An All-In-One Guide to Learning Property Management Basics
- The Importance of Strong Property Management
- Ensuring Compliance
- Learn The Top Property Management Basics
- Understand How To Measure Success
- Importance Of Board Member Education
- Connect With Us
What should a partnership between a board of directors and a management company look like? Watch this quick video to find out!
The Importance of Strong Property Management
It’s important to understand the property management basics, because the real estate industry can be full of risks, if you are not careful. Be it some mismanagement in data or ineffective workflow management, there is always a chance of something, or the other can go wrong.
This is why effective property management companies play a critical role in the field of HOA management. They’re experts in risk management and know-how to strategize accordingly. However, they need to stay connected with the latest developments in the industry. This involves technology developments, staffing, capital improvements, ensuring board alignment, preventive maintenance, and much more.
Effective property management can only be done when the managers are in touch with the latest trends in the industry. It is the best way to lower the risks and get ahead. Let us try to understand this with some statistics, the latest market trends, and the current scenario of the real estate industry.
To help spare board members from having to deal with these problems, here is a simplified guide to the foundations of property management.
Know Your Role When It Comes to Compliance
HOA boards typically hire a property management company to ensure the daily responsibilities related to a community property are taken care of. This may include anything from creating work orders, scheduling preventive maintenance, communicating with residents, collecting fees – and enforcing the direction of the board overall. But another major responsibility of a property management company is to ensure the company is following all the rules, local laws, and guidelines associated with the community and area. Their job is to make sure a property is up to code and follows the basic rules of compliance as defined by their local municipality.
In order for a property to be considered compliant, it must meet these various requirements, including:
An accessible building entrance on an accessible route. Covered multifamily dwellings must have at least one building entrance on an accessible route unless it is impractical to do so because of terrain or unusual characteristics of the site.
Accessible to common and public use areas. Such areas could include but are not limited to clubhouses, front offices, playgrounds and other recreational areas, laundry rooms, postal drop areas, and other recreational areas.
Usable doors (usable by a person in a wheelchair). All doors designed to allow passage into and within all premises must be sufficiently wide to allow passage by persons in wheelchairs.
Accessible route into and through the dwelling unit. There must be an accessible route into and through the dwelling units, providing access for people with disabilities throughout the unit.
Light switches, electrical outlets, thermostats and other environmental controls in accessible locations.
Reinforced walls in bathrooms for later installation of grab bars. All premises within dwelling units must contain reinforcements in bathroom walls to allow later installation of grab bars around toilet, tub, shower stall, and shower seat, where such facilities are provided. Showers and tubs should also have a seat.
Usable kitchens and bathrooms. Dwelling units must contain usable kitchens and bathrooms such that an individual who uses a wheelchair can maneuver about the space.
HOA Governing Documents
A community’s governing documents and other policies are the bonding document that tie the property management partner, residents, and board together. The governing documents outline the responsibilities and expectations of all stakeholders and should include detailed information regarding:
Names of all residents
Property Access Details
A property manager is responsible for preparing and enforcing these policies and making sure everyone involved stays in compliance.
Fair Housing Laws
Property managers are also required to stay on top of fair housing laws and avoid any practices that could be confused as discrimination. From the way the home is advertised to the questions asked during a community walk-through, property managers must be very intentional not to break any fair housing laws when managing residents. If there is a violation, it could mean an expensive lawsuit for the board. A professional property management company will be current on these laws and intentional about following them carefully.
Most board members do not have a background in real estate law and, find themselves drowning in paperwork and checklists and regulations regarding the HOA they’re managing. A property manager can take the stress out of this. This is why so many hire professional management companies who have extensive experience working on these issues and can be proactive to ensure the property is always up to standard; leaning on 3rd party legal counsel when necessary. A property management team can even help improve your bottom line by avoiding legal fees.
There are a lot of rules to follow and laws to adhere to when dealing with HOAs, and hiring a property management company can help you keep it all current, organized, and legal and gain a firm understanding of the most important property management basics.
