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What Do Property Management Companies Do?

What Do Property Management Companies Do?

The property management industry plays a pivotal role in the real estate market, serving as the essential intermediary between property owners and tenants. Their multifaceted responsibilities encompass everything from marketing and leasing properties to overseeing maintenance and resolving tenant issues. In essence, they serve as the glue that holds the landlord-tenant relationship together, ensuring the seamless operation of residential and commercial properties. 

This comprehensive guide will give you an insight into property management companies, exploring their diverse functions and shedding light on the vital role they play in the real estate ecosystem. Whether you’re a property owner looking to understand how these companies can benefit you or a prospective tenant curious about the services they offer, this guide will provide you with a detailed understanding of what property management companies do and why they are an integral part of the real estate landscape. 

So, let us find out the inner workings of property management companies, unraveling the intricacies of their day-to-day operations, and gaining insight into how they contribute to the efficient management of residential and commercial properties. Whether you’re considering hiring a property management company or simply seeking to expand your knowledge of the real estate industry, this guide is your comprehensive resource for understanding the world of property management. 

Role of Property Management Companies 

Property management companies are crucial entities within the real estate industry, providing a wide range of services to property owners and tenants alike. Their responsibilities are diverse and encompass everything from marketing and leasing properties to overseeing maintenance, handling tenant concerns, and ensuring compliance with the intricate web of laws and regulations that govern property rental. 

In this segment, we’ll explore the fundamental functions of property management companies while emphasizing the importance of staying informed about the laws that govern property management. Whether you’re a property owner looking to engage a property management company or a tenant considering renting a property, understanding their roles and legal obligations is essential. 

What Do Property Management Companies Do? 

Property management companies act as intermediaries between property owners and tenants. Their primary objective is to ensure the efficient and profitable management of residential or commercial properties. Here are some of the key responsibilities of property management companies: 

Property Marketing: Property managers advertise vacant units to attract potential tenants. This involves creating compelling property listings, taking high-quality photographs, and promoting properties through various channels. 

Tenant Screening: They perform thorough background checks on prospective tenants, including credit history, rental history, and criminal background checks. This helps ensure that tenants are financially responsible and unlikely to cause issues. 

Lease Management: Property managers handle lease agreements, ensuring they are legally compliant and protect the interests of the property owner. They also negotiate lease terms, collect security deposits, and enforce lease provisions. 

Rent Collection: They are responsible for collecting rent from tenants, ensuring payments are made on time, and taking appropriate action in case of non-payment. 

Property Maintenance: Property management companies oversee property maintenance and repairs. They coordinate necessary repairs, conduct routine inspections, and ensure the property is in good condition. 

Tenant Relations: Property managers act as the point of contact for tenants. They address tenant concerns, respond to maintenance requests promptly, and maintain a positive tenant-landlord relationship. 

Financial Management: They handle financial matters related to the property, including budgeting, accounting, and financial reporting to property owners. 

Legal Compliance: Property management companies must ensure that their actions and the properties they manage comply with federal, state, and local laws and regulations. This includes fair housing laws, property codes, and eviction procedures. 

Knowing the Laws 

Property management involves navigating a complex legal landscape. Property managers must be well-versed in various laws and regulations that pertain to property rental. Here are some critical areas of the law that property management companies need to understand: 

Fair Housing Laws: Property managers must adhere to federal, state, and local fair housing laws, which prohibit discrimination based on factors such as race, color, religion, sex, national origin, disability, and familial status. 

Property Codes: Properties must meet specific safety and habitability standards outlined in local building codes. Property managers need to ensure properties are compliant and address any violations promptly. 

Lease Agreements: Property managers need to create lease agreements that are legally sound, protect the interests of both parties and adhere to state and local laws. 

Security Deposits: Laws governing security deposits vary by location. Property managers must understand the regulations related to the collection, handling, and return of security deposits. 

Eviction Procedures: In cases where eviction becomes necessary, property managers must follow legal procedures to ensure a lawful eviction process. 

