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Home Buying
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Staging
Sell a Vision
Put “Real Estate1 Agency’s” vision for real estate to work for you through well-communicated guidance, personalized marketing, and high-touch personal service.
We specialize in representing our client’s best interests in the sale of single-daily residences, income, and commercial properties.
In today’s competitive Real Estate market, it is imperative to understand the importance marketing plays in the sale process. It is not enough these days to simply place a photo or two and a few descriptive words on a window display or the internet.
The correct marketing of a property is integral to achieving a successful sales result. A comprehensive marketing plan can mean a difference of thousands of dollars in the final selling price.
When you engage “Real Estate1 Agency”, to sell your most valuable asset, you can be assured of receiving cutting-edge, innovative marketing. Our research has shown, that the more buyers you reach, the greater the chance of securing a buyer who will pay a premium price for your property.
We understand the importance of leaving no stone unturned when searching for a buyer for one of our owner’s homes. Facilitating exposure through the right mediums ensures we maximize our chances of achieving a premium price. After all, anyone can sell property, but selling it for the best possible price is a different matter entirely.
We not only believe in our marketing strategies but know from research conducted over the years, that these strategies work. This is why we can say with confidence, ‘We bring more buyers to your door’, which means we will always get the best possible price for your home.
When you appoint “Real Estate1 Agency”, you will find it is a matter of commitment.
We wish to thank you for considering our agency. Rest assured should you choose “Real Estate1 Agency”, to market your property, you will receive the full attention, interest, and involvement of our entire organization. We will give you the finest service available and achieve the highest price possible for you. You have our guarantee!
Market Analysis
Learn the Value of Your Future or Current Home.
Discussing property prices, where they currently stand and what will happen in the future is arguably a British obsession.
It seems like hardly a day goes by when the direction of house prices isn’t mentioned in mainstream media. Even in your social circles, you may find the topic often gets talked about (whether you like it or not!).
However, working out what may happen even in the short to medium term is not an exact science. There’s a huge range of variables involved that can influence where things may be heading for better or worse.
As experienced homebuyers and auctioneers, the team at Property Solvers conducts thousands of professional home valuations every year.
In the following article, we run through a calculation that you can use to broadly predict the future of property prices in your local area. We also look at the “micro” and “macro” factors that can affect valuation levels.
Calculating the Future Value of Your Property
The property market constantly evolves and accurately predicting what will happen is next to impossible.
Nonetheless, you can get a general idea by looking at historical growth rates and applying them to the future. To use the example of England and Wales, the graph below shows average prices over the last 4 decades.
Graph1
We have also plotted the annual growth rate as a means of taking a look at the overall trends over a longer period.
Graph2
The next stage is to take this average growth rate and multiply it by the current estimated value of your property.
Image1
Let’s say the average growth rate over the last 10 years in your area has been 4%.
Assuming this growth rate continues, you now want to know what prices could be in 5 years (from now). Your property is currently valued at £250,000.
The idea is to multiply 4% by 5 (years) and add this percentage to the £250,000 – in other words, £300,000. Here’s the calculation:
Image2
Please note…
This is a crude way to assess future house prices and the trends are not usually consistent.
Average property prices can also be heavily skewed by low sales volumes. Similarly, we wouldn’t recommend relying on the data if a handful of properties in a given area sell for above-average prices or under-market value (at auction for example).
Much will also depend on how far into the future you’re looking to value your home. It stands to reason that the shorter the time within which you’re predicting, the higher the likelihood of being accurate.
It’s also important to take a look at the “micro” and “macro” factors that tend to stay constant – regardless of whether the market is strong or weak…
“Micro” Factors That Can Affect the Future Property Values
To start, let’s look at the “micro” side of things – in other words, the more localized and individual factors that can affect house prices…
The Condition of the Property
Like most things we make use of every day, properties are subject to wear and tear (depreciating as a result).
A well-looked-after house or flat is more likely to hold its value relative to one that undergoes neglect or simply does not get worked on whilst you own it.