Learn The Top Property Management Basics
Property management is the overseeing and maintenance of properties. It involves overseeing the daily operations, fielding resident issues, and ensuring the property is well-maintained and profitable.
Here are some key components of property management:
Marketing: Finding residents, setting HOA prices, and creating community agreements.
Maintenance and repair: Handling repairs and maintenance, as well as coordinating with contractors and vendors.
HOA fee collection: Processing payments, tracking expenses, and preparing financial statements.
Legal compliance: Ensuring compliance with state and federal laws and regulations.
Communication: Communicating with residents, property managers, and other stakeholders, such as board members or treasurers.
To be a successful property manager, you will need to have strong communication and organizational skills, as well as knowledge of local laws and regulations. Additionally, it is important to have a deep understanding of the property market and the needs of residents.
Overall, property management is a complex and challenging field, but with the right skills and knowledge, it can also be very rewarding. It is a great opportunity for anyone looking to make a career out of real estate.
Know When to Hire a Property Management Company
With a clearer idea of what a property manager does, the next step is to determine if one needs to be hired for your project. Many boards choose self-management, especially if they are personally located close-by to their property. Without a professional property manager involved, the board will need to cover bases such as readying the property, running inspections, handling finances, accepted payment methods, doing routine maintenance, and more.
This may seem overwhelming, but there are plenty of online resources available to teach boards about the property management basics. By personally managing your HOA, it’s possible to save the money that would have been paid to a property manager, but the trade-off is ultimately time and convenience – if that resident phones at 3 AM due to a burst pipe or another issue, then you will be the one they awake.
Luckily, there is also a variety of property management software that can help you manage multiple properties, like FirstService Residential Connect™. Modern property managers are increasingly utilizing new technological tools to change the way they work with real estate, and these tools are.
How to Select an HOA Management Company
Not all property managers are top quality, and selecting the right one is a key for success. The first step is to determine what type of property manager is available in the area, and which properties they actively specialize in. This is where research and due diligence comes in – determining if licenses are needed, whether they have insurance, their track record and other factors need to be ascertained before any contracts are signed.
Then there is the cost involved with hiring one. Property managers can ask for up to 10% of the property’s monthly income as their fee, but the average cost is highly dependent on the location and type of property. Finally, a legal agreement or contract will need to be signed by both the investor and property manager, covering all the details of the services which will be performed, the payments and other essentials.
A good property manager is well-organized. Organization is one of the most important property management basics. Property managers must maintain track of each property they manage, as well as each resident, property showing, security deposit, and maintenance issue. Because property managers must remain on top of so many shifting details, organizational skills are an undeniable value.
Finances play a significant role in property management. Negotiating lease agreements, collecting rent and utility payments, and keeping track of daily spending are all responsibilities of a property manager. Finally, a property manager must ensure that the property they are responsible for remains profitable.
Every property manager’s job requires effective communication. It’s one of the fundamental property management skills. It will be easier for a property manager to react to resident emails and inform suppliers exactly what needs to be done in a property if they have strong written and vocal communication skills. A property manager must also be able to explain the leasing procedure to residents and keep the property owner informed of any concerns that emerge.
HOA Marketing Knowledge
Filling your community is an important part of property management. Every property manager’s toolset should include basic marketing methods such as creating a mind-blowing property description and producing a standout video tour. To engage with new and existing residents, it also helps to have some knowledge of email marketing and social media platforms.
A property manager oversees vendor relations, which includes everything from setting clear expectations to ensuring that all work is performed. They are also in charge of vendor payment coordination.
While most boards don’t associate homeowners insurance with property management, a few now do. The premiums are competitive with other management plans, and because the policy is owned by the property management firm, any claims against it do not affect the board or residents personally (i.e higher rates on personal insurance because of claim history).
Understand How To Measure Success
One of the most important property management basics is knowing what good looks like.
