Property Management: What It Is and How It Works

The success of a rental property business is determined by three key factors: 1) Where you invest, 2) What property you buy, and 3) How you manage it. Thus, even before you invest in a real estate property to rent out, you need to think about the best property management strategy.

In this article, we’ll cover everything you need to know about rental property management, from what it is and how it is done, to how much it costs. We’ll look at the pros and cons of self-management and third-party management to help you decide on the best approach for you. We’ll also rank the best property management companies in the US market for the needs of different investors and different property types.

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What Property Management Is

Rental property management relates to all the work you do in order to own and operate a successful rental property business. This includes a wide range of tasks and jobs whose main objective is to keep your property well priced, occupied, well maintained, and profitable.

While managing a long-term rental property requires less day-to-day work than running an Airbnb business, it still needs active involvement and ongoing dedication. Otherwise, you risk making your tenants unhappy or getting your property into a poor state.

That’s why a lot of investors choose to hire a professional property manager instead of becoming a landlord. This holds true not only for remote investors but also for those who invest close to home.

Both approaches have their advantages and disadvantages, which we’ll discuss in a bit.

How Property Management Works

There are three fundamental ways in which a real estate investor can handle the management of their rental properties. The choice of the most appropriate method for each investor depends on their personal skills and professional background and their availability and willingness to be actively involved.

Self-Service Property Management

Self-management means that you take care of everything that’s needed to own and rent out a property on a monthly or annual basis. This translates into becoming a landlord. While you have total control over the management of your business, you need to be ready to put in a few hours a week. How much work exactly you’d need to do depends on the age and condition of your property, the quality of your tenants, and the tools that you use.

If you have a new rental in top shape, place good tenants, and automate most processes, you might bring down your involvement to just a couple of hours a month. If your rental is old and needs regular upkeep, your renters are late with payments and cause troubles with neighbors, and you do everything manually, you might need to devote a few hours every day.

In case you’re considering self-managing your rental property, you should know that you’d still need to work with some professionals, such as maintenance experts, accountants, and others.

This method is suitable for landlords who live close to their investment property, who have a lot of free time, and who like being in charge of their business endeavors.

Lease Only

Some rental property management companies provide services that help landlords price their properties, market them and advertise them, screen tenants, and place renters. Once your property is occupied, their work is completed, and you take over the day-to-day management until you need new tenants.

This property management model is called lease only and is good for investors who’d like to personally oversee their business but don’t have the marketing skills and tenant screening tools. Similar to self-management, it’s important that you invest close to home and remain available to deal with urgent matters.

Full-Service Property Management

The last property management strategy entails giving up the daily tasks associated with running a rental business and handing them over to a professional property manager. This can be an individual local expert or a company that works with long-term rentals.

Many real estate investors refrain from hiring property management services because they don’t want to lose control over their property. However, in most cases, professional property managers can boost performance and bring down rental expenses, which eventually leads to more revenue, better cash flow, and higher ROI. Any money you make is passive income.

So, this model is ideal not only for remote investors and those with full-time jobs but also for those you’d like to enjoy passive real estate income.

Property Management Services

The list of services provided by the best property management companies is wide and long. This doesn’t mean that all managers cover all services. Thus, before deciding which company to opt for, you need to review what exactly they provide to rental property owners.

The property management services provided by most companies include:

Setting Up Rental Rates

One thing that property managers can do much better than individual landlords is to price rental properties. They have expert knowledge of the local market besides access to extensive rental data and analytics tools. This allows them to set rental rates that are just right for the local rental market.

If the rent is too high, a property will suffer from unnecessary vacancy, which means not generating any income while still having to cover expenses. If, alternatively, the rental rate is too low, you are not maximizing the revenue potential.

Property management companies are also responsible for periodically adjusting rental rates to stay in line with market trends. Of course, this is done according to local rent control policies.

Rental Listing and Marketing

All property management companies create optimized listings that are published on their own website and on several rental websites. This includes taking professional photos that highlight the best aspects of the property and writing enticing descriptions. Listings have to be SEO-friendly to facilitate online searches.

The best property managers use social media, email marketing, and paid ads besides content marketing.

