Five Easy Pieces: The Big Picture of Property Management
Let’s start by stepping back and looking at the big picture. While managing a rental property is an undertaking with seemingly countless details to coordinate—and it is—each of the details relates to one or more of the five basic elements of property management:
- You, the property owner
- Your property
- Your tenants
- Your money
- Your legal responsibilities
The work of property management is to oversee all five elements, to ensure that the many tasks related to each are carried out correctly and consistently, and to make sure that the matters pertaining to each are considered in the context of all five.
Yes, it’s a daunting job, but the benefits are substantial when It is done well. However, the costs are great when it is done poorly. Consider:
An older couple buys a solid house in a desirable neighborhood and invests carefully to transform it into the ideal rental home for the market. But then they lease it to a tenant who made a good first impression but who was in a precarious place financially and stopped paying rent after three months. The mistake: a lack of proper tenant screening.
A young engineer pays a high price for an older urban bungalow and spends handsomely on its restoration: refurbishing the pocket doors, creating a master suite complete with jetted tub and tiled shower stall, and furnishing the kitchen with high-end appliances. In short, it’s a house he’d love to live in himself. But then he can’t get it rented for the $1,800 that (as he says) “I need to have” to cover the cost of his investment. The mistake: putting too much money into a property relative to the economic profile of its surrounding neighborhood.
Two roommates seem to be the ideal tenants in a duplex unit owned by a busy investor. For three years they’ve paid their rent on time every month. They never complain, and they don’t even submit maintenance requests like most tenants. All is well, or so it seems. But when they move out they leave behind thousands of dollars in damage from multiple unauthorized pets, attempted renovations not allowed in their lease, and an unreported water leak in the bathroom wall. The mistake: a failure of the owner or manager to conduct regular “eyes on” inspections of the property.
An owner of a rental house becomes understandably frustrated that he gets calls several times a month from neighbors of his tenants complaining of loud, late-night parties. The landlord asks the renters to move, but they refuse—and they have eight months left on their lease. To encourage their early departure, the owner repeatedly denies tenant requests to have the water heater repaired. The tenants move out. Early one morning shortly after, the owner is served with papers notifying him that he is being sued for damages for constructive eviction. The mistake: the owner was not mindful of his legal responsibilities as a landlord.
You can begin to see how any specific matter in the property management process is going to relate to one—or several—of these five: the owner, the property, the tenant, the money, and the law. We’ll continue in the next post by taking a closer look at the one who gets it all started: the rental property owner.