Most homeowners look to refurbish their properties every 10 to 15 years depending on how “lived in” it is. This may need to happen more frequently if the property is tenanted.
Also, if your property has issues that could potentially render it unmortgageable, it can be a costly exercise to bring the value back up to the level of the local market. This can include flooding risk, Japanese Knotweed, or structural problems.
Extensions or Loft Conversions
Provided it’s undertaken legally – i.e. through seeking planning consent or Permitted Development Rights – this is an excellent way to lock in solid value into your property.
Other savvy property owners choose to maximize the space they already have to add value. Examples can include:
- Changes to the property layout (such as knocking through to create a kitchen/diner)
- Garden upgrades such as modern landscaping
- Repurposing one room to become another (such as changing a study into an additional bedroom)
- Improving the property’s overall curb appeal
- The inclusion of new features, such as smart storage
Many sellers then sell or remortgage to release the locked-in capital in the property.
Energy Efficiency
Related to the above, having a high Energy Performance Certificate (EPC) rating is becoming ever-important.
Indeed, it’s likely to have an influence on mortgage and remortgage valuations as well as future buyers’ decisions as we move more towards a more energy-efficient and carbon-free society.
Proximity to Local Amenities / Infrastructure / Transport
Living close to supermarkets/shops, restaurants, green spaces, coffee shops/pubs/bars, healthcare/dentists, sports centers, and other recreational activities can all have a beneficial effect on your home’s value.
On the other hand, proximity to wind farms, mobile phone towers, transport links, and air and/or noise pollution tend to lower the desirability (and therefore prices) of homes up for sale.
Good School Catchment Area
Properties close to in-demand schooling often see consistent price growth – irrespective of external circumstances.
You can check local schools by Google searching Ofsted reports and looking out for “Outstanding” and “Good” ratings within a mile or so of your street.
Local Economic Growth
Combined with the factors described above, a healthy local economy will always attract more eager homebuyers and fuel higher prices.
Note that local employment levels are not always an influential factor provided there is good commutability. That’s why property prices in well-connected suburban towns close to the UK’s largest cities such as London, Manchester, Sheffield, and Birmingham tend to hold their value.
Safe Neighbourhood
Demand for property, and therefore overall valuations, tends to be lower if there’s a noticeable presence of crime or other forms of anti-social behavior.
In a similar vein, noisy or disruptive neighbors can end up being a long-term issue – particularly if complaints to the authorities are not going anywhere.
Tenure
If you own a flat or another form of leasehold property and the unexpired lease term is approaching anything close to 80 years, it’s worth exploring extension costs.
The lower the unexpired lease length is, the bigger the impact on value.
Decorative Appeal / Uniqueness of the Property
Of course, it’s entirely up to you how you decorate your property and we all have our tastes. However, it’s worth bearing future saleability in mind and how much the overall aesthetics would appeal to future buyers.
Similarly, quirky properties may struggle to sell – particularly in a down market.
Limited Supply (Locally)
Often, especially in areas with high demand, any proposals for new housing face local objections.
Although it has its own wider socioeconomic impacts, the phenomenon known as NIMBYism (“Not in My Back Yard”), results in constrained supply and, therefore, buoyant property prices.
Image3
“Macro” Factors That Can Affect the Future Property Values
Let’s now take a “high-level” view of the broader factors that can benefit and hinder property price growth…
The UK Housing Market in General
You should stay up to date with market predictions regarding the property market and its likelihood of growth or stagnation. Try to take in a broad range of opinions. We often find publications like the Financial Times and The Economist offer fairly balanced viewpoints.
One theory is that there’s an 18-year cycle of recovery, growth and recession. Major explosive growth is often followed by a crash. It may be worth working out where we currently are within this pattern to predict what is coming next.
Economic Growth
Property prices generally grow when there’s low unemployment, rising income, consumer confidence, and general positivity about the economic climate.
Conversely, when the opposite effects occur, home sellers tend to struggle more as more buyers batten down the hatches and only move forward if it’s a bargain.
