Keep this definition of property management in the back of your mind as the foundation of your actions. There will be something new every day when it comes to property management. You will have to think on your feet and make decisions in the moment. Having guidelines and principles to fall back on when things seem uncertain is very important. If something doesn’t seem right, it probably isn’t. Your duties as a manager and agent for the owner are as follows:
- Achieve the objectives & goals of the property owners
- Generate income for the owners
- Preserve and/ increase the value of the investment property.
Ensuring you are putting the needs and objectives of the owner/client first and foremost is the most important thing to remember as you go about your property management duties. As you perform the management tasks on a daily basis, you will often encounter challenging scenarios. Along with experience and knowledge, guiding principles will help you to make the right decision. There will be pressures from bad tenants who may attempt to take advantage of certain situations. And while we have all heard stories of bad tenants, there are definitely property owners and landlords who will try to take advantage of their position of power, and in certain cases will even break the law to get what they want. You will need to know how to handle these people in a professional manner and avoid from getting involved in anything that could put you or your broker at risk.
Being a Professional Property Manager
One time I dealt with an owner said that he wanted to cancel a lease after he found out the tenant was African American in decent. That was literally his only reason for wanting a cancellation. This person had submitted an application, was qualified financially and had a clean background. She was a ready, willing, and able tenant. We had the authority to complete leases on the owner’s behalf and it was our responsibility to fill the unit with a qualified renter. So that’s what we did. We had strong confidence that this new tenant would be great. She was highly qualified and had a solid rental history. We did not anticipate the reaction of the owner. Usually, property owners and investors are thrilled to have such a qualified tenant as a resident. However, apparently, this owner was not. I was sitting in my office one afternoon with some associates when he came in and started telling us his thoughts. “I drove by (the house) with the new tenant that you placed last week. I noticed she was black…” He said. “So, what?” I asked… “I don’t want those kinds of people in my houses,” the owner then told me. Immediately I was on high alert. I couldn’t believe what this owner was saying to me. I calmly explained that she was well qualified and there was no reason to believe she wouldn’t be a good resident. But, no matter what I told him he didn’t seem to hear it. I explained that what he was saying was not only the wrong way to think, but it was also highly illegal.
By the end of our discussion, we were no further along. The owner was asking me to cancel the lease on the new resident for no reason other than the fact that he didn’t like the color of her skin. I explained to him that it was not possible and that he should forget it and just be thankful that we have such a well-qualified tenant. He wasn’t hearing it. He said to me “go figure out a way to cancel that lease, or you’re fired.” – It was at this point I realized there was no way out of this situation and we were not going to be working together anymore after today. So I told him, “If you want to cancel the lease you are going to have to ride over there on your horse, wearing your Ku Klux Klan uniform and cancel the lease yourself”. Needless to say, he didn’t like this comment and we immediately terminated our agreement right then and there. Not before I warned him, however, that if he did attempt to cancel that lease, he would be facing serious legal charges and I would be happy to testify against him.
I explained to the tenant that we would no longer be the management company for the property and if she felt uncomfortable in the home in any way, to contact me right away. I do believe the owner honored the original lease that was in place for that year and I don’t know what happened to the tenant from there. I never heard any more about it. But it is a strong reminder that there are people who are going to try to take advantage of a situation and do the wrong thing. You are the professional and it is your responsibility to know and understand the landlord/tenant laws in your state and at the federal level so that you can effectively do your job as a property manager.
Red Flags to Watch Out For
Pay attention to the various “red flags” that potential tenants and owners may waive. When they do, you’ll need to be aware of what’s happening and how to handle it. The last thing you want is to follow an owner’s illegal instructions. If you do, you can quickly find yourself in trouble as well. You are the professional. You are responsible for knowing what to do. During my time in the Army, I dealt with plenty of people who were above me in rank. If you find yourself facing illegal orders, you must have the courage and the knowledge to handle the situation and know when to say no.
