If you are asking, “What are property management companies?”, then there’s a very simple explanation.
A property management company will handle most, and usually all, of the responsibilities that come with running a rental property.
The management firm will be hired by a property investor or landlord to run their property to ensure it’s not only a success but that the legal requirements are met.
And if you’re a tenant wondering why you are dealing with a property management company, it may be because the landlord may not live locally and wants a reliable firm to deal with any queries or issues you may have.
What do property management companies do?
Here, we detail what do property management companies do. So, if you’re interested in hiring a managing agent, this is what you need to know.
Legal and safety requirements
A property management company will ensure that a rental home will meet a range of safety and legal requirements so it can be let.
These will include carrying out the gas safety inspection, having an energy performance certificate (EPC), and carrying out electrical inspections too.
They may even carry out regular inspections to ensure that the tenants are safe, and the property is legally compliant.
More importantly, the property management company will take care of sourcing professionals and carrying out any repair work.
Tenant recruitment and screening
One of the most important aspects of investing in property is to source quality tenants and this is where property management companies have their strengths.
They can take care of the tenant recruitment and screening process and they may already have a list of potential tenants to contact when a rental home becomes available.
The agent will also carry out a reference check and ensure that the deposit is secured with a Government-approved third party.
Having professionals find tenants means a landlord will not have to deal with a void period, which is when no rent is being paid.
Rental values
As a landlord, you may not be aware of how much rent you could ask for when you become an investor, but a property management company will do.
That’s because they will understand the local market and what a quality property will demand from quality tenants.
An agent will also help maximise rental income by recommending what work needs to be carried out and even arrange for the tradesmen and women to implement this.
Property maintenance
One of the big issues for a landlord, particularly for those who may not live locally, is to maintain a property effectively.
Again, a property management company will be located within the area and will be easy for a tenant to contact – this also removes a headache of the landlord being contactable and then having to organise qualified tradesmen to resolve an issue.
Agents will also carry out inspections every year to ensure that the property is being maintained properly.
Problem-solving
As we have seen from the issues raised here, a property management company will deal with tenants whenever necessary without having to trouble the landlord.
They will also ensure that the tenant’s rent is paid on time which is a major worry for many landlords.
The agent will have the experience of resolving late payments and will act promptly when a tenant does pay rent late.
Tenancy agreement
The tenancy agreement is a legal contract drawn up between tenants and landlords, but it needs to be robust and enforced. The agreement lays out the obligations of both the landlord and tenant and will be used to resolve potential disputes that may occur.
A property management company will help landlords draw up their tenancy agreement so that it is legally compliant and pertinent to the property.
There’s no doubt too that for many landlords, selecting a property management company is a headache and some may resent having to pay for their service when everything is running well, but it is certainly worth considering if:
- You are a new property investor without experience in recruiting tenants and maintaining a rental property;
- You don’t live in the area and cannot respond quickly to tenant concerns;
- You don’t want the hassle of running a rental property and would prefer to pay professionals to find and manage tenants and deal with problems and maintenance issues.
How do I start a property management business?
Having looked at the benefits of landlords engaging a property management business, this may sound like a great business opportunity that you might be interested in.
If you want to know how to start a property management business, you will need good personal and communication skills because you will be dealing with landlords and tenants, as well as tradesmen and women.
You also need to understand tenancy agreements and keep a calm head because in property management things can, and will, go wrong. Here’s our step-by-step guide:
Starting a property management business
You could start a property management business from your own home for minimal costs. It means you will need to visit landlords but once you become established, you could rent offices so landlords and tenants can visit you there.
Research demand
As with any new business, you should research carefully whether there’s demand from clients for a new property management business in your area. Is there a niche that you could exploit, or do you want to be a full-service letting agency?
Contact other management companies
You will need to find out what they charge and determine whether you could offer a better service at a lower cost.
You then need to advertise your new service or contact landlords on forums or approach other firms, such as an estate agent who may not offer the service to see if they have clients who would use you.
How to choose a property management company
If you are new to property investment and have a buy to let that you would like a property management company to run, then choosing the one that meets your needs is crucial for financial success.
A property manager will offer a range of service packages at a range of prices, and these will be geared to the type of property that they will manage.
A property management firm will cover:
- Marketing a buy to let property;
- Finding and screening tenants;
- Administering the tenancy to meet legal obligations;
- Collect rent;
- Deal with repair and maintenance issues.
However, not every landlord will need a property management company to do everything for them, and there will be some issues that the landlord will want to take care of.
That’s why property managers offer a range of services to meet a particular need.
Don’t forget too that a property management company will also:
- Conduct tenant viewings;
- Carry out property inspections;
- Ensure all legal certificates are in place;
- Offer rent protection or insurance;
- Explain legal expenses cover;
- Provide support for the eviction process;
- Offer property maintenance or home emergency cover;
- Help the landlord deal with taxes and their accounting process.
How much will a property management company charge?
Property management companies will offer a range of charges and they will be:
- Charged as a percentage of the rent: Most property managers will offer their services as a percentage of the monthly rent and will include either a tenant-find service, which could be as low as 5%, or a fully managed service which could be between 10% and 15%. Be aware that they may also charge VAT on top of this.
- Fixed fee property management: The alternative is to pay a fixed fee for a property management service. This will be very attractive for landlords with high rents, for example, in London or the South East.
What to consider when hiring a property management company
There are a number of issues to consider when hiring a property management company, including:
Cost
How much will the property manager cost? You need to know what your expected rental income will be and whether you can realistically afford a property management firm. You may need to carry out some of the tasks yourself to save money.
Service level
If cost is an issue, you could choose a lower level of service, for example, have the property manager find and screen tenants but you carry out the viewings.
Time
New landlords may find that their buy to let investment takes up more time than they appreciated and if you haven’t got enough time to meet your landlord responsibilities, you may need a property management firm.
Reputation
When searching for a property management company you need to compare their services and fees, plus you need to check what customer feedback is on platforms such as Google. They need to have a good reputation before you work with them.
What are property management companies?
Here, we’ve looked at what property management companies do, why landlords may need them, and explained why a tenant may be wondering why they are dealing with a property manager and not a landlord.
We have also looked at how to start up a property management company, and there’s no doubt that to understand the question, ‘What do property management companies do?’ means speaking with several of them to see what services they offer, the prices they charge and whether you can work with them.
For many landlords, hiring a property management company means they don’t have the day-to-day headache of dealing with tenant issues and will be reassured that their property meets all the necessary legal requirements.