Interest Rates and Mortgage Lending Practices
Generally, monthly commitments after buying a property with a mortgage tend to be lower than paying rent.
In an environment where interest rates are rising, however, fewer people become able to afford to get on the property ladder. The risks of more homeowners falling into mortgage arrears also rise.
In response to the financial crisis of 2007-08, the Mortgage Market Review resulted in more responsible lending criteria such as higher deposits and more thorough “stress-testing” procedures.
Whilst arguably better in terms of controlling market speculation and minimizing the risk of homeowners falling into negative equity, it has meant that housing has become less accessible for more people.
Affordability / House Price to Earnings
Very much related to the above, there’s a certain limit on how much most people can pay for property at any given time.
The main measures are the house prices to income ratio and how much of people’s take-home pay is consumed in mortgage payments.
Affordability issues tend to appear first in London and the South East, followed by a ripple effect across the country.
“Black Swan” Events
These are out-of-the-blue occurrences that can unexpectedly impact a country’s economy and therefore the housing market.
Recent historical examples include the Brexit fallout and the COVID-19 pandemic.
The UK’s Under Supply of Housing
An ongoing political hot potato, the fact remains that there are simply not enough homes being built in the right areas across the country.
Much of the issue relates to planning alongside the huge risks associated with delivering scaled development projects successfully.
Although government-led initiatives such as Help to Buy have helped somewhat, annual targets are continually not met. The result is that sustained house price rises over the long term are likely to remain.
Frequent RICS Surveyor Down Valuations
Regardless of where the market is at, it’s long been the case that estate agents often exaggerate asking price recommendations. Telling home sellers that their properties will fetch higher prices than what is the reality is more likely to win them instruction.
Whilst this often means properties end up lingering on the market longer than they need to, in good times, buyers may be willing to pay those kinds of prices at the outset.
However, time and time again, we see surveyors/valuers having a different viewpoint. The result is often that the property returns to the market or there’s some kind of renegotiation to a more realistic level. Other times, the seller withdraws completely.
Household Growth
It’s also worth keeping an eye on wider population growth both domestically and from those coming from abroad.
Larger influxes of people looking to build a life in the UK often boost demand. The result is an overall positive influence on house prices.
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Always Use HM Land Registry Data to Assess Future House Prices
Although the various house price calculators and estate agency estimations have some validity, nothing beats using the HM Land Registry in terms of accuracy.
These days, as well as the portal itself, you can access the same data completely free on a range of portals. These include Rightmove, Zoopla, Mouseprice, and Net House Prices.
It’s also worth noting that commercial, industrial, land and other buildings have their unique valuation methods which differ from residential property.
Investment Guidelines
When you think about real estate investing, the first thing that probably comes to mind is your home. Of course, real estate investors have lots of other options when it comes to choosing investments, and they’re not all physical properties.
Real estate has become a popular investment vehicle over the last 50 years or so. Here’s a look at some of the leading options for individual investors, along with the reasons to invest.
KEY TAKEAWAYS
- Real estate is considered to be its asset class and one that should be at least a part of a well-diversified portfolio.
- One of the key ways investors can make money in real estate is to become a landlord of a rental property.
- Flippers try to buy undervalued real estate, fix it up, and sell it for a profit.
- Real estate investment trusts (REITs) provide indirect real estate exposure without the need to own, operate, or finance properties.
Historical Prices
Real estate has long been considered a sound investment, and for good reason. Before 2007, historical housing data made it seem like prices could continue to climb indefinitely. With few exceptions, the average sale price of homes in the U.S. increased each year between 1963 and 2007—the start of the Great Recession. Home prices did take a small hit at the onset of the COVID-19 pandemic in the Spring of 2020. However, as vaccines were rolled out and pandemic concerns waned, home prices accelerated to reach all-time highs by 2022.1
This chart from the Federal Reserve Bank of St. Louis shows average sales prices between 1963 and Q1 2022 (the most recent data available). The areas that are shaded in light grey indicate U.S. recessions.