Rent Control and Rent Stabilization: Some areas have rent control or rent stabilization laws that limit how much landlords can increase rent. Property managers must be aware of and comply with these regulations. 

Privacy Rights: Property managers must respect tenant privacy rights, including providing proper notice before entering a rented unit. 

In summary, property management companies serve as vital intermediaries between property owners and tenants, handling various responsibilities to ensure the smooth operation of properties. To excel in their roles, property managers must have a deep understanding of the laws and regulations that govern property management to protect the interests of all parties involved. 

Market Properties and Fill Vacancies 

Property management companies play a multifaceted role in the real estate industry, and one of their critical responsibilities is to effectively market properties and fill vacancies on behalf of property owners. This aspect of their work involves a combination of marketing strategies, tenant screening, and lease management. In this section, we’ll investigate how property management companies go about marketing properties and ensuring they are occupied by suitable tenants. 

Property Marketing 

Strategic Advertising: Property management companies employ strategic advertising techniques to promote vacant properties. This includes creating compelling property listings and using various marketing channels to reach potential tenants. These channels may include online listings, social media, real estate websites, and local advertising. 

Professional Photography: High-quality photographs are essential in making properties stand out. Property managers often arrange for professional photography to showcase the property’s features and attract potential tenants. 

Property Descriptions: Well-crafted property descriptions highlight the unique features of a property and its benefits. Property managers use persuasive language to entice potential tenants. 

Pricing Strategies: Property managers help property owners determine competitive rental prices. They consider factors such as market demand, location, property condition, and comparable rental rates. 

Online Listings: Property management companies list properties on popular rental websites and platforms, where tenants frequently search for available rentals. They optimize listings with essential details, images, and contact information. 

Property Showings: Property managers organize property showings for interested tenants. These showings provide an opportunity for potential tenants to view the property in person and ask questions. 

Tenant Screening 

Application Processing: When potential tenants express interest in a property, property managers provide them with rental applications. These applications collect essential information, including personal details, rental history, employment status, and references. 

Background Checks: Property managers conduct comprehensive background checks on applicants. This includes checking credit reports, criminal histories, and rental histories. The goal is to assess the applicant’s financial responsibility and suitability as a tenant. 

Income Verification: Property managers verify the applicant’s income to ensure they have the financial means to pay rent. This involves reviewing pay stubs, employment verification, or other income documentation. 

Reference Checks: Contacting previous landlords and personal references is a standard practice in tenant screening. Property managers inquire about the applicant’s rental history, behavior, and reliability. 

Legal Compliance: Property managers ensure that all tenant screening processes comply with federal, state, and local fair housing laws. They avoid discriminatory practices and treat all applicants equally. 

Lease Management 

Lease Preparation: Property managers are responsible for preparing lease agreements that outline the terms and conditions of the rental. These agreements address rent amounts, lease duration, security deposits, pet policies, and other essential terms. 

Lease Negotiation: Property managers negotiate lease terms with tenants on behalf of property owners. This may involve discussing rent adjustments or addressing specific tenant requests. 

Lease Signing: Property managers facilitate the lease signing process, ensuring that all parties understand and agree to the terms. They collect security deposits and the first month’s rent as per the lease agreement. 

Lease Renewals: Property managers handle lease renewals and may negotiate updated terms with tenants as leases expire. 

Property management companies are skilled at marketing properties to attract potential tenants, conducting thorough tenant screening to identify suitable renters, and managing lease agreements to protect the interests of property owners. Their expertise in these areas ensures that properties remain occupied by reliable tenants, leading to consistent rental income for property owners. 

Security Deposits 

Security deposits are a fundamental aspect of property management, and property management companies play a crucial role in handling and managing these deposits on behalf of property owners and tenants. In this section, we’ll explore how property management companies deal with security deposits, ensuring that they are collected, held, and returned in compliance with relevant laws and regulations. 

Collecting Security Deposits 

Legal Compliance: Property management companies must ensure that all aspects of collecting security deposits comply with federal, state, and local laws. These laws specify the maximum allowable deposit amount, the timeline for returning deposits, and the conditions under which deductions can be made. 

