How Property Management Works

property management

Hiring a property management company may or may not be perfect for your business.

One of the most significant choices you’ll make as a landlord is if you’re going to employ a property management company. Many landlords handle properties on their own or with the help of staff, such as a resident manager. But sometimes the landlord wants more support, and that’s when the property management firm would make sense.

If you employ an individual resident manager, secure your rental property and the manager by using a Residential Rental Property Management Agreement.

There’s a good chance that property management companies could be a huge asset to your company, but they’re not cheap. There might also be other reasons why you don’t necessarily want or need one.

Carefully evaluate the factors listed below to decide whether hiring a property management company is the right step for your business.

What Does A Property Management Company Do?

Management agencies work directly with prospects and clients, saving you time and stress over selling leases, collecting rents, managing maintenance and repair problems, responding to tenant concerns, and even seeking evictions.

A top-notch management company will bring their know-how and expertise to your property portfolio, giving you the peace of mind that comes with knowing that your investment is in good hands. At the end of the day, management firms are independent contractors, so you escape the challenges of becoming an employer.

When Is The Best Time To Hire a Property Management Company?

While hiring a property management company has several advantages, having one work for you may be costly. And, apart from the expense, it’s not for everybody to depend on a property management business. Consider the following factors to decide whether hiring a property management company would be a good choice for your business.

One of the best times to consider hiring a property management company is when:

  1. You’ve got a lot of rentals or rental units – The more tenants you have and properties you own and the more units they hold, the more likely you are to benefit from the management business.
  2. You’re not staying near your rental house – If your properties are in locations all over the country or situated far from where you live, hiring a property management company could be invaluable when dealing with the many issues that you may not be able to deal with from afar.
  3. You don’t care for hands-on management – Many landlords look forward to the task of attracting good tenants and rewarding themselves for maintaining a secure and attractive house. But if you perceive rental property as an investment and want little or nothing to do with the day-to-day management of your property, consider hiring to help manage your house.
  4. You have limited time constraints – It doesn’t matter if you enjoy hands-on management, you may not have a lot of time to devote to your business, particularly if being the landlord is not your day job – If you prefer to spend your time increasing your business, like searching for new assets, organising renovation financing, or changing your business structure, then a management company could be a good way to spend your money.
  5. You can afford to pay the cost – Hiring a property management firm is an appealing choice if you can afford to pay the fees. When interviewing businesses, expect to hear quotes ranging from 5 % to 10% of your income from rent. If it’s a down market and you’re able to handle things yourself (or with the help of a resident manager or other staff), you may want to keep going until the market changes.
  6. Suddenly, you’re overwhelmed with management duties – If your company is increasing, you could realise at some stage that you need a considerable amount of support to handle everything properly. It might make sense at that point to hire a management company.
  7. You’re not going to be an employer – If you hire a resident manager or other workers to help with your properties, you become an employer. You will have to deal with payroll and a host of other legal requirements and considerations. But, since the property management business is not your employee (it is an independent contractor) and neither are the people who work for the firm, by having one you escape the difficulties of becoming an employer.
  8. Your property is part of a programme of affordable housing – If you’re part of an affordable housing initiative, things can get complicated. Typically, under such arrangements, the landlord receives financial aid, which can be in the form of a grant, a low-interest loan or a tax credit, in exchange for agreeing to rent at least part of the property to tenants receiving less than a certain amount of income. In order to continue to obtain assistance, the landlord must comply with a specific set of laws. With so much at stake, it is always worth recruiting a property management firm with knowledge and experience in the unique housing programme in question.

How To Find A Good Property Management Company?

finding a property management company

If you plan to employ a property management firm, use caution when choosing one. Here’s how:

  • Get advice from colleagues and the nearby apartment association.
  • Search for professional directories on the Internet – Visit the Membership List of the Institute of Real Estate Management to find accredited property managers. Or search the NARPM property manager site of the National Association of Residential Property Managers.
  • Interview businesses to answer all the questions before handing over the reins.

What To Look For In A Property Management Company?