Graph3
The most significant downturn in the real estate market before the COVID-19 pandemic coincided with the Great Recession. The long-term results of the coronavirus crisis have yet to be seen.1
Rental Properties
If you invest in rental properties, you become a landlord—so you need to consider if you’ll be comfortable in that role. As the landlord, you’ll be responsible for things like paying the mortgage, property taxes, and insurance, maintaining the property, finding tenants, and dealing with any problems.2
U.S. Bureau of Labor Statistics. “Property, Real Estate, and Community Association Managers: What They Do.”
Unless you hire a property manager to handle the details, being a landlord is a hands-on investment. Depending on your situation, taking care of the property and the tenants can be a 24/7 job—and one that’s not always pleasant. If you choose your properties and tenants carefully, however, you can lower the risk of having major problems.
One way landlords make money is by collecting rent.2 How much rent you can charge depends on where the rental is located. Still, it can be difficult to determine the best rent because if you charge too much you’ll chase tenants away, and if you charge too little you’ll leave money on the table. A common strategy is to charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit.
The other primary way that landlords make money is through appreciation.3 If your property appreciates, you may be able to sell it at a profit (when the time comes) or borrow against the equity to make your next investment. While real estate does tend to appreciate, there are no guarantees.
This is particularly true during periods of intense volatility in the real estate market, including most recently throughout the COVID-19 pandemic. From February 2020 to March 2022, median real estate prices in the U.S. rose by an astonishing 38%.4 The dramatic growth has left many wondering whether prices are due to a crash.
Flipping Houses
Like the day traders who are leagues away from buy-and-hold investors, real estate flippers are an entirely different breed from buy-and-rent landlords. Flippers buy properties intending to hold them for a short period—often no more than three to four months—and quickly sell them for a profit.
The are two primary approaches to flipping a property:
- Repair and update. With this approach, you buy a property that you think will increase in value with certain repairs and updates. Ideally, you complete the work as quickly as possible and then sell at a price that exceeds your total investment (including the renovations).
- Hold and resell. This type of flipping works differently. Instead of buying a property and fixing it up, you buy in a rapidly rising market, hold for a few months, and then sell at a profit.
With either type of flipping, you run the risk that you won’t be able to unload the property at a price that will turn a profit. This can present a challenge because flippers don’t generally keep enough ready cash to pay mortgages on properties for the long term. Still, flipping can be a lucrative way to invest in real estate if it’s done the right way.
REITs
A real estate investment trust (REIT) is created when a corporation (or trust) is formed to use investors’ money to purchase, operate, and sell income-producing properties. REITs are bought and sold on major exchanges, just like stocks and exchange-traded funds (ETFs).5
U.S. Securities and Exchange Commission. “Investor Bulletin: Publicly Traded REITs.”
To qualify as a REIT, the entity must pay out 90% of its taxable profits in the form of dividends to shareholders. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed on its profits, thus eating into the returns it could distribute to its shareholders.5
Much like regular dividend-paying stocks, REITs are appropriate for investors who want regular income, though they offer the opportunity for appreciation, too. REITs invest in a variety of properties such as malls (about a quarter of all REITs specialize in these), healthcare facilities, mortgages, and office buildings. In comparison to other types of real estate investments, REITs have the benefit of being highly liquid.5
Real Estate Investment Groups
Real estate investment groups (REIGs) are sort of like small mutual funds for rental properties. If you want to own a rental property but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you.
A company will buy or build a set of buildings, often apartments, then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space. However, the company that operates the investment group manages all the units and takes care of maintenance, advertising, and finding tenants. In exchange for this management, the company takes a percentage of the monthly rent.6
There are several versions of investment groups. In the standard version, the lease is in the investor’s name, and all of the units pool a portion of the rent to guard against occasional vacancies. This means you will receive enough to pay the mortgage even if your unit is empty.
