Use a Property Manager Instead of a Real Estate Agent
Owning property is a significant investment, and the decision of how to manage it can greatly influence the return on that investment. For many property owners, real estate investors, and landlords, the question often arises: should I use a property management company or can my real estate agent do it? While both can serve a property owner’s needs under different circumstances, understanding why a property management company is the more appropriate choice is more important than many realize.
Understanding the Roles
Before we dig into the reasons for choosing a property management company over a real estate agent, it’s important to understand the distinct roles they play in the real estate industry.
Property Managers
Property managers oversee the daily operations of rental properties on behalf of owners. Here are some of their main responsibilities:
Coordinating Property Maintenance and Repairs: Ensuring the property is well-cared for and habitable.
Marketing and Showing Property: Attracting potential tenants through marketing efforts.
Locating and Screening Tenants: Finding reliable tenants and conducting background checks.
Record Keeping and Reporting: Keeping detailed records of the property’s financial and operational status.
Contract Management: Taking care of the legalities involved in tenant agreements.
Tenant Relations: Acting as a mediator and main point of contact for tenants.
Rent Collection: Making sure rent is paid in a timely manner.
Property Inspections: Regularly assessing the state of the property for any issues.
These responsibilities make property managers an indispensable asset, especially for those who don't live close to their property, lack the time or expertise, or prefer to focus on other priorities. Property managers provide freedom to their property owners by way of managing their investments, while the property owner can be completely hands free of the day-to-day operations and still reap the benefits of owning property.
Real Estate Agents
Real estate agents typically specialize in buying and selling properties, which may include:
Understanding Seller Needs: Knowing what the seller expects from the sale of their property.
Market Research: Establishing an asking price based on comparable properties.
Property Listings: Utilizing listings services to promote the property.
Marketing Materials: Creating visual presentations (such as photos) to enhance the property’s appeal.
Open Houses and Showings: Coordinating with potential buyers to view the property.
Negotiation: Using skills to negotiate property prices.
The key distinction between property managers and real estate agents is their focus; managers concentrate on the day-to-day management of rented properties, while agents focus on transactions involving the sale or lease of properties.
Some property management companies have different divisions of their business so that there is no overlap between what the roles of their employees and agents do. This allows property managers to focus on managing properties, and real estate sales agents to excel in the field of sales.
So Why Choose a Property Management Company?
Specialized Expertise
Property managers possess a wealth of specialized knowledge and experience. They dedicate all their resources and time to ensure that every property under their charge is well-maintained, filled with reliable tenants, and generating steady income. They have developed specific skill sets tailored to the intricacies of property management, making them more adept at handling the unique challenges that come with it.
Time Savings
By assuming responsibility for all management tasks, from tenant communications to property maintenance, property management companies free up substantial amounts of time for property owners. This is invaluable for those who have other businesses, careers, or personal endeavors to pursue. Doesn’t the idea of free time sound like a dream? A property management company will be able to take the burden of managing an additional property off the property owner’s mind so that they can focus on the things that really matter to them.
Tenant Relations and Retention
A good property management firm practices effective tenant screening, reducing the risk of problematic renters. They also handle all tenant relations, which is time-consuming and delicate. Professional management often increases tenant retention by addressing issues promptly and maintaining an orderly living environment. By prioritizing tenant satisfaction, property managers can significantly reduce turnover rates and minimize vacancies, ultimately maximizing the property owner’s rental income.
Regular Maintenance and Upgrades
Property management companies have an established network of contractors and service professionals to handle maintenance and emergencies swiftly. By conducting regular inspections and addressing maintenance concerns proactively, property managers help preserve the condition of the property, enhance its appeal to tenants, and prevent costly repairs down the line. This proactive approach protects the property owner’s investment to ensure a comfortable an safe living environment for tenants. Regular property maintenance and updates also means the property will rent for more money.
Legal Compliance
Navigating the legal landscape of property rentals can be daunting. Staying compliant with local, state, and federal regulations is essential for landlords to avoid legal issues and potential liabilities. Property managers are well-versed in local and federal regulations regarding landlord-tenant laws, fair housing, and safety compliance, which mitigates the risk of legal troubles and the potential expenses that come with them. From drafting lease agreements to handling eviction proceedings, property managers handle all legal aspects of property management, providing the owner with peace of mind and minimizing legal risks.
