Is Property Management for You?
Sales associates and brokers looking for alternate income streams should consider property management. Find out if it’s for you.
Joseph Cappella has been managing Florida properties for nearly 50 years. “It’s kept my doors open through three major downturns in the residential market,” says the owner of Joseph A. Cappella Inc., a realty firm in Lantana near West Palm Beach.
On the other hand, Larry Chatt is a relative newcomer with just two years in the field. But by applying the lessons he learned as a corporate executive, Chatt is successfully managing seasonal and annual properties on Anna Maria Island, near Sarasota.
“Vacation rentals go hand in hand with relationships for property sales,” says Chatt, general manager of Island Real Estate in Holmes Beach. “A high percentage of buyers want rental income, and having property management capabilities helps to grow and strengthen that relationship. Before you know it, the owner is buying another unit and you have an opportunity for more management income as well.” Supplemental Income
Throughout the state, real estate sales professionals are turning to rental property management as a source of supplemental or full-time income. Owners of single-family homes, apartment buildings and commercial properties are looking for pros who can handle the day-to-day tasks of finding tenants, leasing space, collecting rents and managing the upkeep on their properties.
In recent years, the state’s rental market has been driven by three main trends: growth in investor-owned foreclosures, high inventories of unsold residential units and reluctance by some potential buyers to make a commitment to ownership in an uncertain economic climate.
“I’ve seen a big increase in the property management market here in Southwest Florida in the past year,” says John Giddens, broker-associate and property manager, with Century 21 Birchwood International Inc. in North Fort Myers. “With all the foreclosure activity, there has been an increase in the rental market. Some owners have hired me to manage their home and then turned around and become a tenant at another property I manage.” Sales vs. Management
If you’re contemplating a career move from sales into property management, it’s important to understand the similarities and differences between the two fields.
First, there are fewer peaks and valleys in property management—in terms of both income and emotions—than there are in residential sales. Fees for managing an owner’s property, which typically range from 10 to 25 percent of annual rental income, are likely to be more stable than sales commissions.
Managers’ relationships with owners tend to focus on business and financial issues. After all, these are investors seeking a return from their property, and it’s the numbers that count.
But many sales skills are highly transferable to property management. For example, it takes networking and prospecting to find owners who want assistance in managing a residential or commercial property. Once engaged by an owner, a manager needs to market the rentals, find suitable tenants and close those lease transactions.
It’s also important to have a handyman or a professional firm available to handle landscaping maintenance and janitorial duties as well as tenants’ electrical, air-conditioning and plumbing problems. And it never hurts to have an experienced real estate lawyer on call if needed.
Finally, a good property manager needs to be able to collect the rent, prepare financial spreadsheets and provide regular reports to owners. “It takes hard work to maintain a property and qualify prospective tenants,” says Giddens, “but if you do it right, you can grow your business in the future.”
While a real estate sales associate might be able to manage a handful of properties as a sideline, most successful managers focus exclusively on their chosen discipline. “To do it right, you have to specialize,” says Chatt. “There are just too many things to know and only so many hours in the day.” Choose a Niche
Just as there are niche markets in residential sales, rental properties fall into several distinct categories:
• Short-term seasonal rentals—homes, apartments and condominiums aimed at the snowbird or summer vacation markets
• Single-family homes and duplexes—a growing niche for families seeking year-round primary homes
• Apartments—from affordable to luxury rental communities
• Commercial properties—shopping centers, office buildings, warehouses and industrial properties
Sales associates new to the field should probably focus on residential rentals, say experienced managers. That’s because both buyers and tenants are looking for a place to live. Getting into commercial property management usually requires more education and training. A typical career step in commercial work would be to take a junior position in a growing company and learn about office, retail or industrial property management from the ground up.
Nancy B. Marshall, a sales associate with Thomas Kay Realty Inc. in Melbourne, says it’s important for property managers to find the right niche and become specialists. “I’ve done almost every type of rental, except for timeshares, and I’ve chosen single-family homes,” she says. “Being very specific about the geographic area and the kind of property I will manage is important to the success of my business.”
Why specialize? Marshall says it allows you to focus your marketing efforts in attracting both property owners and potential tenants. “Retail, residential and industrial properties require different skill sets, software tools and documentation,” she adds. “Even within the residential field, marketing a short-term furnished property is very different than a long-term rental for a working family.” Working with Owners
Just as sales associates seek motivated sellers, successful property managers build their business by cultivating relationships with owners. “They have to trust you with their investment property,” says Giddens.
Marshall says another source of business comes from real estate sales professionals who aren’t interested in managing properties themselves. After selling an income-producing building, they refer the investor to a management firm.
After 10 years in the field, Patrick Darden, a broker with Darden Property Management in Tallahassee, says the residential rental market is wide open for smaller firms and individual associates. “I like to call myself the small guy,” he says. “We manage one- to 20-unit properties for small investors who don’t have time to do it themselves. These buildings aren’t big enough to have someone full time on the property, so the owners hire us and we get it done.”
To attract owners, as well as market to tenants, Darden puts signs on every property he has under management and encourages prospects to visit his Web site. He also assists investors seeking to buy foreclosed properties at bargain prices and rent them out.
In Florida’s seasonal market, owners look for firms that can attract vacationers from around the world, according to Chatt, whose firm manages about 165 units. He says it takes an extensive year-round marketing program and a robust reservation system to fill seasonal units. “Unlike an annual rental with a year-long lease, you may have 40 to 50 guests [per year] renting a property for a week or two,” Chatt says. “Some may have planned their vacation months in advance, while others fly down to Florida on a whim. But they all contribute to occupancy levels and provide income for the owners.” Communicate Frequently
Property management professionals agree that being an effective communicator is essential to success. “You have to be able to understand and relate to tenants as well as owners,” says Marshall. “These are very different mind-sets, and you have to balance both points of view. In my experience, most of the problems in property management occur when the communication process breaks down.”
In addition to sending monthly or quarterly financial reports to owners, some managers are using other approaches to keep in close touch with their owners. Larry Roth, an associate with The Keyes Co./Realtors®’ Homestead office, for example, sends out a monthly newsletter on issues like property taxes and insurance premiums. When Tropical Storm Fay threatened the state in August, Chatt started a blog updating out-of-state owners on weather conditions in Sarasota.
The bottom line: property management is a service business, just like residential sales. “You’re there to help owners and their tenants,” says Chatt. “You have to be able to build relationships, provide professional skills and meet the needs of different kinds of people.” Richard Westlund is a Miami-based freelance writer.