The quality of an investment group depends entirely on the company that offers it. In theory, it is a safe way to get into real estate investment, but groups may charge the kind of high fees that haunt the mutual fund industry. As with all investments, research is key.
Real Estate Limited Partnerships
A real estate limited partnership (RELP) is similar to a real estate investment group. It is an entity formed to buy and hold a portfolio of properties, or sometimes just one property. However, RELPs exist for a finite number of years.
An experienced property manager or real estate development firm serves as the general partner. Outside investors are then sought to provide financing for the real estate project, in exchange for a share of ownership as limited partners. The partners may receive periodic distributions from income generated by the RELP’s properties, but the real payoff comes when the properties are sold—with luck, at a sizable profit—and the RELP dissolves down the road.
Real Estate Mutual Funds
Real estate mutual funds invest primarily in REITs and real estate operating companies. They provide the ability to gain diversified exposure to real estate with a relatively small amount of capital. Depending on their strategy and diversification goals, they provide investors with much broader asset selection than can be achieved through buying individual REITs.
Like REITs, these funds are pretty liquid.7 Another significant advantage to retail investors is the analytical and research information provided by the fund. This can include details on acquired assets and management’s perspective on the viability and performance of specific real estate investments and as an asset class. More speculative investors can invest in a family of real estate mutual funds, tactically overweighting certain property types or regions to maximize return.
Why Invest in Real Estate?
Real estate can enhance the risk-and-return profile of an investor’s portfolio, offering competitive risk-adjusted returns. In general, the real estate market is one of low volatility, especially compared to equities and bonds.
Real estate is also attractive when compared with more traditional sources of income return. This asset class typically trades at a yield premium to U.S. Treasuries and is especially attractive in an environment where Treasury rates are low.
Diversification and Protection
Another benefit of investing in real estate is its diversification potential. Real estate has a low and, in some cases, negative, correlation with other major asset classes—meaning, when stocks are down, real estate is often up. This means the addition of real estate to a portfolio can lower its volatility and provide a higher return per unit of risk. The more direct the real estate investment, the better the hedge: Less direct, publicly traded vehicles, such as REITs, are going to reflect the overall stock market’s performance.
Because it is backed by brick and mortar, direct real estate also carries less principal-agent conflict or the extent to which the interest of the investor is dependent on the integrity and competence of managers and debtors. Even the more indirect forms of investment carry some protection. REITs, for example, mandate that a minimum percentage of profits (90%) be paid out as dividends.
Some analysts think that REITs and the stock market will become more correlated, now that REIT stocks are represented on the S&P 500.8
Inflation Hedging
The inflation-hedging capability of real estate stems from the positive relationship between gross domestic product (GDP) growth and demand for real estate. As economies expand, the demand for real estate drives rents higher, and this, in turn, translates into higher capital values. Therefore, real estate tends to maintain the purchasing power of capital by passing some of the inflationary pressure onto tenants and by incorporating some of the inflationary pressure, in the form of capital appreciation.
The Power of Leverage
Except for REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. Leverage means to use debt to finance a larger purchase than you have the available cash for. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order—unless you are buying on margin. And even then, the percentage you can borrow is still much less than with real estate, thanks to that magical financing method, the mortgage.
Most conventional mortgages require a 20% down payment.9 However, depending on where the property you invest in is located, you might find a mortgage that requires as little as 5%. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, the size of your mortgage affects the amount of ownership you have in the property, but you control it the minute the papers are signed.
This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage or wait for an opportunity to sell for a profit, they control these assets despite having only paid for a small part of the total value.
How Can I Add Real Estate to My Portfolio?
Aside from buying properties directly, ordinary investors can purchase REITs or funds that invest in REITs. REITs are pooled investments that own and/or manage properties or which own their mortgages.
Why Is Real Estate Considered to Be an Inflation Hedge?
Home prices tend to rise along with inflation. This is because homebuilders’ costs rise with inflation, which must be passed on to buyers of new homes.10 Existing homes, too, rise with inflation though. If you hold a fixed-rate mortgage, as inflation rises, your fixed monthly payments become effectively more affordable. Moreover, if you are a landlord, you can increase the rent to keep up with inflation.