Lease Agreements: Property managers include clauses related to security deposits in lease agreements. These clauses outline the amount of the deposit, its purpose (typically to cover damage beyond normal wear and tear), and the conditions under which it will be returned. 

Collecting Deposits: Property managers collect security deposits from tenants when they sign the lease agreement. This involves receiving the deposit amount, documenting the transaction, and providing tenants with a receipt. 

Holding and Managing Security Deposits 

Segregated Accounts: Property management companies often hold security deposits in segregated trust accounts separate from their operating funds. This separation is essential to ensure that tenants’ deposit funds are not commingled with the company’s finances. 

Accounting and Record Keeping: Property managers maintain meticulous records of security deposits. This includes details of each tenant’s deposit, the amount, the date received, and the account where it is held. Detailed records help resolve any disputes that may arise during deposit return. 

Interest Payments: Depending on local laws, property management companies may be required to pay interest on security deposits held for a certain period. They must calculate and disburse interest payments to tenants as mandated by law. 

Returning Security Deposits 

Move-Out Inspection: When a tenant vacates a property, property managers typically conduct a move-out inspection. This inspection assesses the property’s condition to determine if any deductions from the security deposit are necessary. 

Deductions: Property management companies deduct specific amounts from the security deposit for damages or unpaid rent if they are outlined in the lease agreement and supported by evidence. 

Timely Returns: Property managers are responsible for returning the tenant’s security deposit within the legally specified timeframe. They provide tenants with an itemized list of deductions, if applicable, and the remaining deposit balance. 

Dispute Resolution: If there is a disagreement between the tenant and the property management company regarding deposit deductions, property managers often facilitate dispute resolution processes, which may include negotiation or mediation. 

Legal Compliance: Property managers must adhere to all legal requirements related to security deposit returns. Failure to do so can result in penalties and legal action. 

Accounting for Interest: If required by law, property managers ensure that any interest earned on security deposits is included in the return to the tenant. 

Property management companies play an important role in collecting, holding, and returning security deposits in compliance with the law. Their responsibilities include proper documentation, accounting, and adherence to legal regulations to protect both property owners and tenants’ rights regarding these deposits. This ensures a fair and transparent process for all parties involved. 

Financial Analysis 

Financial analysis is a critical aspect of what property management companies do. It involves the careful examination and assessment of a property’s financial performance and the preparation of reports and recommendations for property owners. Here, we’ll explore how property management companies conduct financial analysis to help property owners maximize their investments. 

Financial Reporting and Record Keeping 

Income and Expense Tracking: Property management companies maintain detailed records of income and expenses related to each managed property. This includes rent collections, utility payments, property maintenance costs, and other financial transactions. 

Financial Statements: Property managers prepare regular financial statements for property owners. These statements typically include income statements (profit and loss statements), balance sheets, and cash flow statements. These reports provide property owners with a comprehensive view of their property’s financial health. 

Budget Development: Property management companies collaborate with property owners to develop annual budgets for each property. These budgets outline expected income, operating expenses, and capital expenditures. Budgets serve as a financial roadmap to ensure that property operations remain financially sustainable. 

Rent Collection and Lease Management 

Rent Collection: Property managers are responsible for collecting rent from tenants. They ensure that rent is paid on time and handle late payments and delinquencies in accordance with lease agreements. 

Rent Increases: Property management companies help property owners determine appropriate rent increases, taking into account market trends, local regulations, and the terms of existing leases. 

Expense Management 

Expense Oversight: Property managers oversee property-related expenses, including routine maintenance, repairs, utilities, insurance premiums, property taxes, and homeowner association fees. 

Vendor Management: They work with vendors and contractors, negotiating contracts and ensuring that services are delivered cost-effectively. This includes obtaining multiple quotes for larger projects to secure competitive pricing. 

Financial Analysis for Property Owners 

Performance Evaluation: Property management companies analyze the financial performance of each property. They assess whether the property is meeting its income and expense projections and make recommendations for improvements. 