Property management firms will do a lot with the rental unit(s). The management company will be the agent of your house, working on your behalf to keep your home in good shape and ensure it stays occupied.

This helps you to enjoy better quality tenants and less legal and financial concerns, as the management team would be responsible for the screening of applicants and the handling of legal and other rental-related issues. If you’re considering putting a property management firm to work on your rentals, here are some things to bear in mind.

Check The Management Companies Track Record

The first thing you want to check on when evaluating a property management service is their credibility and success rate in the industry. Do your research and find out how many properties the business runs and how well they’re doing. Property managers should be more than forward-looking about their achievements. If they are reluctant to share past details about their business, ask questions. Find out what they’re trying to cover up, or whether they’re just not worth the time.

Read The Property Management Company’s Reviews

Reviews by the customer are tricky – The Internet makes it possible for almost everyone to write a review for almost every product or service.

In certain cases, people post feedback to try to get marketing to work for them.

The reviews are sincere in some cases.

It’s up to you to find the few helpful reviews that do have valid details about the property management business.

Find out which were the main benefits and disadvantages for other landlords and property owners. Then you will be able to decide if a particular company is right for you.

Look at Management Company Vacancy Rates

Bigger property management companies can also provide details about their vacancy and fill out prices on their website. After all, they’re trying to persuade you that your money is best spent with them. If this information is open to you, use it to your advantage. After all, a business that has a lot of vacancies or fails to rent out units is not your best choice. You deserve a property management team with a track record of complete units and long-term tenants. Check out these things when you’re doing your research.

What Are Property Management Fees?

As with any consultancy or management business, there will be costs associated with the registration of a property management firm to assist with the rental property. Normal fees include set-up fees, lease fees, vacancy fees, advertisement fees and others. Some businesses can also charge a “special services” fee that might include additional monies for different services that are not included in the regular list of management services. You need to inquire for any and all fees paid to the property management firm before you consent to anything.

Management Services Offered

Perhaps the final factor of your decision is the most critical one. You need to know what kind of services are provided by a particular property management business. Generally speaking, management providers treat such topics as:

  • Evaluation of property and determination of the rental rate
  • Property marketing
  • Selection and screening of tenants
  • Move-in and move out processes.
  • Collection of rent
  • Judicial questions, evictions and inspections
  • Financial resources for owners of properties
  • Repairs and maintenance

Of course, you can pick and choose the resources you want to use when recruiting property managers. Whether you want a comprehensive management approach or only use one or two of the services they provide, it will make your life as a property owner and a landlord much easier.

Putting Property Managers to Work for You

There are a lot of things to think about when you employ a property management firm to handle your unit(s). If you have a single home or five houses, you need to make sure they are in safe hands. Through using the tips here, it will be easier to find the right property managers to step in the right direction.

Do You Need A Property Manager?

A lot of landlords and property owners are asking this question. However, the answer is very straightforward. If you have lots of experience managing assets and a lot of spare time running stuff, it might be better to leave it to the pros. Now that you know a bit more, you will find the right management methods to suit your needs.

Are Property Management Fees Tax Deductible?

Yes, some are – No matter how you became a landlord, whether you created a portfolio or mistakenly fell into it, keeping your books in order and knowing what to report would make all the difference, to the dreaded tax return.

Nobody wants to worry about tax, but as a landlord (even if you’re just renting out a room) it’s something you’re going to have to keep on top of. Fortunately, the tax treatment of landlords is reasonably generous, even after the wide-ranging reforms implemented in the last two years. Through making sure you know what the tax-deductible is, you will help make sure you’re not hit by an unfairly big bill.

As a rule of thumb, any cost you deduct from income must be “totally and exclusively for the purpose of renting your house.” But if it would cover anything from decoration and maintenance to utility bills and management fees, how exactly should you define what is and is not tax-deductible as a landlord?

Landlord Expenses That Are NOT Tax-Deductible

First, it is important to understand the recent changes to the landlord tax. In the past, landlords have been able to make up for their mortgage interest payments. This was seen as a crucial favourable treatment for the private rental market.