Why Are Home Prices Impacted by Interest Rates?
Because real estate is such a large and costly asset, loans must often be taken out to finance their purchase. Because of this, interest rate hikes make mortgage payments more costly for new loans (or on existing adjustable-rate loans like ARMs). This can discourage buyers, who must factor in the cost to carry the property month-to-month.
The Bottom Line
Real estate can be a sound investment and one that has the potential to provide a steady income and build wealth. Still, one drawback of investing in real estate is illiquidity: the relative difficulty in converting an asset into cash and cash into an asset.
Unlike a stock or bond transaction, which can be completed in seconds, a real estate transaction can take months to close. Even with the help of a broker, simply finding the right counterparty can be a few weeks of work. Of course, REITs and real estate mutual funds offer better liquidity and market pricing. However, they come at the price of higher volatility and lower diversification benefits, as they have a much higher correlation to the overall stock market than direct real estate investments.
As with any investment, keep your expectations realistic, and be sure to do your homework and research before making any decisions.
Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau (CFPB) or with the U.S. Department of Housing and Urban Development (HUD).
Demographic Evaluation
For instance, you can use demographic data to identify emerging markets and niches based on population growth and income levels, assess the competition and vacancy rates of similar properties in the area, forecast the rental income and expenses of a property based on the income and spending habits of the target tenants
Property Value Analysis
Getting Started
There are three types of approaches used to value property: market or comparison, cost and income. This story map will focus on the comparison approach for residential properties. The market approach requires three different types of data: property characteristics, property sale price and location.
Showings
Attend an Open House With Us Online, Through “Bytna1.COM”!
An open house is when a homeowner and their real estate agent invite the general public to view the property, usually within a 1- to 3-hour window of time. During the event, the listing agent will answer questions, point out design features, and record the contact information for any interested parties.
Open houses are a long-standing tradition that started in the early 1900s. Back then, to list a home for sale, the owner would simply put a sign in the yard. However, most sellers would have a hard time finding prospective buyers using word of mouth. Eventually, real estate brokers started to open listed homes to visitors as a way to better market the property and find serious buyers.
How Do Open Houses Work?
Since homes can vary widely in their floor plans, interior design or finishings, it can be helpful to give buyers time to tour the property alone or with a real estate professional. While a home seller can use scheduled showings the same way, an open house allows viewers more time to imagine themselves living in the space.
Open houses are also more likely to start a bidding war than a private showing because multiple home buyers can view the property simultaneously, which might create a sense of urgency to submit an offer. That’s why seller’s agents often recommend using this type of event as a marketing strategy to drum up interest in a newly listed home.
The Pros And Cons Of Open Houses
Even though open houses can be very beneficial to sellers and buyers alike, some may decide to forgo this tactic in favor of private showings. Before you choose to host or attend one, you should first consider the pros and cons.
Pros For Sellers
Open houses come with many advantages for sellers which make them well worth the effort, such as:
- Attracting a large number of potential buyers within a short period of time
- Giving owners a chance to collect feedback from a wide range of visitors
- Increasing the chances of receiving multiple competitive offers
- Showcasing the home at its best without having to make numerous appointments
- Possibly reducing the amount of time it takes to sell the house
Pros For Buyers
Sellers aren’t the only ones to enjoy the benefits of an open house. Buyers can also use this opportunity to:
- Get a sneak peek at a home they’re interested in without having to make a commitment
- Figure out the size or type of house that would work best for their situation
- Learn more about the home buying process firsthand
Cons For Sellers
Of course, there are also disadvantages for sellers that might make hosting less attractive, including:
- It can be labor-intensive to prepare the home.
- A lot of people may visit the home, which can create safety concerns.
- The buyers viewing the house may not be qualified to purchase it.
- It’s easier to advertise the home online or through a multiple listing service.