Market Analysis: Property managers monitor local real estate market conditions and conduct comparative market analyses to determine competitive rental rates and property values. This information helps property owners make informed decisions about their investments. 

Capital Planning: Property managers assist property owners in developing long-term capital improvement plans. They evaluate the need for major repairs or renovations and help owners budget for these projects over time. 

Risk Management: Property management companies assess potential financial risks associated with property ownership. They may recommend insurance coverage, contingency funds, or other strategies to mitigate financial risks. 

Tax and Legal Compliance 

Tax Reporting: Property management companies provide property owners with the necessary financial documentation and records required for tax reporting. They may also offer guidance on tax deductions and benefits related to real estate investments. 

Legal Compliance: Property managers ensure that property operations and financial transactions comply with all applicable laws and regulations, including landlord-tenant laws and fair housing regulations. 

Dealing with Tenant Disputes 

Dealing with tenant disputes is a critical aspect of what property management companies do. Tenant conflicts and disagreements are common in rental properties, and property managers play a pivotal role in resolving these issues professionally and efficiently. Here’s how property management companies handle tenant disputes: 

  1. Communication:

Property managers maintain open lines of communication with both tenants and property owners. Tenants are encouraged to report issues or disputes promptly to the property manager, either through phone, email, or a dedicated online platform. 

  1. Documentation:

Property managers maintain detailed records of all communications and interactions with tenants. This includes documenting tenant complaints, requests, and any actions taken to address these concerns. Having a comprehensive record is crucial in case disputes escalate. 

  1. Mediation:

Property managers act as intermediaries between tenants and property owners. When a dispute arises, they listen to both sides, understand the issues involved, and work to find a mutually agreeable solution. This may involve negotiating terms or reaching compromises that satisfy both parties. 

  1. Legal Knowledge:

Property management companies have a thorough understanding of landlord-tenant laws and regulations specific to their location. This knowledge helps ensure that any resolutions or agreements reached are in compliance with the law. 

  1. Conflict Resolution:

Property managers use conflict resolution skills to address tenant disputes effectively. They remain impartial and objective throughout the process, focusing on finding solutions that align with the terms of the lease agreement and the interests of both parties. 

  1. Lease Enforcement:

Property managers enforce the terms of the lease agreement. If a dispute arises due to a violation of lease terms, property managers take appropriate action, which may include issuing warnings, notices to cure violations, or initiating eviction proceedings when necessary. 

  1. Maintenance and Repairs:

Disputes often revolve around maintenance or repair issues. Property managers coordinate timely repairs and maintenance, addressing tenant concerns promptly. Ensuring that the property is well-maintained can prevent many disputes from occurring. 

  1. Rent Collection:

Property managers oversee rent collection, making sure that tenants pay on time. Disputes related to rent, late fees, or payment methods are handled efficiently, with a focus on resolution. 

  1. Security Deposits:

Property managers are responsible for managing security deposits according to local laws. Any disputes regarding deductions from security deposits or their return at the end of the lease term are handled in compliance with legal requirements. 

  1. Legal Remedies:

In cases where disputes cannot be resolved through mediation or negotiation, property managers may advise property owners on pursuing legal remedies, such as filing eviction proceedings or seeking court orders to address specific issues. 

  1. Tenant Education:

Property managers often provide tenants with information about their rights and responsibilities under the lease agreement and local laws. Educated tenants are more likely to understand and adhere to the terms of their lease, reducing the likelihood of disputes. 

Overall, property management companies play a crucial role in maintaining a harmonious landlord-tenant relationship by addressing and resolving disputes effectively. Their knowledge of legal requirements, communication skills, and commitment to upholding lease agreements help create a positive rental experience for both property owners and tenants. 

Should I Hire a Property Manager? 

Deciding whether to hire a property manager for your building is a significant choice that depends on various factors. Property managers can provide valuable services that make property ownership more manageable, but they come at a cost. Here are some key considerations to help you determine if hiring a property manager is the right choice for your building: 

Property Size and Complexity 

Number of Units: If your building has multiple units or is a large, multi-story complex, managing it can become time-consuming and complex. Property managers excel at handling the logistics and demands of larger properties. 

