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A manager is primarily an agent—an extension of the owner he or she represents. The owner’s interest always should be uppermost in the professional manager’s mind. When faced with decision making, the property manager ought to ask: “What would I do if I owned this property?” The manager who has acquired experience and specialized skills is in a much better position than the owner to produce a qualified answer. As a professional substitute for the owner, the property manager is like any other professional whose specialized skills are applied in the owner’s best interests.
The basic goal of the property manager is to produce the highest possible net operating income (NOI). This is defined as collections less operating expenses. Sonic owners would like the property manager’s role expanded to include the production of the highest possible cash flow, which is net operating income less debt service (mortgage payment). The amount and payment of debt service has little to do with successful management. The property manager who has produced maximum rent collections and has kept operating expenses to an effective minimum has done the job, regardless of the debt service the owner must pay.
So with the goals and responsibilities of management in mind, let us look at what is involved in property management. First, a professional property manager must be equipped with a storehouse of information about the property and its location, the market area, operating expenses, maintenance techniques, reporting procedures, and a host of other items. The principal ingredients that make a capable property manager are common sense, resourcefulness, and a willingness to work hard. The sole purpose of this manual is to offer managers time-tested knowledge that has been gained by others through years of experience.
The most exciting part of the management business is the handling of investment properties for profit. While caretaker assignments and not-for- profit housing offer their own opportunities and challenges, in the main, this manual is directed at managing income-producing multifamily housing.
Investment housing is intended to generate profits. In fact, the value of investment real estate is in direct proportion to the property’s ability to generate net operating income. The manager’s role is to produce the highest possible net operating income over the economic life of the property.
The skills in managing profit-producing housing are more demanding and more fulfilling than those needed for caretaker or not-for-profit management. In fact, managing the caretaker or not-for-profit properties can be very frustrating because of the absence of a material goal. Without the motivation of producing a profit, the manager is often deprived of the purpose and spirit required to succeed.
The differences between the types of managers really reflect varying degrees of knowledge possessed at the different levels. Granted, the amount of authority also changes, but this is just a further reflection of a particular manager’s skill and experience.
Managers are employed in one of two ways: as direct employees of owners, who can be individuals, partnerships, corporations, or even the government; or as employees of real estate companies that are in the business of property management. The first type covers the greatest number of property managers.
The managers described below may belong to either group. They are the people who are engaged in the practice of property management and enjoy career opportunities rarely found today. The success or failure of privately financed investment real estate falls on their shoulders. Those who learn their lessons well will he rewarded both financially and in the satisfaction of performing a vitally needed service.
Executive Property Manager
An executive property manager is a supervisor who oversees and directs other property managers who are in the field handling the operational affairs of various properties. The executive’s primary concern is with running a business that manages properties rather than with the direct management of those properties. Knowledge for this position is usually acquired from long and broad experience in the actual management of investment real estate. This knowledge is used to establish long-range policies and fiscal plans and to guide the company’s property managers in resolving difficult situations.
The executive property manager is frequently an officer of the company and, in fact, might be its owner. Typically, compensation is by a regular salary; additional incentive bonuses are common.
This is a comparatively new job description in the business of property management. Asset managers answer the need for finely-tuned skills in the planning, analysis, and financial tracking of investment real estate. These managers are often charged with the long-range planning and preparation of business plans for rather substantial investment portfolios. It’s common to combine the use of an asset manager with a full complement of management personnel. For example, a 200-unit apartment community might have a site manager who works for a supervising property manager who, in turn, reports to an executive property manager. At the top of this “ladder” might be an asset manager who is coordinating that 200-unit property with the other properties in his or her portfolio. Matters such as capital improvements, cash management, market analysis, rent structuring, budget tracking, plus short- and long-range goal attainment are a few of the responsibilities of the asset manager.
Sometimes an individual or company will hire an asset manager to directly supervise or at least monitor the activities of the people or firm doing the actual management of a property. One of the problems with this arrangement is that some asset managers distance themselves from the daily problems and pressures of residential management and make decisions based on business textbook guidelines. Rental housing is a con sumer product that is emotional as well as volatile. Careful tracking of rents and expenses along with comparative studies of neighboring properties will frequently help an analyst to develop a financial plan, hut there is no substitute for a thorough understanding of the property and its marketplace. This knowledge comes with years of hands-on experience. Hence, the asset manager whose analytical skills are combined with day-to-day property involvement can deliver significantly better bottom-line results.
The individual who is directly responsible for managing a particular property is called a property manager. In effect, the person holding this title is the chief operating officer or administrator of a particular property or group of properties. A property manager is responsible for fiscal planning, setting rents, establishing marketing and maintenance procedures, supervising site managers, and reporting to and maintaining liaison with owners and superiors.
At the next level of management is the site manager. Responsibilities of a person in this position include day-to-day dealings with residents, renting units, making collections, and follow-through supervision of maintenance. The site manager is truly the person on the firing line.
Some people refer to the site manager as the on-site or resident manager, which implies that the person lives on the site. This is not always true. The place of residence has nothing to do with the responsibilities of this position. In this manual, the term ‘site manager” will be used to refer to this level of management.
“Ma and Pa” Management
So called “ma and pa” management, originally popular in small hotel- motel buildings, is well on its way to extinction in apartment operations. Typically, one spouse performs renting and bookkeeping duties, while the other handles maintenance and perhaps problem collections or disturbances. While less expensive in the short run than professional management, this arrangement is frequently inadequate and ineffective in today’s demanding times—especially for major investments.