Resident managers wear many hats in the management rights industry – here we focus on four of those: marketing and financial; occupancy – tenants/guests; facility management and day-to-day operations; and administration and risk management.
The resident manager is the unit owner’s partner in maximising the return on investment of the property through efficient performance of these four functional areas of responsibility. The resident manager acts in the best interests of unit owners to maintain the property, keep it occupied with tenants/guests, collect rents/tariffs, undertake improvements and maintain records.
Many real estate agents attempt to master property management and frequently move around within the industry or, at the very least, under-deliver when the scope of the management tasks and record-keeping are fully understood. It’s definitely a niche for professional resident managers.
Marketing and financial – Resident management requires an understanding of operating expenses and budgeting. From this information, appropriate rental rates/tariffs are set, balanced by the current market and what the market will support in the way of rents/tariffs.
A sound knowledge of the local area and competitive rental properties/holiday accommodation is required. The resident manager may recommend marketing programs, special promotions and other advertising strategies to unit owners in order to maximise occupancy and rental rates/tariffs. Regular financial reporting to unit owners is required. Understanding financial reports, profit & loss statements, taxes and budgeting are all very important for the resident manager.
Property management operations budgeting – The resident manager, in consultation with unit owners, will prepare detailed budgets for the day-to-day operations of the property. Not only will the income from rents/tariffs need to be estimated, a reasonable estimate of expenses for the other three functional areas will need to be made. Costs for tenant/guest services, repairs and maintenance, and administration will need to be closely monitored.
Capital expenditures budgeting – Properties that fall into obsolescence will experience lower rents/tariffs and a less attractive return on investment as the property ages. A long-term budget for capital improvements should be developed. Renovation, remodeling, and more modern appliances will help to maintain and increase rental/tariff income in competition with newer properties. Capital improvements are normally not expensed in the years they are undertaken. A specialist accountant can help to set up costing over their useful life. Certain tax advantages could result from financing such improvements.
Marketing and advertising budgeting – Though word of mouth can bring new tenants/guests, effective competition in the marketplace will require a marketing plan and advertising budget. It is wise to develop a budget to fund regular marketing initiatives that have a proven track record in generating tenants/guests. Likewise, budgeting for increased marketing activities when vacancy rates increase is a sound strategy.
Bringing it all together – The resident manager is the agent for unit owners and should work closely with unit owners to maximise rental/tariff income and return on investment for the property. The first step in that process, and quite important, is comprehensive budgeting.
A thorough knowledge of competitive properties, their comparative features and rental rates/tariffs, is imperative. Be as accurate as possible in estimating ongoing management expenses for repairs, maintenance and administration. Maximise rental/tariff prices in relation to competition and current market conditions. Hopefully, when all this is done, income will exceed expenses, and you’ll be managing a profitable property not only for your unit owners, but also for yourself.
Occupancy – tenants/guests – Understanding the needs of tenants/guests is important. Getting them to move in/holiday is only the beginning. The resident manager must then respond to their requests, monitor their activities, collect rent/tariffs in a timely manner and continually assess the tenants’/guests’ satisfaction as regards the property’s amenities versus those of competing properties in the area. The unwelcome task of eviction for violations or non-payment forms part of this function.
A property can be nicely designed and in a desired area but it will not be a profitable business if tenants/guests are not managed properly and satisfactory occupancy levels are not maintained.
When permanent tenants are not happy, they vacate at the end of their leases or even sometimes before. Not only does this reduce income due to unpaid rents, it also increases costs for marketing to replace the lost tenants. Effective tenant management involves:
- good rent collection practices;
- responsive handling of repairs and maintenance;
- consistent and fair enforcement of regulations; and
- regular and informative communication with tenants/guests.
Failure in any of these areas will result in dissatisfied tenants, lower occupancy rates, increased marketing costs and lower return on investment. A resident manager that does not consistently perform well at these duties will inevitably put unit owners offside.
Facility management and day-to-day operations – Another responsibility for the resident manager is physical management of the infrastructure and common areas. The resident manager must maintain relationships with contractors and repair companies, budget capital expenditures and monitor the quality of all repairs and maintenance. This function ties in with the financial piece, as some improvements will require significant capital expenditure and budgeting.
A permanent property will not enjoy long term tenant retention and acceptable return on investment unless it is maintained properly. This involves:
- preventative and ongoing maintenance;
- repairs to correct problems or malfunctions; and
- construction and renovation.
Preventative and ongoing maintenance to rental properties requires a thorough knowledge of the property, its needs for upkeep, staffing required to accomplish the tasks and funding. The resident manager must balance the costs of routine and preventative maintenance with the benefits and desired results.
Repairs and corrective actions are required when things break or cease to function as intended. Sometimes the repair is of an emergency nature, such as an air-conditioning malfunction in summer, while at other times these repairs can be scheduled and done efficiently in groups. It is the responsibility of the resident manager to know the difference and to serve the needs of the tenants while balancing costs. It’s also important to take care of small problems before they become large ones.
A resident manager can be very skilled at all the other functions of management, but if they drop the ball when it comes to facility maintenance, the property will experience a degradation of condition, loss of tenants, and declining profits.
Administration and risk management – Federal, state and local governments all have some jurisdiction over real estate property management activities. Certain reporting requirements must be met for all of them. Meticulous records for accounting and taxation purposes are a must. For reasons of liability, all activities and tenant/guest interaction must be recorded and maintained for specified periods. There are very rigid requirements for the handling of trust funds paid by tenants/guests for disbursement to unit owners.
Administration and risk management is a critical component for the resident manager. The record-keeping function must be carefully managed and, the greater the level of detail, the better the likely results. It is important to keep:
- accurate financial records of expenditures and income, taxation records and trust account audits;
- comprehensive logs of tenant/guest services, rental payment history and rules violations; and
- maintenance schedules for facility maintenance, repair records for warranty, and employee and subcontractor personnel records.
The risk management component is of course very important. A large disaster can threaten the survival of the property economically. The records kept are a part of this, as any legal action taken by others can be thwarted if there are detailed records that refute their claims.
The successful resident manager will plan for problems, keep excellent files and records of all activities, and continually assess these functions to determine if change is necessary.