Below is a list of items that the HOA board should check annually to measure its performance. Some of these are a quick check based on your experience, so go with your first reaction. You may need to review some documents or your minutes for other items. Ask each board member to rate these items on a scale of 1 to 5 (with 5 being the best), so you can easily identify gaps and opportunities for improvement.
Reserves – HOA has adequate reserves demonstrated by a reserve study and avoids special assessments.
Insurance – HOA maintains all necessary insurance coverage.
Leadership – HOA has adequate and effective Board participation and committee volunteers.
Meetings – Board conducts effective and productive meetings (timely, agenda, results-oriented).
Governance – Association is managed according to governing documents and applicable laws.
Delinquencies – Assessment delinquencies are less than 5%.
Financial – HOA has a formal budget, financial report and follows fraud protection measures.
Covenants – HOA fairly enforces covenants and conducts inspections to ensure compliance.
Maintenance – Program is in place for routine upkeep and replacements.
Vendors – Contracts are awarded based on project specifications and vendor qualifications.
Communications – Effectively reach residents via multiple communication channels.
Forums – Owners and residents have an opportunity to address the board in a forum.
Importance Of Board Member Education
1. Understand your HOA’s basic financial status. As an HOA board member, you are partly responsible for the proper administration of HOA funds. Heard of “fiduciary duty?” Yep, as an HOA Board member you are a fiduciary. As a fiduciary your obligation to the association is to act in the best interest of the association, show good faith and act diligently – most importantly in regards to the HOA’s general financial well-being. Make sure you spend some time reviewing the current budget, past budgets, and the most recent reserve study.
2. Get familiar with state laws impacting HOA’s. What are the legal allowances and restrictions that your community association faces in your state? No state laws are the same for HOA’s, so learning the state laws is crucial.
3. Know your community’s guidelines – CC&R’s – front and back! The HOA is also governed by its own unique governing documents, after the applicable HOA state specific laws. Board members should have copies of these, and spend some time studying and understanding them.
4. HOA Insurance and Directors Liability Insurance – one does not equal the other. Quickly brief yourself on the types of lawsuits facing HOA’s, and how to discern if your HOA & HOA Board Directors have proper coverage. These are not all inclusive policies! We’ve covered this here in a recent blog about HOA Directors Insurance.
5. Develop best practices for ensuring that HOA meetings are effective and not too time-consuming. This will involve some strategic development on meeting procedure and possibly integrating some templates. We have a complete archive of articles and tips on how to have a successful HOA Board Meeting.
6. Know your management team. Who is your property manager or HOA Management company? What services does your association management team offer? Spending some time with your manager, simply getting to know one another, can be most helpful so that you are using your resources wisely.
7. Know your role (And everyone else’s too!). A clear understanding of expectations for each board member also helps define everyone’s role. Start by outlining the board’s powers & duties and the roles of the board officers. Try this exercise with the entire HOA Board present, if possible. Your board is most likely comprised of individuals who come from diverse backgrounds, each with different perspectives and problem-solving methods. This exercise will create stronger and more effective working relationships amongst the HOA Board – guaranteed!
For more information on board member education, check out this article here!
Connect With Us
While each market will have distinct intricacies when it comes to property management basics, knowing the essentials (above) is crucial when choosing a property management company and running your community.
Whether you hire a manager in charge of 30 properties or a large firm with over 1,000, you must feel comfortable with whom you hire and believe that they will do the right thing. The beautiful thing about a free market and competition in this field is that you can always change companies if the first one you choose doesn’t turn out as well as you had hoped.
Whether it is a question, a problem, or a new business opportunity, you will want to partner with a company like FirstService Residential that has a proven history of support and knows best practices for your industry.
As the property management leader, our team has been managing HOAs, condominiums, high-rise buildings and more for decades! Our experienced team can help you establish a plan of action when it comes to staying ahead of important property management trends.