Mixed-Use Properties: Properties that combine residential and commercial spaces have unique management requirements. Property managers can navigate the complexities of mixed-use properties effectively. 

Distance from Property 

Proximity: If you live far away from your building or if it’s in a different city or state, hiring a property manager is almost essential. They can be your local presence, ensuring that maintenance, tenant issues, and emergencies are addressed promptly. 

Time and Availability 

Time Commitment: Managing a property can be a part-time or full-time job, depending on the number of units and tenants. If you have other commitments or prefer not to invest significant time in property management, a property manager can handle the daily tasks for you. 

Expertise and Legal Compliance 

Laws and Regulations: Property management involves understanding and complying with various laws and regulations, including landlord-tenant laws, fair housing laws, and building codes. Property managers stay up-to-date on these requirements, reducing your legal risks. 

Maintenance and Repairs: Property managers have networks of reliable contractors and can efficiently coordinate repairs and maintenance, ensuring that your property remains in good condition. 

Tenant Relations 

Tenant Screening: Property managers are skilled at screening potential tenants, conducting background checks, and verifying rental histories. This can help you avoid problematic tenants and reduce turnover. 

Handling Tenant Issues: Dealing with tenant complaints, requests, and disputes can be time-consuming. Property managers act as intermediaries, resolving issues professionally and maintaining positive tenant relations. 

Financial Management 

Rent Collection: Property managers handle rent collection, reducing the likelihood of late or missed payments. They can also enforce lease terms, including addressing non-payment issues. 

Financial Reporting: Property managers provide detailed financial reports, making it easier for you to track income, expenses, and profits related to your building. 

Cost Considerations 

Property Management Fees: Property managers typically charge a percentage of the monthly rent or a flat fee for their services. You should evaluate whether the fees are justified by the time and stress they save you and the value they add to your property. 

Long-Term Goals 

Investment Goals: Consider your long-term objectives for the property. If you’re looking for a passive investment and want to minimize your involvement, a property manager can help you achieve that goal. 

In conclusion, hiring a property manager for your building can be a smart decision if you have a large or complex property, live far away, lack the time or expertise for hands-on management, or seek a more passive investment. Property managers can enhance tenant relations, ensure legal compliance, and streamline property operations. However, it’s essential to weigh the cost of property management services against the benefits they provide to determine if they align with your investment goals. 

Where to Find Property Management Teams? 

Finding property management teams can be accomplished through various channels: 

  1. Referrals:

Ask for recommendations from fellow property owners or real estate professionals in your network. Personal referrals often yield trustworthy leads. 

  1. Online Directories:

Search online directories or listings of property management companies in your area. Websites like Angie’s List, Yelp, and the Better Business Bureau can be helpful. 

  1. Real Estate Associations:

Contact local real estate associations or landlord organizations. They often maintain lists of reputable property management teams. 

  1. Local Real Estate Agents:

Real estate agents are well-connected in the industry and can provide referrals to property management teams they trust. 

Interviewing and Selecting a Property Management Team 

Once you’ve identified potential property management teams, it’s time to conduct interviews and make a selection. Here’s a step-by-step process: 

  1. Initial Screening:

Contact each property management team and conduct an initial screening over the phone. Ask about their experience, services, fees, and availability. 

  1. In-Person Meetings:

Arrange in-person meetings with the top candidates. Use this opportunity to discuss your property’s specific needs and ask detailed questions. 

  1. Ask for References:

Request references from the property management team and contact these references to inquire about their experiences. 

  1. Review the Contract:

Carefully review the management contract, paying attention to fees, termination clauses, and services provided. Seek legal advice if necessary. 

  1. Clarify Responsibilities:

Ensure that roles and responsibilities are clearly defined in the contract. This includes tasks related to rent collection, maintenance, and tenant relations. 

  1. Evaluate Communication:

Assess the team’s communication style and responsiveness. Effective communication is essential for a successful partnership. 