Financial Management
Managing rental income, expenses, and budgets requires meticulous attention to detail and financial expertise. A reputable property management company will provide detailed financial reports and handle the management of rental income and expenses. This includes collecting rent, managing late payments, and budgeting for maintenance costs. Laws by state vary, but in Texas, property managers are required to hold rent payments and security deposits in separate accounts from the business operating account.
By maintaining accurate financial records and providing transparent reporting, property managers empower the property owner to make informed decisions about their investment and optimize their rental income.
Market Knowledge
Property managers have in-depth knowledge of the local rental market, which allows them to set competitive rent prices, market properties effectively, and maintain low vacancy rates. This translates into maximized revenue for property owners. Property managers market proficiency allows them to adapt to changing market conditions, optimize rental pricing strategies, and capitalize on emerging opportunities.
Stress Reduction
Perhaps one of the most significant benefits of hiring a property management company is the reduction of stress for the property owner. Knowing that the property is in good hands and that all the administrative, operational, and legal aspects are being managed professionally can provide immense peace of mind.
Real Estate Agents Adding Property Management Services
Property management isn't just about fixing leaky taps; it's about juggling the numerous tasks required to keep properties performing at their best. This level of specialized service is challenging to replicate for an agent whose expertise is geared towards sales and acquisitions.
For real estate agents considering adding property management to their services, this can be an excellent way to diversify income and serve clients more holistically. However, property management is a niche and requires additional education to be successful.
Can a Real Estate Agent Even Act as a Property Manager?
A real estate agent operates under a broker, and therefore, the broker must approve of any property management services a real estate agent might provide. Many brokers prohibit real estate agents from engaging in property management due to the increased liability and insurance requirements. If an agent is to proceed with management without their broker having the proper insurance policies in place, the property owner will be the next in line for a lawsuit or lien placement.
There Is So Much Paperwork
When it comes to managing and leasing a property, there are two contracts involved: the property management agreement that outlines the service the property manager will provide to their client, and the lease. Texas REALTORS® provides a generic property management agreement, residential lease, applications, etc. Will a real estate agent know to use addenda like animal agreements, bed bug addenda, flood addenda, and any other custom addenda that would provide for better legal coverage for a property owner? Texas REALTORS® has over 130 forms.
Will They Win in Court?
Real estate agents operating as an individual property manager usually lack documented policies, processes, and procedures. A lack of documented policies creates liability from fair housing issues to not being able to win an eviction case because there is a lack of accurate record keeping. Processes and procedures help to make sure the same thing happens in every case with every tenant. Anytime there is deviation, there is liability. Processes and procedures make sure everything is documented properly, and that deviation does not occur.
Can a Real Estate Agent Afford Good Property Management?
Property management software makes adhering to policies and procedures, and accounting much easier. However, they can be incredibly costly to purchase into and take a lot of manpower to use to its full potential. Most property management software provides a portal login for owners and tenants with real time up to date information on the status of their account. It is required in Texas that the property manager provide monthly account statements to the property owner. Will a real estate agent that does not have access to property management software be able to provide timely records?
If a real estate agent does not hold the proper accounting requirements, it is easy to commingle funds which could lead to having their license revoked by the Texas Real Estate Commission. Commingling could lead to the property owner’s money being spent by the person who is supposed to be managing it responsibly.
Can a Real Estate Agent Practice Fiduciary Duty in Both Fields?
Real estate agents must also be prepared to shift their mindset from transactional work to the comprehensive ongoing care of properties. Will a real estate agent have time to complete regularly scheduled walk throughs of the property when they’re working with sales clients every day? Will they send the property owner a report showing the property condition? Will they have time to check on the unit when it is sitting vacant between tenants or oversee maintenance?
When considering who to entrust a valuable investment with, recognizing the benefits a dedicated property management company brings to the table could make all the difference in the success as a property owner. While both property managers and real estate agents serve important roles within the real estate industry, understanding the range of responsibilities and the depth of service a property management company offers can make the decision clearer for property owners and investors. Opting for a property management company can lead to better maintained properties, happier tenants, compliance with laws, and ultimately, a more successful investment.
At Hendricks Property Management, we are always happy to refer a property owner or tenant back to their favorite real estate agent when they’re ready to make their next buy or sell.