Getting Rental Property Insurance

Many but not all property managers offer to take care of the required landlord insurance to protect properties from damage and property owners and themselves from liability. This differs from the homeowner’s insurance and the renter’s insurance.

In most cases, this service is paid for separately and is not included in the monthly fee. If you already have rental insurance, you just need to add the name of the property manager on it.

Showings

Whether lease-only or full-service, property management companies show your rental to interested tenants. That’s part of getting properties occupied. Showings can be done in person or virtually, depending on the company’s practices.

Tenant Applications and Screening

Property managers have to collect, evaluate, and respond to applications from potential renters. They create and disburse the tenant application form together with the rental listing. All this has to be done in a manner which guarantees to find the best tenants for your rental property while avoiding any form of discrimination which is strictly illegal.

As part of the process, property management companies have to apply tenant screening. This includes background check, credit report, criminal records, eviction report, and employment summary. All this information is needed to ensure that the renter is responsible and trustworthy, will take good care of your property, and will pay rent on time each time. Some companies have their own proprietary technology for screening tenants, while others employ third-party online tools.

The best property management companies guarantee quality tenants with additional benefits like guaranteed income, free replacement, and covering eviction costs if a renter placed by them does not live up to the expectations.

Preparing and Signing Rental Agreements

Another property management service is writing a lease agreement which is in line with local legislation. Each state and each city has different laws that pertain to rental properties, with some states being more landlord-friendly and others being more tenant-friendly. No matter whom your market favors, the rental agreement has to meet all regulations and ensure that your rights are protected.

It is the responsibility of the property manager to provide the best copy and to make sure it’s signed and renewed as needed.

Managing Move-Ins and Move-Outs

For passive income, you need to hire a company that will take care of onboarding and offboarding tenants. This includes move-in and move-out property inspections, providing any necessary instructions and guides, and handing over keys.

Collecting Rent and Transferring Owner Payouts

One more responsibility handled by property managers is collecting rent from tenants. They usually automate and do this online, so it doesn’t require a lot of effort unless payment is late. Then a property manager needs to take the steps to ensure that the rent gets paid in full as soon as possible, and this needs to be done legally. In case renters continue not paying, an eviction might be filed.

Meanwhile, the best property management companies guarantee rental income within a certain limit, usually around $5,000. This means that even if payments from tenants are late, landlords will still receive their payout.

In terms of owner payouts, they are done monthly, through bank transfers or another agreed upon method.

Handling Tenant Communication and Support

Property managers have to be available to respond to questions from potential and existing renters. This has to be done in a timely manner to keep tenants happy and avoid preventable move-outs.

Addressing Maintenance Requests

Maintenance requests submitted by both tenants and property owners go directly to the property management company. It is their responsibility to review the request and check out the situation within a couple of days, at most. They need to evaluate the amount of work that’s required and who needs to do it - whether it’s something that can be handled in-house or needs to be outsourced to their network of professionals.

This service is a must in order to ensure tenant satisfaction and the property’s best condition. If maintenance is not taken care of one time, this can lead to major problems with renters and the property itself.

Communicating with the HOA

For long-term rentals within a homeowner’s association (HOA), it is the responsibility of the property manager to manage this. They have to be in touch with the HOA and handle all necessary communication.

Conducting Property Inspections and Maintenance Works

Property inspections are a crucial part of the property management process for optimal results. Some companies include regular rental inspections within their core services, while others have them as an add-on service and charge for them separately. Some property managers inspect properties annually, and others do it biannually. You need to make sure that they include this service in the package that you get.

In addition, property managers have to conduct or coordinate property maintenance work. Most companies perform minor tasks in-house, and they have a network of local experts to handle larger projects. In most cases, maintenance work up to $500 is done right away, while more expensive jobs are discussed and reviewed with the owner.

Renewing and Terminating Leases

Property management services include making sure that lease agreements get renewed on time. Occasionally, property managers need to end leases early in case a tenant is in breach of the agreement. This might entail different legal steps and requirements.

The best companies will find the next renter for free in case a tenant placed by them needs to be ended early or evicted.

Financial Reporting

A property manager needs to provide comprehensive monthly statements that include all revenue and expenses, such as the rental rate, occupancy, rental income, maintenance work, and property management fee. In addition, all this information and all tenant and activities details should be always available through an online owner portal. Investors need to have access to review the performance of their rental property at any point.