Cons For Buyers
Buyers might experience the following drawbacks of open houses as well:
- They can create a distracting and busy environment.
- The buyer could feel pressured into submitting an offer.
- It could be hard to socially distance if the home becomes crowded.
Buyers might have difficulty choosing which events to go to since most happen over the weekend.
Buyer Education
Learn the Ropes
What Is Property Management?
Property management is the daily oversight of residential, commercial, or industrial real estate by a third-party contractor. Generally, property managers take responsibility for day-to-day repairs and ongoing maintenance, security, and upkeep of properties. They usually work for the owners of investment properties such as apartment and condominium complexes, private home communities, shopping centers, and industrial parks.
Their main roles are to manage routine tasks delegated to them by the owners and to preserve the value of the properties that they manage while generating income.
KEY TAKEAWAYS
- Property management is the oversight of real estate by a third party.
- Property managers can manage various types of property: residential, commercial, industrial, and property for special purposes.
- Property managers are generally responsible for the day-to-day operations of the real estate, from screening tenants to arranging for repairs and maintenance.
- Owners pay property managers a fee or a percentage of the rent generated by the property.
- Every state has its laws regulating the activities of property managers.
Understanding Property Management
Property developers generally want to move on to the next project as soon as each one is completed. Even if they continue to hold title to the property, they prefer to delegate the day-to-day operations to an outside company.
The responsibilities of a property manager generally involve the following:
- Screening potential tenants
- Drafting, signing, and renewing leases on behalf of property owners
- Collecting rent
- Maintenance of properties, including landscaping and snow removal
- Arranging for necessary repairs to properties
- Setting up and adhering to budgets for property maintenance
- Understanding state and national landlord-tenant laws and regulations
- Marketing properties
- Supervising other employees
- Handling taxes.
The companies must comply with any state and local landlord-tenant laws and regulations.
Types of Property Management
Just as property comes in many types, so do property managers. Some firms specialize in providing management for a particular type of property, while others offer management services over a range of property types. A huge range of property types can be managed.
Residential Property Management
Residential property managers are typically hired for rental properties, and they manage the rental process. They can be hired to manage:
- Single-family homes
- Vacation rentals
- Multifamily homes
- Townhouses
- Condominiums
- Apartments
- Manufactured homes
- Real estate-owned (REO) properties
Commercial Property Management
Commercial property owners have different needs from those who own residential property. Commercial property management can apply to:
- Public accommodations like hotels
- Retail properties like malls, restaurants, and gas stations
- Office properties like real estate brokerages or doctors’ offices
- Co-working spaces where professionals rent workspace by the day or the hour
Industrial Property Management
Industrial properties that can benefit from management include:
- Heavy manufacturing facilities such as automotive plants and steel mills
- Light manufacturing factories such as food packaging
- Warehouses
- Distribution facilities
Special-Purpose Property Management
Numerous types of property don’t fit neatly into the categories above but require management nonetheless. These include:
- Theaters
- Sports arenas
- Resorts
- Senior care facilities
- Schools and universities
- Places of worship
Owners pay property managers a fee or a percentage of the rent generated by a property while it is under their management.
Who Needs a Property Manager?
Several types of property owners can benefit from the services that property managers offer.
Landlords, for example, hire property management firms for a variety of reasons. Some may have multiple rental properties in their portfolios and lack the time or expertise to maintain the properties and deal with individual tenants. Some owners only have an interest in owning rental properties and earning profits from them. When this is the case, they hire professional property managers. Absentee landlords also make use of property management services. Some property management companies cater to individual landlords who rent out a single property such as a vacation home.
Property owners who participate in affordable housing programs tend to use property management services because their rental properties are subject to complex federal guidelines that require specialized expertise. Certain real estate brokers also operate as property managers. For example, a broker in a resort town may provide buyer and seller agent services as well as property management services. When this is the case, the real estate broker lists, shows, leases, and maintains vacation rentals for several property owners.
special Property Management Considerations
Property management licensing requirements vary by state.1 Most states require property management companies to be licensed by the local real estate board, so property owners need to make sure that the firms they hire are properly licensed.
