Duties of Property Management Marketing Tenants and Rent Flashcards
A market analysis is a report that analyzes and assesses the defining characteristics of:
The property itself
The property’s region
The property’s neighborhood
A market analysis estimates the market value of a similar property to the “subject property” located in the same area. It is important to note that a market analysis will help a property manager better understand their area so they can cater their property to the needs of that area.
It might include things like transportation options, zoning regulations, and population statistics, along with information on the area’s vacancy rates. Is the neighborhood a ghost town, or are rental spaces in high demand? Assessing these factors will help establish fair and profitable rental rates.
We’ll cover market analyses in much greater detail later in the course. (Spoiler alert!)
Fair Marketing
Property managers need to ensure their advertising lines up with federal, state, and county laws, along with the civil rights laws and fair housing guidelines. These laws and guidelines state that organizations can’t pick and choose their tenants based on factors like race or gender.
Remember that legislation prohibits marketing campaigns from discriminating, so don’t forget to include the equal housing logo in your marketing graphics!
Market Analysis
I’ll go over a few good ways to introduce your property to potential five-star tenants:
Advertisements in the local paper or on social media platforms like Facebook are a good way to reach a desired audience.
Gossip, aka word of mouth, is a simple yet effective marketing tool (it’s also a good way to ward off prospective tenants if you have a bad reputation!). Offering compensation (like a $50 rent deduction) for each word-of-mouth referral helps, as well.
Signs are a good way to reach new tenants, but make sure they include contact information.
Brochures and direct mail (like fliers) should be concise, clean, and attractive to draw in potential tenants.
Websites should be easy to use and should include photos of the property and contact information.
If a property has snazzy new brag-worthy features, a press release is a good way to highlight and sell those features.
Marketing Strategies
Okay, so you’ve made some all-star ads (go you!). But if you spend $500 on brochures but don’t get any prospective tenants from those brochures, document this in your marketing plan and change your tactic. Always weigh the cost of advertising and marketing against its own usefulness. A good way to do this is by using the following formula to find the cost per prospect.
Cost of advertisement ÷ Number of prospects = Cost per prospect
Let’s give this a try!
Example 1: Let’s say you spent $900 on a 12-foot billboard advertising your apartment complex in Tucson. That billboard brought in 9 prospective tenants.
$900 ÷ 9 = $100 per prospect
So, each prospective tenant costs you $100.
Example 2: Next, let’s say you spent $300 on a Facebook advertisement that brought in 33 people…
$300 ÷ 33 = $9.09 per prospect
This method costs you $9.09 per prospective tenant.
Analyzing the Results
The Facebook advertisement was a lot more cost-effective than the billboard. In your next marketing campaign, it might be a good idea to allocate more funds for Facebook advertisements and also launch another marketing campaign on a similar social media site.
Staying organized and keeping track of prospects and costs will allow you to get more bang for your marketing buck while also helping you reach your owner’s goals.
It’s a good idea to add your data to your marketing plan, as well, so you can reference that information later. Here’s a sample marketing plan comparing how a property manager might market different properties based on their respective costs per prospect:
A chart displaying the components of marketing plans by commercial, residential, industrial, and specialized property type.
Image description
Calculating Cost Per Prospect
Imagine you sifted through hundreds of lease applications and chose ten new tenants to occupy your units. You would now need to create a lease between yourself (the lessor) and the tenant (the lessee).
The lease will list all of the property’s rules and regulations. It will also outline the expectations of both the landlord and the tenants. Landlords may need to negotiate these leases, depending on the tenant. But I’ll go over all the details of a lease and how they relate to property managers in another level. For now, let’s move on to setting rental rates!
Leases
Regardless of the type of lease you choose to utilize, one of your key responsibilities as a property manager will be setting rental rates.
Rental rates need to cover operating expenses and still yield a high return on the owner’s investment. But how does a property manager go about doing this?
As I mentioned, rental rates need to be set so as to cover the property’s operating expenses, pay for fixed charges, and yield a fair return, so creating a budget is necessary. Property managers should also be monitoring their competition and consider how much similar, competitive properties are going for.
Do some sleuthing: What amenities is the apartment complex next door offering, and for what price? Do they offer any concessions? What is the quality of the interior of the building?
The Perfect Balance
Rent prices will probably need to be adjusted each year, depending on the area. This is why it is important for property managers to do their research when establishing rental rates.
Sky-high rent will lead to a lot of vacancies and low profits, but rent that’s too low won’t cover the property’s costs, either. Property managers need to find the perfect balance.
So, to recap, rental rates should:
Be based on area research
Cover a property’s operating expenses
Be competitive for their area
Not too low
Not too high
On the next screens, we’ll go over a few other concepts related to rent. (Feel free to sing any songs from the Broadway musical Rent while we’re at it.)
Setting Rental Rates
A property manager will be responsible for a report known as a rent roll. Despite sounding like a delicious baked good, a rent roll is actually a report that lists:
Number of units in a property
Identities of tenants
Lease terms (meaning the start and end date of each lease)
Monthly rental income from each unit
Any outstanding balances owed by tenants
Basically, it’s like a roster of who is renting units within a property and all of their most basic stats. Here’s an example of what a rent roll might look like.