Property managers should also submit annual statements and 1099s in order to make the life of a landlord easier around tax season.

Renovating Properties

This is a service that’s not offered by many property managers. However, some provide help with getting properties ready for renting out in case they are not already. This can include a wide range of things like fixes and repairs, renovation projects, and even furnishing if you’d like to focus on furnished rentals.

Some property managers might also offer more extensive home renovation work. This can help make your property more attractive to tenants in the area and push up the rental rate.

If they don’t have this service, the company that manages your property should be able to recommend a local professional with an established reputation in the field.

Taking Care of Evictions

Property management companies handle the legal aspects of the eviction process should a need arise. This means that they can complete the process in a much faster and more efficient way than if handled by a property owner with no experience in legal matters.

The best property managers cover the legal fees for tenants placed by them.

How Much Property Management Costs

There are two main rental property management fee structures in the US market: flat fees and percentage of rental income.

Flat Property Management Fees

This is the less popular pricing model. The size of the monthly fee depends on the company, the market, the services included, the property type and size, and the size of the rental portfolio. Most companies provide major discounts to owners for whom they manage multiple properties.

The usual range is between $70 and $200 per property per month.

Property Management Fees as a Percentage of Rental Income

The more widely spread model is for property managers to charge a share of the monthly revenue. This makes sense for investors as it ensures that their manager puts the effort to maximize performance and rental income in order to bring up their own income.

Most companies charge between 7% and 12% of monthly revenue. Again, the exact percentage depends on the company, the services, the location, the property, and the portfolio.

Most property managers who deploy this pricing structure ask for a fee during vacancy. Only a few charge nothing when there are no tenants on the property.

Additional Property Management Fees

Besides the monthly property management fee, companies charge a few other standard costs too. These include:

• Leasing fees: Usually a fixed rate between $100 and $500, but sometimes between 25% and 100% of one month’s rent.
• Lease renewal fees: Usually between 50% and 100% of one month’s rent.
• Landlord insurance: Depends on the underwriter, the market, the property type and size, the property age and condition, the coverage, and the rental activities.
• Home inspections: Sometimes covered by the monthly fees, sometimes paid separately.
• Property maintenance: Usually coordination is included in the monthly fee, and actual fixes and repairs are paid at cost. Property managers can get discounted rates because of their relationships with local vendors and contractors.
• Tax preparation: Most companies provided this for free, but some charge for it.
• Eviction guarantee program: This is offered by some property managers and charged differently.
• Maintenance reserve fund: Usually $500.

Pros and Cons of Property Management

Hiring a full-service property management company comes with some major advantages and disadvantages that investors need to consider before deciding.

Property Management Pros

The major benefits of working with a professional property manager include:

• Property performance optimization: Property managers can set the right rental rate and to manage your property that boosts occupancy. All this leads to more revenue.
• Passive income: All money you make from your investment property is passive as it doesn’t require any active involvement on your behalf.
• Remote investing: With a property manager, you can invest in any location, no matter how close or far from you it is. This is beneficial for investors who live in unaffordable markets or away from the best cities to buy a rental property.
• Professional services: Listing, marketing, tenant relations, inspections, and maintenance are all handled with professional quality.
• Cheaper maintenance: Property management companies get discounted rates from local vendors, which leads to more cash flow and ROI for you.

Property Management Cons

Some drawbacks to consider include:

• Loss of control: When you hire a manager, you no longer have full control over your business. After all, as the owner, you’ll always be the most invested in the success of your property. However, on the flip side, dedication is not always enough in the rental property investing business. You also need the skills and the experience which property managers have. To minimize this risk, we recommend you hire a company that charges a percentage of rental income in order to have the incentive to boost performance.
• Revenue sharing: You don’t pocket all rental income but get to share it with the property manager. If they can increase rent and decrease rental expenses, their fee will be more than covered for.
• Less personal management: Property managers are not as devoted as you are. But if you hire a company with a strong local team, your tenants and your property might still get this personal approach.
• Contracts: You need to sign a property management agreement which might require annual commitment and impose an early termination fee. Make sure that you review the contract carefully before signing it.

