Property Management
So, your project is built, it’s being leased, and now people are moving in—turning the vision you started two, three, or even four years ago into their home.
Now comes the next big step: property management.
What exactly does a property management company do?
They’re responsible for the day-to-day operations of a property, taking over where the construction team left off. Their duties include:
Collecting rent
Budgeting and financial reporting
Tenant screening and management
Maintenance, repairs, and building upkeep
Advertising and leasing the property
They also serve as the point of contact for your tenants once they’ve moved in.
Now, the big question is: do you manage your property in-house or hire a third-party firm?
There’s no one-size-fits-all answer, and you’ll likely get different opinions depending on who you ask. At our company, we hire a third-party management firm. Some companies choose to self-manage, but here's the key difference:
If you self-manage, especially as your portfolio grows, you’re essentially running a separate company dedicated to the day-to-day details of property management. You’ll be dealing with everything from toilets to HR issues and employee turnover. Without a dedicated VP of Operations or someone overseeing this aspect, self-management can be overwhelming and take a significant amount of time away from your development activities.
Plus, property management is typically a low-margin business—unless you have 600, 700, or even 1,000 units, it’s often a break-even endeavor. While it offers benefits like market insights and data, it’s not a huge money-maker until you scale significantly. This is why we’ve opted to use a third-party firm for managing our assets.
Whether you choose to self-manage or outsource, a few things are crucial:
Onsite team: The people managing the building day-to-day are essential. The onsite manager interacts with tenants and handles operations, so they need to be on top of their game.
Back-office team: Equally important is the team handling your property’s accounting and financial reporting. A VP of Operations or equivalent person overseeing both these teams is vital.
Site Supervisor: The head maintenance person is just as critical. This role ensures that repairs, upkeep, and tenant satisfaction are managed smoothly.
Once you’re operational, the management company handles the property’s financials, including opening bank accounts, paying bills, and collecting rent. All expenses—such as payroll, utilities, repairs, insurance, taxes, and mortgage payments—are managed by them. Typically, property management fees range from 3% to 5% of the income, depending on the market, building size, and services provided.
They’ll also handle leasing renewals, tenant screening, and maintenance requests. Overseeing physical upkeep and hosting tenant events are their responsibilities too. And they’ll manage your financial records—balance sheets, income statements, rent rolls—so you can stay focused on your development goals, not day-to-day issues.
If this is your first project, finding a property management company is much like finding an architect or general contractor. Research management companies that specialize in your type of property and ask colleagues for recommendations. It’s crucial to hire a firm with local experience—having boots-on-the-ground knowledge can save you from expensive mistakes, as I’ve learned firsthand.
For example, we once had an issue with water usage at one of our properties. After our management company noticed similar issues at other newly constructed buildings they managed, they discovered that all the buildings had installed the same faulty toilet model. A small, fixable issue was causing leaks, but without their local knowledge and involvement in multiple properties, we might never have connected the dots.
Licensure and certifications are table stakes, but don’t overlook the importance of carefully reviewing the management agreement—much like your attorney reviewed your purchase agreement. Pay attention to the contract terms, including termination clauses, responsibilities, and insurance coverage. Make sure the management company carries general liability and Errors and Omissions insurance, and establish clear communication guidelines.
Remember, as a developer, you don’t want to get bogged down in the minutiae of property management, but you do need to stay in the loop on anything affecting tenant satisfaction or your bottom line.
Peace,