/she is in for trouble. The tenants’ call many times even at odd hours to have their problems fixed and as such, the manager needs to be a patient person. Sometimes tempers flare-up and the manager have to control the situation and deal with all types of emotions (Griswold, 2011). The manager is also expected to be up to date with current market conditions hence carry out research often. Complying with rules and regulations of the state and federal government is important to avoid conflict with the law. Furthermore, ensuring the safety of tenants, property and employees is crucial hence knowledge of insurance is critical. Many times, the owners of the property do have all the skills needed to manage the property and if they do have, they have limited time to deal with all the issues. It is at this juncture that they may decide to engage the services of a property manager as a poorly managed property cannot sustain itself. The key to success in real estate is a well managed property hence the need to engage professionals. Property managers in most cases belong to a property management firm. Before engaging their services, Griswold (2011) argues that it is better to carry out a thorough research on their viability as this entails putting your investment into their hands. Depending on the owner’s choice, the investment may prosper or run down or collapse. First, it must be an accredited organization and in possession of broker licenses and certifications. It should be insured in general liability, automobile liability, worker’s compensation and professional liability plus a fidelity bond worth $ 1, 000,000 for all employees to protect against embezzlement (Griswold, 2011). Professionals should be certified by bodies like the Institute of Real Estate Management (IREM), Accredited Management Organization (AMO), Accredited Residential Manager (ARM) designation, Certified Property Manager (CPM), Certified Apartment Property Supervisor (CAPS) designation and other industry-accepted certifications. This shows how important studying property management is. It gives one the knowledge required to handle properties and gain a meaningful career in the field as not just anybody can get into the field. Besides, it requires full understanding of rules and regulations of the state such as the Fair Housing laws of 1968 which prohibit discrimination in accommodation. Different states have different laws thus continuous research is needed in order to handle properties well without conflicting with the laws. This may be a huge task for the owners who undertake to manage the property themselves. However, the question that owners need to ask themselves is whether it is worth hiring a property manager. Property managers perform a number of roles which make them worthwhile. The first task is to advertise the property to get applicants then screen tenants to choose the right ones. Selecting wrong tenants who destroy property, run away with rent or bring chaos to the property can affect the business negatively. Tenants need to pay rent in a timely manner as stipulated in the lease agreement if they expect to receive services such as repairs from property managers (Beirne, 2006). Property managers are also responsible for collecting rent; paying expenses; maintaining the property by engaging repair and maintenance contractors; liaise between owners and tenants; deal with rent defaulters or late rent payments; handle calls and complaints from tenants; show rental units; advise the owners on various issues such as availability of additional property and offer regular financial reports to the owner (Riley, 2010). Most of the firms have well established contacts of service firms hence can get preferential pricing and cut costs. Moreover, they have good rent collection policies and procedures for late rent payment. Beirne (2006) compare property management to running a very large household whereby order has to be maintained, cleanliness and security ensured, bills paid, budgeting and children (tenants) watched over. It is a huge task and requires studying various subjects such as business, accounts, communication, engineering and sociology. The problems comes in when the owner hires managers who surcharge on repairs and maintenance, keep fees collected for late payment, or account for unnecessary repairs while ignoring needed repairs (Burrell, 2006). The owner expects returns on his/her investments and a property that is well maintained while the tenants expect to get the best services from their rent not staying in poorly maintained buildings which leak or where there is no safety. Failure to meet these expectations by the property manager may lead to exodus of tenants out of the property or lawsuits which may be costly to the owner and in the worst case, a total destruction of the property. It is thus important for the owner to learn a bit of property management so as to know how to select and deal with people who manage this important investment and get high returns for it. Those who view hiring a manager as an unnecessary expense risk losing their properties due to poor management. References Beirne, M (2006) The Property Management Tool Kit. New York, NY: AMACOM. Burrell, J (2006) The Rental Property Manager’s Toolbox: A Complete Guide Including Pre-written Forms, Letters and Legal Notices. Florida: Attlantic. Griswold, R (2011) Property Management for Dummies. Hoboken, NJ: John Wiley & Sons Riley, R (2010) Field Guides to Finding a New Career: Real Estate. New York, NY: InfoBase. Read More