Top Property Management Companies

There are thousands of property management companies in the US long-term rental market. Some of them are large corporations with nationwide coverage, working with various property types. Others are small, local teams that handle a few dozen rentals.

Here we will review the 7 top property management companies that work in multiple states and cities so that many landlords can benefit from their services:

HomeRiver Group

HomeRiver Group (HRG) is the largest third-party long-term rental property management company in the US market. It was founded in 2016, with headquarters in New York, NY, and currently manages 40,000+ rentals plus 32,000+ homes within HOA communities. The company operates in numerous cities in 32 US states and DC.

Our HomeRiver Group review shows that the company provides comprehensive property management services. These include everything from pricing and marketing, through leasing and tenant management, all the way to property maintenance and renovations. The company works with single-family homes and small multifamily properties and HOA communities.

HomeRiver Group operates through a network of local offices, each of which deploys a different pricing model. Some local managers charge a flat fee, while others ask for around 8%-9% of rental income. The exact rates depend on the market and the property. Additional fees include leasing, lease renewal, property inspections, eviction protection, HVAC tune-up, and gutter cleaning.

Mynd

Mynd is a major property management company working with long-term rentals. The company was established in 2016, with headquarters in Oakland, CA. At the moment, they manage 11,000+ properties in 25+ cities in 12 states. The real estate assets under their management exceed $3.5 billion.

Mynd provides full-service property management. The services include but are not limited to getting properties ready, listing, marketing, tenant screening and placement, regular property inspections and maintenance, lease renewals and terminations, revenue reports, tax reports, financial analysis, and evictions. Mynd focuses on single-family homes.

The Mynd property management fee is a fixed rate, which ranges from $75 to $199 per property per month, depending on the market and the rental. Extra costs include leasing and lease renewal.

Evernest

Evernest is another popular name among national property managers in the US. The company was created in 2008, with headquarters in Birmingham, AL. Evernest manages 15,000+ rentals for around 6,000 owners, making it a good choice for investors with a couple of properties. They operate in 30 US cities in 16 states.

As a full-service provider, Evernest takes care of initial inspections, rental listings and advertising, the leasing process, move-ins and move-outs, tenant management and communication, rent collection, inspections and maintenance, eviction protection, and financial statements. The company manages single-family homes, condos, and small multifamily homes.

Similar to HomeRiver Group, Evernest charges a mix of flat fees (between $89 and $219) and rental income percentages (7%-10%) across different markets. Leasing and lease renewal are paid for separately.

Specialized Property Management

Specialized Property Management manages long-term rentals across the US. This is the oldest property management company on our list, founded in 1984, with headquarters in Dallas, TX. They work in 11 cities in 7 states, through independent local offices.

Specialized Property Management focuses on the use of technology in the property management process. They provide comprehensive services from getting properties occupied, to managing all day-to-day tasks. The company manages single-family homes, townhouses, and apartments.

Specialized Property Management offers 3 different plans, depending on the service coverage. They are priced between $99 and $189 per month. The company charges additional fees for leasing and lease renewals.

Keyrenter Property Management

Keyrenter Property Management is another one of the best property management companies in the US market. The company was established in 2007, with headquarters in Midvale, UT. Since 2014, it has been franchising in order to reach multiple markets. At the moment, their property management services are available in several cities in 23 states plus DC.

Keyrenter Property Management takes care of all aspects of running a long-term rental property business, from listing and marketing to managing tenants and maintaining properties. The company operates single-family homes, townhouses, condos, and apartments.

Keyrenter Property Management has different service packages, and the rates are around 9%-12% of monthly income. Lease only options are also available.

Great Jones

Great Jones is a major property management company. It was created in 2017, with headquarters in New York, NY. In 2021, Roofstock acquired Great Jones, which continues to operate as a property manager. Their services are available in multiple cities in 9 states.

Great Jones offers comprehensive property management services. This includes everything needed to make a passive income as a landlord.

Great Jones charges different fees depending on the market, the property, and the rental portfolio size. There are separate fees for leasing and lease renewals.

Belong Home

Belong Home is a smaller-scale property management company available in a few markets. The company was founded in 2018, with headquarters in San Mateo, CA. At the moment, they work with about 2,000 investors in major cities in California, Florida, and Washington, with plans to expand into more markets in the near future.

