Residential Property Management

Residential property management (or, simply, property management) is the business of providing professional management for multifamily housing on behalf of the property's owner or owners. Although there are several types of multifamily housing, rental apartments are the predominant form. Property management is preserving the asset and achieving optimum performance, while also meeting the owner's goals and objectives. Housing scholars are particularly interested in property management because one third of the U.S. population occupies rental housing. Furthermore, housing research focuses on residential satisfaction of apartment renters, which is largely impacted by residential property management. Multifamily housing is higher density than single-family housing, which supports an increased public preference due to rising energy prices and land costs. In response to public support for infill and transit development, recent development by property management companies has been in the urban core and adjacent to transit rail corridors. Housing scholars have also declared multifamily rental housing as a viable option for baby boomers, the second-largest generation; therefore, there are implications for residential property management.

Residential property management includes the professional management of several types of multifamily rental housing—affordable, luxury market rate, low-income housing tax credit, military, elderly, mixed-income, nonprofit, public, and student housing. Property management also includes management of community associations. There are numerous ownership types of multifamily housing that affect property management: joint venture, condominium, cooperatives, real estate investment trust (REIT), partnership, corporation, foreign, and institutional. Often, properties are not owned and managed by the same company, which is an example of fee management. Fee management has increased in popularity in the last few years due to the absence of readily available capital to buy assets to manage.

Through the years, apartments have evolved from “shag carpet and four walls” to live-work-play communities; thus, whereas apartment dwellers in the past may have been simply renters, they now consider themselves residents. This shift in the mentality of apartment dwellers necessitates the sort of intense customer service environment under which many apartment managers operate. Apartment communities offer amenities and services that range from community-wide Wi-Fi, movie theaters, pet sitting, clubhouses, demonstration kitchens, massage rooms, sports clubs, and retail and office space within walking distance. Many residents are choosing convenient and lifestyle-focused apartment living; they are renters by choice, not circumstance. As a result, they seek an increasingly higher degree of service by their property management company.

Property size, budget limitations, and number of employees affect property management. Larger properties benefit from economies of scale with purchasing, employee efficiencies, and typically more amenities. Smaller properties often repair rather than replace equipment and have smaller teams who are trained to perform more roles. Smaller properties re-lease vacancies in less time and have fewer evictions. They also maintain smaller inventories, which equates to less waste. Rent increases become more difficult to implement as the property becomes older.

Value is often added to a property through capital expenditures. Capital expenditures include items such as roof replacement, new appliances, new windows, and new clubhouse furniture. Capital [Page 620]expenditures often cost more than $250 and extend life to the asset. Many owners desire increased asset value from property management companies. Asset value is derived from the ratio of net operating income and capitalization rate. Net operating income is calculated by subtracting total expenses from total income. Capitalization rates are the interest rates used to convert a rental income stream into a present value lump sum.

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