  1. Fee Structure:

Understand the team’s fee structure, including management fees, leasing fees, and any additional charges. Ensure it aligns with your budget. 

  1. Compliance:

Verify that the team complies with local laws and has the necessary licenses and certifications. 

  1. Trust Your Instincts:

Choose a property management team that aligns with your values, communicates well, and gives you confidence in their abilities. 

Contract and Agreement Details 

Once you’ve selected a property management team, it’s time to finalize the contract. Here are some critical points to include: 

Scope of Services: Clearly outline the services the property management team will provide. 

Fees and Payment Schedule: Specify all fees and the schedule for payments. 

Duration of Agreement: Define the contract’s duration and any renewal or termination clauses. 

Maintenance and Repairs: Detail how maintenance and repair requests will be handled, including approval thresholds. 

Tenant Relations: Clarify the property management team’s role in handling tenant relations and disputes. 

Communication: Establish a communication protocol, including reporting frequency and preferred methods. 

Legal Compliance: Ensure the team is responsible for staying compliant with local laws. 

Insurance: Discuss insurance coverage, including liability and property coverage. 

Exit Strategy: Define the process for terminating the contract, including notice periods. 

Working Effectively with Your Property Management Team 

A successful partnership with your property management team requires ongoing collaboration. Here’s how to work effectively together: 

Open Communication: Maintain open lines of communication with your property management team. Encourage them to report both good news and issues promptly. 

Regular Updates: Request regular updates on property performance, including financial reports and occupancy rates. 

Trust Their Expertise: Trust your property management team’s expertise and let them handle day-to-day operations. 

Feedback: Provide constructive feedback when necessary and be open to suggestions for improvement. 

Annual Reviews: Conduct annual reviews of your property management team’s performance to ensure your goals are being met. 

Monitoring and Evaluating Performance 

To ensure your property management team continues to meet your expectations, implement a monitoring and evaluation system. Regularly assess their performance based on agreed-upon key performance indicators (KPIs). These might include: 

Occupancy Rates: Monitor how quickly vacancies are filled and the overall occupancy rate. 

Rent Collection: Track the percentage of rent collected on time and address any issues promptly. 

Maintenance and Repairs: Assess the timeliness and quality of maintenance and repairs. 

Tenant Relations: Review tenant feedback and evaluate how disputes are handled. 

Financial Performance: Examine financial reports to ensure your property is generating the expected returns. 

Legal Compliance: Ensure your property management team remains up-to-date with changing regulations. 


Choosing the right property management team can significantly impact the success of your real estate investments. By understanding your needs, conducting thorough research, and carefully evaluating candidates, you can find a team that aligns with your goals and ensures your properties are well-managed. 

Investing in real estate should be a rewarding experience, and with the right property management team by your side, you can enjoy the benefits of property ownership without the stress of daily operations. Take your time in the selection process and remember that a well-chosen property management team can be an asset in your real estate investment journey. 

Property management companies are the bridge that connects property owners and tenants, ensuring a harmonious and profitable relationship between the two parties. From marketing properties and filling vacancies to maintaining the physical condition of the premises and handling financial matters, property management companies wear many hats. 

Moreover, these companies act as a shield against the complexities of the legal landscape governing landlord-tenant relationships. They help property owners navigate the intricate web of regulations, ensuring compliance and minimizing the risk of legal disputes. 

One of their crucial functions is ensuring the financial health of an investment property. Property managers meticulously collect rent, manage budgets, and provide transparent financial reporting, ultimately safeguarding the owner’s return on investment. 

While property management companies offer an invaluable service, the decision to hire one should be made judiciously. Property owners must weigh the benefits against the costs and consider factors such as property size, location, and their own availability and expertise. 

In the end, property management companies serve as the lynchpin that holds the real estate industry together. They contribute to the vitality of communities by ensuring that properties are well-maintained and provide suitable living conditions for tenants. Simultaneously, they support property owners in achieving their financial and investment goals.

So, what are you waiting for? Contact Arrant Construction for property management companies in Houston & Dallas, TX.

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