Belong Home is a full-service property manager. They do everything from getting properties ready for welcoming tenants to renter support and rental maintenance. The company works with single-family homes and multifamily buildings.

Belong Home charges property management fees equivalent to a certain percentage of the monthly rental income. There are no payments when properties are vacant. Landlords pay 75% of one month’s rent for tenant placements.

Property Management Alternatives

While hiring a property management company offers many important benefits, this is not the only option available to property owners. Those who’d like to have more control over their rental properties can seek an alternative to full-service property management.

Leverage Technology and Be a DIY Landlord

Investors who buy rental properties close to home can become DIY landlords and use the power of real estate technology to make the management process faster and more efficient. There are hundreds of online tools and platforms that help landlords with everything. This includes listing properties, distributing listings on rental websites, pricing rentals, tenant applications, renter communication and support, rent collection, vendor communication and payments, maintenance work coordination, and tax filing.

Some of the best property management software for small landlords includes TurboTenant, Rentler, Avail, TenantCloud, Yardi Breeze, and Buildium. These tools can help you save a lot of time while maintaining control over your rental business.

Hire a Small Local Property Manager

Some real estate investors do not want to work with large property management companies because of the lack of local market knowledge and personal touch. Indeed, this can deteriorate the quality of services if the company doesn’t have a strong local presence.

An alternative to this problem is working with a small local property manager who is knowledgeable about the local rental market and who provides customized services to each property, landlord, and tenant. While such property managers lack corporate supervision, they put a lot of effort into serving properties and customers in the best way.

Invest with a Partner

Yet another strategy which you could try is to invest together with a partner. This can work if you’re located remotely and/or don’t have enough time to manage a property, while your partner lives in the same market as the rental property and has the time and skills to take care of it.

Real estate partnerships can take many structural shapes and legal forms. What matters in all cases is to make sure that you have a legal, written, and signed agreement with your partner that specifies the rights and responsibilities of both parties.

How to Select the Best Property Manager for Your Property

Choosing the best property management company for your specific property and needs should be done carefully. After all, the success - or failure - of your entire rental property endeavor depends on the quality of the services that the company will provide.

Here are the factors that you should take into consideration when selecting the most appropriate property manager for your long-term rental:

• Services provided: You should decide whether you need lease-only or comprehensive services. Get a list of the exact services that a company will provide before opting in.
• Costs and fees: You need to understand if you will have to pay a flat fee or a percentage of rental revenue. Inquire about all additional fees such as leasing, lease renewal, rental income protection, eviction protection, inspections, etc.
• Revenue and cash flow projections: Ask different property managers to provide you with detailed financial projections for your rental property and choose the one that promises to optimize performance.
• Market coverage: Both local and national companies have their own pros and cons. Decide which approach you personally prefer. Make sure that the property manager has a firm presence in the local market and real expertise.
• Company size: You need to choose between a small and a large company, based on your preferences. But ensure that the local office is big enough to take on new properties.
• Online reviews: Look for online reviews by both property owners and tenants on major third-party online review websites like Trustpilot, BBB.org, and Yelp. Read through individual reviews instead of looking only at overage ratings.
• Local investor recommendations: Search for investors who work with this company in your market. You can check out online forums or ask the company itself to provide you with some names. It’s important to speak personally with someone who has experience with this property manager and ask all the questions that come to your mind. See what they have to share about the manager.
• Interviews: Don’t go for a property management company that doesn’t have the time to schedule a proper interview with you and address all your concerns. It’s best to talk to someone at the local office rather than at the corporate offices.
• Value for money: Choose the property manager that provides the best value for money. This means covering all services that you and your property need without overcharging and with no hidden fees.

Takeaway

Hiring a professional property manager is a good option for investors who buy properties remotely, who have full-time jobs, and who have large portfolios. But it could also work for small scale-investors who are just getting started and have little experience in the rental market. Whichever one you might be, what matters is to have a solid process when choosing the best property management company. Look for someone who has an excellent understanding of the local market, positive local reputation, experience in your city, and the capacity to onboard more rentals. This can be a large national company or a small local manager, depending on your preferences.