For instance, property managers in Florida are required to have real estate broker’s licenses to operate in the state.2 That’s because some of their responsibilities are deemed real estate activity. Holding a real estate broker’s license allows property managers to list rental properties in the multiple listing service (MLS) and to market the properties by standard real estate marketing methods. Holding a real estate broker’s license also allows the property management company to place a real estate board lockbox on a property’s door so that other licensed agents can show the property.
Florida also requires property managers to hold a broker’s license if they deal with rentals or leases and receive a commission for their services. However, property managers who manage the properties that they own in the state don’t need a license to do so.2
Managers in Massachusetts don’t require a broker’s license.3 That’s because certain duties considered to be real estate activities, such as listing and leasing properties, may be secondary to the main duties performed by the property manager.
Is a property manager worth it?
It depends. Managing property can be costly and take a lot of time. If the cost of a property manager is less than the opportunity cost of managing properties yourself, it’s probably a good investment. However, this is an equation that every investor will have to work through for themselves.
Who benefits from hiring a property manager?
Any property manager who doesn’t want to deal with the day-to-day management of property can potentially benefit from property management. This can include a residential property owner who doesn’t want the headaches of dealing with tenants, or commercial property owners who prefer others to source and manage tenants, leases, and maintenance.
Are property managers regulated?
Yes. Property management licensing requirements vary by state, but most states require property management companies to be licensed by the local real estate board. Property owners should make sure that the firms they hire are properly licensed.
The Bottom Line
Property management is the oversight of real estate by a third party, normally a professional property manager or property management company. Property managers can manage many different types of property: residential, commercial, industrial, and property for special purposes.
Property managers are generally responsible for the day-to-day operations of the real estate, from screening tenants to arranging for repairs and maintenance, and are paid via a fee or a percentage of the rent generated by the property. Every state has its laws regulating the activities of property managers, so property owners need to check that potential property managers are properly licensed for their state.
Build Your Own
New Construction & Remodeling & Renvoation?
A renovation project is the process of restoring or repairing a structure back to a good or “like new” condition. In the construction business, renovation can include but is not limited to, re-facing cabinets, installing new light fixtures, replacing outdated and possibly dangerous electrical systems, and generally replacing or repairing any part or all of a home or building that is outdated, worn by time, or damaged and not in working condition. This includes elements of a structure that may not meet present-day building codes and pose a safety hazard to the owner and/or the general public if the structure or dwelling is to be used by people.
But renovations also hold another purpose: Adding value to a home or other structure. Let’s say you want to sell your home, which was built sometime in the 1980s, and as a responsible homeowner, you kept most, if not everything, in good shape over the years. Nonetheless, if you decide you want to sell your home, the realtor may advise updating your kitchen to add value and appeal to buyers. Replacing the linoleum tiles with porcelain tiles; replacing the cabinets with modern ones; and changing the sink with a better, more modern-looking one are also considered renovations.
A remodeling project can add pizazz and bring life back into any home or office space. Remodeling is defined as altering a structure, whether this alteration is exterior or interior, from the original construction. Some examples of remodeling are, but are not limited to:
- Completely transforming the structure and/or style of any space, home, or building.
- Changing the layout, in part or in whole, of any space, room, or garage area from the original floor plan.
- Combining rooms or other spaces within a structure that were once separated by a wall or any other sort of permanent partition.
- Adding or taking away from the exterior and/or interior of any structure.
When one is planning a remodeling project, one should understand that it can involve complex design considerations, causing the need to hire or consult an experienced and licensed building contractor and architect before beginning any remodeling project. Remodeling projects need to be done right the first time because if you have to go back and fix any flaws in the design, it can become very costly.
A new construction project is pretty straightforward, but each process can be unique and comes with its own set of challenges and hurdles depending on the size and complexity. New construction is constructing an entirely new home or building from the ground up and includes every type of material that goes into any such project.
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