Chart displaying typical rent roll information gathered per unit, including unit number, monthly rent, tenant, square footage, and lease start and end dates.
Image description
Rent Collection
Any tenants’ accounts that are past due (and by what amount) will be reflected on the rent roll. It’s a property manager’s duty to implement a collection plan for tenants who fail to pay rent in a timely manner.
Past-due accounts with a tenant could potentially be indicative of future rental collection problems. Since the property manager’s first duty is to generate income for the owner, any issues with tenant payment must be quickly corrected through the use of collection plans.
Delinquent Account Report
A delinquent account report is a report of, well, delinquent accounts. While it’s not exactly good news to report, it is important to ensure the manager and owner maintain an awareness of any of the business’ accounts that have fallen into delinquency (such as those past-due accounts we just covered).
This report may also include any ongoing legal proceedings (lawsuits, for example) that affect the financial status of the project.
Rent Roll
I trust that you remember trust accounts from earlier levels. (Not my best pun, I know…) To recap: a trust account account is used to maintain and account for transaction-related funds, and is separate from operational or personal accounts.
Arizona property managers must maintain trust accounts that are designated to specifically hold property management-related funds, such as security deposits and rental payments.
The designated broker for the owner or property management firm is in charge of handling all trust funds, however the broker may authorize a direct employee to transfer money or sign for the firm’s trust accounts. This employee is not required to hold a real estate license, but they must be employed by the firm if they are not licensed.
Funds & Record Requirements
Trust funds, including rent and security deposits, must be deposited into a designated trust account within three business days of receipt. Additionally, all leases must include a provision that clearly states how tenants’ funds will be handled. This way, tenants will know that their funds are in safe hands.
All clients’ financial records must be kept for at least three years from the date each document was executed. This includes:
Bank statements and receipts
Canceled checks or bank-generated check images
Deposit slips
Receipts and disbursement journals
Owner statements
Client ledgers
Any other applicable bills, invoices, and statements
Trust Accounts
Well, Anthony, you’ve learned a lot about tenants:
How to market to potential tenants
How to sort through tenant applicants
How to collect rent from tenants
How to handle security deposits and funds
But every tenant is different, just like every person (and robot!) is different. This means that you will have to treat each tenant differently and expect that one tenant will not be exactly like another. Because they are all different, you may have to perform alterations and construction on your property to account for those differences.
Construction and Alterations
There are a variety of reasons a property manager may choose to alter a unit for a tenant, such as:
A request for build-outs
A desire for renovations
Environmental risks
Legal stipulations
To perform these changes, a property manager may contract the work to an outside party or maintenance service, but it is a good idea to supervise all work being done. The construction could be done by on-site employees, depending on the property size and scale of work.
Build-Outs
Build-outs, or tenant improvements are changes made to a unit according to a specific tenant’s desires.
This is more common in newly constructed buildings where units are left partially unfinished and then completed according to what a new tenant wants.
Renovations
A renovation restores a unit to a high-functioning condition. Renovations help attract new tenants, cut down on maintenance costs, and help keep rental rates up.
A property manager should be careful not to spend more money on a renovation than they would potentially gain as a benefit of that renovation. Property managers want to make money for their owners!
Unpainted and unframed interior walls of a property presently under construction.
Unique Tenants
It’s also possible that a property manager may have to make renovations to accommodate a tenant whose needs are legally protected under the Americans with Disabilities Act (ADA) or Fair Housing Act, federal laws which make accommodations for persons with disabilities.
For example, building a wheelchair access ramp or installing safety guardrails within the home for tenants with limited mobility would be considered tenant improvements that are legally required.
We’ll discuss the provisions of disability law in greater detail later in the level.
Door-opener button with wheel chair symbol.
Legal Reasons
All good things must come to an end, Anthony. So it is with life, and so it is with this chapter. But before you go, let’s review some of the important terms, concepts, and principles you’ve learned along the way.
Key Concepts & Principles
Here are the concepts and principles you’ll want to master from this chapter.
Marketing Rental Property
Depending on a property’s vacancy rate, property managers may have to do a lot of marketing, or maybe just a little. Whatever their situation, they should create a marketing plan that includes:
A market analysis
A budget
An outline of their marketing tactics (i.e., a budget for how much money will be spent on each marketing strategy)
The marketing plan will also outline things like the property’s target market, goals, and mission statement.
Calculating Cost per Prospect
Always weigh the cost of advertising and marketing against its own usefulness. A good way to do this is by using the following formula to find the cost per prospect.
Cost of advertisement ÷ Number of prospects = Cost per prospect
Rent Roll
A property manager will be responsible for a report known as a rent roll. Despite sounding like a delicious baked good, a rent roll is actually a report that lists:
Number of units in a property
Identities of tenants
Lease terms (meaning the start and end date of each lease)
Monthly rental income from each unit
Any outstanding balances owed by tenants
Basically, it’s like a roster of who is renting units within a property and all of their most basic stats. Here’s an example of what a rent roll might look like.
Chart displaying typical rent roll information gathered per unit, including unit number, monthly rent, tenant, square footage, and lease start and end dates.
Image description
Chapter Summary
