A Guide to Property Management
The key to becoming a thriving landlord is efficient property management. Strong property management is the bedrock of every successful landlord business strategy, whether managing the property yourself or using a letting agent to outsource your workload.
“Property management is not easy, but with good organisation skills, proper communication, firm property maintenance control and knowledge of the latest legislation and regulation laws, everyone can create a sustainable and profitable investment environment.” – Sunil Sharma, Director of Regal Estates.
Ramesh Pindoria, Director of Regal Estates – “we have a full professional property management team in place and deal with tenancy issues daily – some are complex. We encounter and have knowledge of so many scenarios which best place us to manage our clients properties”
At Regal Estates, we take care of hundreds of tenanted homes and assets with a combined value of over £500million+, taking the burden off the landlords’ shoulders. Over 25 years of acting as the conduit between landlord and tenant, we have gained priceless expertise on the subject and are happy to share this knowledge with you.
What is property management?
Property management covers all aspects of running and maintaining a rental investment property. This role is usually passed down to lettings agents such as us, but some landlords choose to take on this title themselves.
Property management responsibilities
When renting out a property, a property manager is responsible for many important tasks, including:
Every form of investment is risky. One of the first jobs as a property manager is overseeing potential hazards that might reduce your profits. The two most common challenges you must prepare for are:
- Legal disputes with renters. Sometimes, especially if you’re new to the business, you might face situations where you have infringed on the tenant’s rights in a way you are unaware of and could end up in court. Sometimes even minor disputes (without actual violations) with renters can escalate into legal battles where you might need to hire a solicitor. This would hurt you financially, so you must be prepared to protect yourself. Always enter the market equipped with the latest regulatory and legislative knowledge and oversee any potential problems that might trigger a conflict between you and your tenant.
- Rental Loss. Sometimes landlords underestimate their property and costs, resulting in losing money. Sometimes you just can’t fill the vacancies, leading to rental gaps you must cover from your pocket. Sometimes the tenants are just late on paying rent.
To protect yourself from this, first, you need an appropriate market appraisal. Many lettings management companies do property valuations for free, so if you’re hiring a lettings agent, this should be one of the first services they provide. To protect yourself from rental gaps, the best action you can take is to get rent guarantee insurance. Many insurance policies will cover you for the total rental amount for up to 12 months, including legal expenses, in case you have to go through the eviction process.
Knowing your market
A great property manager is equipped with knowledge about the local property market. Whether buying a property or renting out an already owned one, it is crucial to know the current market conditions and ever-changing trends. The rush to buy or rent a property without evaluating the market data may result in bad decisions that can hurt your wallet.
Finding a property with good potential in a flourishing market is one of the most straightforward property management challenges to overlook. So here are a few critical market data insights to look at:
- Local employment trends and statistics. For you to make money off your rental property, you need to know if the rental area has high employment rates, as the employed people with steady income will be the ones that pay your rent without any difficulty. Conversely, low employment areas present few opportunities for stable rental business, while high employment might even support higher rental rates.
- Average household sizes and demographics. Having insight into local demographics, such as average age, might help you foresee the future potential of the employment market. For example, suppose the population is older within an area. In that case, there might be more job openings, potentially flooding the market with young, new professionals seeking to rent a property. Understanding the size of the families can also determine what type of residencies are most desirable to renters. For example, if a market consists mainly of ‘nuclear’ families, properties with two or three bedrooms can often be in high demand. And studio apartments or one-bedroom flats might be more prevalent in areas populated with singles.
- Rental market rates. To successfully occupy your properties, you need a strong insight into the average rent in the area. If the average rent is low, it may be challenging to attract budget-conscious renters. As in the lower-rent area, units with higher rent might result in decreased profits because you might need to cut your asking price.
- Occupied properties in the area. Knowing how many rental units in the given area are vacant is crucial. If there are many long-term rental housing vacancies, supply and demand might be an issue. This indicates that the market is overcrowded with properties because of insufficient demand. Or there might be some issues that prevent renters from moving in. This can be a good warning sign that you are not aware of something and that you need to investigate more.
Set your most important management metrics
Like any successful business or investment, measuring your success is important. Analysing and understanding your key performance indicators is crucial to sustainable long-term success. Some of the best metrics to track include:
- Occupancy rates. It is essential to have a solid grasp of how many units you own and how many of them are occupied. You will always want to keep this number as close to 100% as possible. This is one of the most important metrics, as it helps you understand your overall performance.
- Occupancy Turnover Rates. (This metric is also often referred to as renter churn.) It’s vital that there is as little turnover as possible. Even though it’s unavoidable. High turnover rates usually indicate issues with properties or the market itself.
- Property maintenance. This is a necessary expense that often eats into your profits. So, it’s important to keep track of spending on property maintenance, as this is the most critical factor if you want an accurate picture of your property profitability.
Finding good tenants
Finding the right tenants can result in fewer issues along the way. This will result in a steady rental income with as few expenses as possible.
- Advertising and marketing. The first step in finding a suitable tenant starts with reaching the right target market. Therefore, advertising your property through appropriate channels online and offline is crucial for every successful marketing strategy.
- Property viewings. It’s important to have an excellent property viewing strategy. Tenants want to know a lot about the properties they are renting, therefore, preparations before viewings are a must.
- Tenant credibility checks. It’s important to check the tenants’ backgrounds to evaluate the potential risks and decide if they are the right fit for the rental property. Every property manager should be able to:
- Right to rent checks
- Obtain references from previous landlords and employer
- Request proof of income
- Perform a soft credit check
- Perform an affordability check (usually, the rent is compared to income)
- Request a rental guarantor
- Tenancy agreement and inventory. Setting up legal contracts between a landlord and a tenant is the most important agreement to issue. This binding document is vital to protect yourself as a landlord, protect your property, and outline the landlord and tenant responsibilities, avoiding any unnecessary disputes during the property’s occupancy.
- Tenancy Deposits. A property manager must be able to handle tenancy deposits. They must be able to provide safe deposit handling, lodged with government-backed tenancy deposit protection schemes while following the latest deposit handling regulations and requirements.
- Property Maintenance and repairs. All rental properties require regular repair work to keep them safe and up to standard. This involves dealing with tradespeople to undertake maintenance and liaising with them to ensure all the work is done on time and up to the required standard. Regular property inspections are necessary to ensure every possible issue is logged. Providing the tenants with appropriate notice times and updates about the repairs.
- Rent collections. This is also one of the essential duties of every property manager. Every agent must ensure that the rent is paid on time and in full. They will also chase late payments and guide tenants who fail to pay the rent on time.
- Communication with tenants. Open and transparent communication with tenants before and during the tenancy is vital to property management. Tenants should know whom to contact in case of emergency, maintenance issues or any other questions that might occur along the way. Property managers should also keep tenants updated with the progress of maintenance and repair work or any other changes regarding the tenancy.
Compliance, health, and safety.
Every property manager must ensure that this is met with the highest standard possible following the latest regulation laws. As fines for failure to comply are often crippling. The requirements include the following:
- Gas and electrical safety
- Fire safety
- Minimum energy efficiency standards
- Prescribed tenancy information
Tenancy renewals and evictions
A property manager must handle the lease renewal process if a tenant wishes to continue living in the property after the fixed term. They also must deal with eviction processes, both at the end of the tenancy or if there is a reason to evict a tenant for breaking the contract.
Outsource your property management workflow
As you can see, there are many complicated tasks a property manager must take care of. Therefore, it might be uneasy to take over the role by yourself. However, here at Regal Estates, we offer high-quality lettings agent services helping landlords to achieve their investment goals smoothly.
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