What exactly does a property manager do?

Question

I've read books and these forums, but all I really see about property managers is that they "take care of everything".  So let's say I have a 6-unit multi-family, and hire a property manager.

What would I end up needing to take care of myself (e.g. taxes, LLC paperwork if I go that route)?  Do they goes so far as to handle evictions?

And, how do the finances work?  Does the tenant write out a check to them, or to me?  If they get the checks, do they typically just deduct any expenses?

I'm (hopefully) in the last stages of deciding to go ahead with getting a multi-family, and want to get a better understanding of how the property management piece would work.
                         -Scott

Paul Falbo · Answer

"Overcharge and Under Deliver."

This is a subject dear to my heart.

Although Mr Carey may be true for unqualified management firms, there are many that would disagree, passionately.  I am one of them.

Please see my blog on the subject.

@joelowens is correct in many ways.  His opinion is balanced and allows for a fair discussion on what a qualified management firm can do for it's clients.

As to your primary questions, a property management company will not do your taxes, will not prepare K-1's, nor establish, monitor you entity (LLC, etc.).

They will, upon your authorization, set up trust accounts in your entities name, collect rents, establish operating budgets,  contract for services, pay bills, handle tenant relations, handle defaults, evictions, tenant improvements or turns, deferred maintenance issues, inspections, financial reporting, coordinate legal issues, leasing (if you so choose), maintenance, design modification, etc.

Your biggest responsibility as an owner is to make the right choice concerning the person and company that is going to handle your asset.  Make sure they have the experience and knowledge in your asset category.  Make sure they communicate with you at your desired level.  Monitor their performance.

If they are "overcharging and under delivering" then you have not done your work.  I always include a right to terminate upon 30 days written notice for any reason, and immediately for cause.  And I'm a property manager who owns a commercial management company.  I provide E & O insurance and employee dishonesty insurance.

Hope this helps.  Feel free to ask away on any management issue.

Lynn McGeein · Answer

Scott, what Joel said about negotiation and area is very true.  I do not have multifamily, but I have one PM for 3 separate properties.  They handle (per our agreement) screening tenants, collecting rents (in their company name), any repairs under $200 without notice, late notices, and they will handle evictions but I pay extra costs involved.   They even handle stupid HOA rules violations and notices at no extra cost (like attending hearings if tenant breaks rules). They send monthly statements and automatic deposit of rents in my account, send a notice if a tenant has not paid so I know not to expect those funds, and send me estimates of all repairs or turnover costs that will exceed the $200 limit.  If I okay it, they'll handle it.  If I want to do it another way, I'm responsible for it.  Their statements are very detailed and perfect for just handing over to my accountant.

I do my own yearly inspections now as finding that no one notices things like the owner would.   They tend to only notice things once it becomes an issue.

Ned Carey · Answer

Overcharge and Under Deliver.

Ooops I thought you were referring too SFH managers  :-)

Joel Owens · Answer

How the PM company works for you and what is included is a negotiation based on what you pay out and where the property is located.

If you have a very upscale building with really high rents and a solid tenant base with college degrees, professionals, etc. in  a good area they might cut you a break on their fees.

If you own a property in a marginal area or  a war zone where the property manager will have lower rents and more problem type tenants due to lack of education, poor life circumstances, etc. then the rates will be higher.

In that situation the PM company knows by experience they will have to collect rents multiple times, deal with damage to the units, drug and alcohol issues, evictions and churning of units on an ongoing basis etc.

Not all tenants that are low income are like that but you will find averages point to this being more the norm.

What exactly does a property manager do?

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