However, as of 6 April 2017, basic rate taxpayers started to lose their relief on mortgage interest payments, along with interest on all other financings of properties. The relief is steadily being phased out.

For the 2018-19 tax year, the portion of mortgage interest payments that are tax-deductible amounts to 50 per cent; for 2019-20, it will be reduced to 25 per cent; and for 2020-21, the relief will be eliminated entirely.

This was a somewhat contentious move, and it prompted some landlords to speak about selling. If you have a loan on your home, you can read the government tax relief guidelines for residential landlords, which includes some valuable case studies.

There are other expenses that are not deductible or are offset in various ways. The general rule is that ‘revenue expenditures’ are permissible deductions (provided they are completely and solely for the purpose of renting the property) while the capital expenditure is not. Revenue costs apply to the day-to-day operation of the house, while capital expenditure is used over a longer period of time – such as improvements or additions to the house or its contents. However, you should keep track of these costs, as you will be able to cover them against the Capital Gains Tax bill if you sell your property in the future.

Tax-Deductible Expenses For Landlords

tax deductible expenses for landlords 2020

And breathe. Have you got all that? Okay, now you can subtract expenses from rental income.

Cleaning, maintenance and repair

General maintenance and repair costs are tax-deductible. That being said, you can’t claim for improvement – just work to get the property back to the level it used to be.


The entire cost of bills – such as water, electricity, gas and council taxes – is deductible, but only if they are charged by the homeowner.


Yes – the cost of your landlord insurance policy is also tax-deductible. Learn all about policies for landlords.


Some properties need more attention than others. Fortunately, the services of a gardener, a cleaner, an exterminator or a handyman can be deducted against wages – as long as the owner pays them directly and the job they do is for the good of the tenants.

Letting Agent And Management Fees

Finding a tenant is not always easy, and finding the right one can be even harder – so many landlords prefer to let their property through an agent. These costs are tax-deductible, as they are the expenses paid when you want to have your property completely handled by an agent.

Accountants’ Fees

And ultimately, one of the toughest decisions about your self-assessment is whether to hire an accountant or do it yourself. Although good accountants are not cheap, their fees are at least tax-deductible. The same applies to legal fees, given that they apply either to lets of one year or less or to the extension of a property lease for less than 50 years.

What Are ‘Part Expenses’?

It is likely that you will incur an expense that is only partially related to the renting of properties, and which also benefits you directly. This is especially popular with properties in which only one room is leased or in which the landlord has been living for most of the year. In these situations, you need to find out what portion of the expense is attributable to rental income – so, for example, if you live on a property six months a year, you might say 50 percent of the otherwise permissible expense.

As with all tax and legal matters, it is vital that you seek professional advice if you are in any doubt. A competent accountant will help you make sense of the landlord fee, and a successful accountant can pay for himself very easily.

What Questions Should You Ask A Property Management Company Before Hiring Them?

  1. What Experience Do You Have?
  2. What Services Do You Offer?
  3. How Much Do You Charge?
  4. What Insurances Are You Covered By?
  5. How Will You Market My Property?
  6. How Will You Ensure My Property Is Not Vacant For A Long Period Of Time?
  7. How Will You Screen Tenants?
  8. How Do You Calculate Rent?
  9. How Do You Collect Rent?
  10. Will I Have Any Control Over Tenancy Contracts?
  11. How Does Your Legal Cover Work?
  12. Can You Deal With Maintenance And Repairs?
  13. How Often Will I Receive Updates On My Property?
  14. Can I Cancel My Management Contract At Any Point?
  15. What Are The Terms & Conditions of My Property Management Contract With You?
  16. If I Decide To Sell My Property, Will I Need To List With You?

This is a great list of questions to start with. It’s also useful to write down your expected answers and expectations under each question so you can see if the management companies you’re questioning live up to your wants, needs and expectations before going ahead and hiring them to manage your property portfolio.

We hope you enjoyed this post if you think we missed anything or have any related questions, then please leave us a post in the comment section below, alternatively, contact us with an article idea you have, and we’ll do our best to get it up for you.