Owners aren’t the only ones who might try to take advantage of a situation. We have all heard horror stories of bad tenants. You will run into situations where people will lie on applications or during interviews. You will hear intricate stories about why the rent is late or why the window is broken. While it’s impossible to have all perfect tenants all the time. You can have a majority of good tenants, and you can reduce the chances of things falling apart by taking a few upfront steps to make sure that you are only approving applications from the best possible applicants.
I can’t tell you how many times I hear these “tenant horror stories” only to find out that if the owner or manager had taken a different approach to how they handled the leasing and application process in the first place, many of these “Horror Story” situations could have been avoided. I’ll often meet with owners who try to self manage and they usually begin by telling me how bad the last tenant they had was, and how they don’t want to do property management anymore because they are tired of “dealing with tenants.”
Yet, usually within the first few minutes of speaking with these owners it’s clear that if they had just followed some simple and effective guidelines with a procedure that was exactly the same for every single applicant, they could have saved lots of time, stress and money. We will discuss what these steps are in the chapter that discusses tenant screening.
Roles of a Property Manager
Ultimately your role as a property manager will be varied. There are many moving parts when it comes to the management of properties, tenants, and owners. If you are a real estate agent or broker you will most likely be managing properties on behalf of owners and investors. It will require some balancing acts on your part to manage all the moving parts. You will learn that the number one factor in successful property management is effective and proactive communication. If you can become good at keeping everyone in the loop and everything on schedule you will have good success as a property manager. You will find your accounts are all well taken care of if you are proactive and stay on top of tasks. All rents are being paid on time. Expenses are being monitored and controlled. Your maintenance schedules will be up to date, your work orders will be completed in a timely manner and you have communicated with all parties effectively and timely. This is what a successful property management business looks like.
A shabby management business is reactive rather than proactive. They don’t find out there was a leak under the sink until the tenant moves out. They don’t attempt to collect rent soon enough and too much time goes by without communication. In a poorly run management company there is a loss of control of maintenance and service calls resulting in higher costs for owners. There is also the extremely high cost of turnover and vacancy. If not handled properly it can take what would be a cash flowing property and turn it into a cash drain. If you are someone who has ever had to deal with a bad management company you know that they can quickly become the difference between making money and losing money.
Your number one duty as the manager is to work to achieve the objectives & goals of the property owners.
I’m pretty sure that no owner’s goal is to have high vacancy and high expenses. In chapter 3 when we discuss meeting with owners and how to be prepared for earning their business, it’s a good idea to find out what the owners objectives are, and tell him or her how you are going to help them achieve those goals and develop a plan that will help everyone execute on those objectives. This duty is first and foremost because it is the most important element of property management. It was the very element that was missing from the management company that I had hired a number of years ago. They had put their goals and objectives in front of mine and failed to uphold their duties. Without integrity it makes trust difficult. Integrity is simply defined as doing what’s right, even when no one will know the difference. Always do what’s right for your client.
Property Management Duties Explained
Duty number two on the list of managers responsibilities, is to generate income for the owner. This means working to keep vacancy rates and expenses low and to make sure that rents are collected quickly and efficiently. Later chapters will discuss how to ensure maximum income is being generated from a property. When it comes to single family homes and condos this means setting the correct rental rate, screening and choosing the right tenants and managing expectations on both the tenant side, and the owner’s side.
Choosing the right tenant is the single most impactful thing that you will do when it comes to property management. WIthout the right tenant, nothing good happens. I will go into further detail about the best ways to screen tenants and what questions to ask during the application process. But just know that almost everything will hinge on whether or not you have placed a quality tenant or not.
The third duty of the property manager is to; Preserve and/ increase the value of the investment property. If you do what’s necessary to be proactive about your management tasks, this last responsibility will take care of itself automatically. By responding to and quickly taking care of maintenance issues; by communicating regularly with tenants and performing inspections during the lease period; and by being proactive about providing property reports to owners that provide details of how to most effectively preserve and maintain the property, you will certainly be successful in your property management duties.
