Getting into property management can be difficult. In both commercial and residential property management, there are many rules to learn and challenges to overcome. It isn't always easy to overcome these property management challenges. Many first-time property managers (PMs) waste time and money making mistakes.
Here are two examples of potential hazards that new property managers may face:
Legal Issues with Renters: There may be cases where a first-time property manager/landlord violates a code or breaks a law they were unaware of, resulting in a court case. Even if there is no actual violation, disputes with renters can end up in legal battles where the manager may need to hire a lawyer.
Losing Money on Rental Property: Many first-time property managers/landlords underestimate their actual costs and lose money on a property. Also, they may have difficulty filling vacancies, leaving them with no steady income.
Here is an easy guide to property management to help first-time property managers avoid such issues.
Guide to Property Management
This short guide won't cover all the details of managing residential and commercial properties because it is meant to teach new property managers the basics.
Here's a scenario that some new property managers may face: The entrepreneur has found a great home or apartment complex for an unbelievably low price after searching for days, weeks, or even months. They don't give the specifics of the building much thought as they rush to buy it before others do.
Despite being affordable, the property was not a good fit for its market, as the aspiring residential property manager would have realized if he had thoroughly investigated the property and the market.
One of the basic property management challenges is finding a good property that fits the market where it's located. Before even looking at properties, it's important to gather market information like:
Local Employment Statistics. People need stable employment to pay their rent. High rents won't do well in areas with high unemployment and few opportunities for steady, well-paying employment.
Average Household Size. How big are families in the area? Are most of the population unmarried, "nuclear" families with two parents and children, or large extended families? This will greatly affect the rental properties. For instance, a multifamily building with two or three bedrooms will usually do well in areas where families are more common. In contrast, studio apartments are better for areas with a lot of singles (such as near college campuses).
Rental Market Rates. How much is the average rent cost in the neighborhood? If the average is too low, it may be difficult to attract budget-conscious renters looking for cost-competitive units without cutting into profits.
Occupancy Rates. How many rental units are vacant in the area? If long-term rental occupancy rates are low, there might be a problem in the neighborhood preventing renters from moving in. This is a sign to stay away from such a market.
Know the Local Laws
State and even local regulations can quickly become one of the biggest property management difficulties that PMs will ever face. Even seasoned property managers can break a rule or law they were unaware of, especially when moving to a new market.
Property managers can learn about property management rules and local laws in many ways. Here are a few:
The second option is the most effective because a lawyer specializing in residential or commercial property management will most likely be well-versed in the laws that PMs must follow.
Know Your Property Management Metrics
Property managers, like any other business or investment, must thoroughly understand their key performance indicators (KPIs) to achieve consistent long-term success. Some key property management metrics to monitor include:
Occupancy Rates. It is important, especially in multifamily property management, to understand how many units are currently occupied vs. the total available. Comparing this property management metric to the larger market scope can help analyze overall performance. Property managers must aim for this figure to be as close to 100%.
Property Maintenance Costs. In property management, property maintenance is a necessary expense. Keeping track of property maintenance spending and which maintenance issues are the most common is important for accurately estimating a property's profitability (and identifying potential problems).
Renter Turnover. At the end of a lease, how many renters leave? (or, worse, before the lease expires) each quarter or year? While some renter turnover (also known as renter churn) is inevitable as people's personal lives change. However, high turnover rates may point to a problem. Given how vacancies drain any property manager's bottom line, identifying the source of the problem is important.
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When you want your property managed by a professional, turn to PropertyAngel. Our team has the education, experience, and attention to detail to see problems before they cause trouble for tenants or owners.
If a problem does arise, our property management in Bangalore team can resolve them quickly and effectively. Contact us and let our team help you with your property management questions.