Download What is Property Management - Train Agents Real Estate Licensing

(Begin with Slide 2_1)
What is Property Management?
Property management is split up into many different areas. How does a person start in
Property Management? The best way to find out what area a person would be interested
in is to read the newspaper ads.
Finding the area the fits you
You may see four types of ads in the newspaper:
Working Manager - Resident Manager
This is the most common property management job available. Duties include general
maintenance, front desk skills, inventory knowledge, and often payroll. The owner does
not want these duties so he hires someone to handle these details.
Condominium Manager
You would still handle daily problems as you would be a Working Manager, but the job
is probably more upscale. You would still be working for an owner; the condominium
association.
Property Manager
Duties include: leasing, leasing negotiation, administration, landlord tenant relationship,
and general management of corporate owned real estate. The duties are high level so you
will need more skills in functions of real estate.
Asset Management
Generally this is 3 to 5 years of experience dealing with owners of real estate. You need
to have a through understanding of accounting, communication skills, management
knowledge, financing, complex computer skills etc. Basically the difference between
Asset Management and Condominium Management is that Asset Management involves
huge projects. You need many skills and experiences.
Next Pages are slides 2, 3. and 4
Property Management Through History - Evolution of Property Managers
Early Times: Several merchants got together and traded their goods all together. This
became a marketplace and a social gathering place. As the market places grew in size and
the participating merchants had disagreements, a manager was need to assign spots and
handle disputes among merchants.
17th and 18th Century – Early “Land” lords
The Lords owned Land and serfs did all the work. The early day “Property Manager”
worked for the king and collected the taxes from the people. This was actually a form of
rent for use of the land. The person who collected the money, as a representative of the
lord, was called the land lord. The landlord did other factors for the lord of the land and
eventually “managed” the use of the land as well.
19th Century
The Industrial Revolution occurred when products were manufactured and more and
more people started working on their crafts and fewer people worked on the land. The
people moved to towns to work the factories and the need for housing was created. As
electricity was added, more goods were produced and sold further away. The “Property
Manager” was needed to oversee plants in different locations such as the auto industry
and others were needed to manage the needed housing. The factory towns sprang up
where the factory owned not only the factory but also the buildings of the town including
the housing. Someone was needed to collect the rents.
Multi-Unit Buildings
Soon the several story building evolved in the larger cities. To assist people going up
several flights of stairs with belongings the Otis elevator was created. This enabled us to
build high-rise buildings. The on site “superintendent” of the building was actually an
early day Property Manager. He controlled and managed the use of the building. Most
real estate was owned by a wealthy person who hired the “superintendent” to manage the
building and handle the daily problems.
Property Management Through History
Mass Production of Cars had its affect
With Henry Ford’s invention of the inexpensive mass produced car, the everyday
individual was able to purchase a car. Life was more mobile. Trucks were used to
transport goods and property-building owners were able to expand their operations, hire
more people, and build more structures for business and housing.
Because of this, there were many buildings built in the twenties. During the depression
in the 30’s building construction stopped, and then flourished in the 40’s. Those who had
invested in real estate prior to the great depression were in much better position than
those who had invested in the stock market.
Real Estate as an investment in the 30’s
Many of the lending institutions that made loans in the 20’s acquired properties during
the depression due to individuals unable to make their loan payments. Banks became
some of the largest property owners in the country and they did not know what to do.
This created a need by the bank for professional staffers to take care of the property.
Every bank today has a department of professional managers hired to manage the bank
owned properties.
In 1933 there was about 100 management property firms in the USA. Individual realtors
managed most real estate. Investors would buy property with the understanding that the
real estate manager would manage it. These 100 people got together and formed
Institute of Real Estate Management. They operated under three rules: There needed
to be a separate trust account for the client, ethics, and a source for education to expand
their ability. It was decided that the individual rather than the firm (since firms change)
would be members.
History of Property Management - Real Estate After World War II
During World War II there was very little that could be purchased. Everything was
rationed including housing. Many people from the farms went to work in the cities to
help produce materials for the war effort. People had nothing to buy so many were able
to save money. Many cities such as Portland and Seattle saw growth after the war due to
the surplus of money and the shortage of housing. The government enacted programs to
enable people to purchase homes. The VA loan was very popular as well as FHA loans.
Housing was very inexpensive and new opportunities were created for real estate. This is
when a small operation was started in Seattle called Northgate. The concept was to put a
bunch of merchants together in one spot. It was called a shopping center. Interestingly,
this Northgate center was the first shopping mall in the country. The concept caught on
and it is now history.
Suburban Living
Real estate became more complicated as homes became larger and many moved to
suburban areas while others lived in large apartment complexes. Quality of life meant
paved streets, indoor plumbing, street lighting, and other features once considered as
luxuries. To develop suburban living, it required a land planner, engineers, and many
professionals working together to ensure all the continually changing government
regulations were met.
Our technical skills are changing as our population grows and this creates complexities.
We now have housing needs for aging people, families with children, single people, and
one building that may house stores/offices/residents. For this reason most Property
Managers need to be specialized in a specific area.
Next Page is slide 5
Property Management – Effect of Transportation
Transportation has become a big issue because of the lack of parking and the regulations
and costs related to parking. Mass transportation in some cities such as Portland has
some employers offering incentives for car pooling or using the public transportation
systems.
Planning has become very critical when a new building goes up. Expertise is needed. We
can get this expertise by learning through a rough experience or by learning through
education. Classes can provide a good return on your course fees. Shopping centers,
industrial buildings, apartments, residential family homes, etc. all require specialization.
New buzzwords that have recently emerged include facility managers and major
corporate manager. The National Association of Realtors (NAR) have the largest
lobbying budget in Washington DC outside of physicians. They have a good-sized
budget in Oregon for lobbying as well. In addition they also provide quality education.
Next Pages are slides 6 and 7
Property Management Training
There are many organizations for specialized fields in Property Management. Their main
purpose is education. Some of these courses are very expensive.
Building Owners and Managers Association (BOMA)
The Building Owners and Managers Association was started in 1908 and their purpose
was a set of ethics and guidelines to ensure everyone is doing things in the same way to
come to the same result. They also developed classes both by correspondence or
classroom instruction. Classes are offered in insurance (such as information on
earthquake insurance), taxes (including property taxes and capital gains taxes), building
operation, and building maintenance.
BOMA also tracks the changes in tenant moving, demands by tenants, and income
expenses (what the average building rents for and the expenses involved. This can
provide a Property Manager with guidelines to see how his property compares to an
average.)
Certified Property Managers Association
More and more companies are requiring education for Property Managers. The Institute
of Real Estate Managers which is an arm of the National Association of Realtors requires
candidates to master a series of courses. The CPM designation is requiring a level of
expertise. It requires many classes, years of experience in property management,
approval by the Certified Property Managers Association, completing a core of at least 4
required classes, and you writing a management plan.
Next Page is slide 8
Property Management Training cont.
International Council of Shopping Centers
The International Council of Shopping Centers is a rapidly growing organization. They
hold a convention usually in Las Vegas. This is like going to a store for stores with latest
shopping center expertise. This is a complex, specialized field.
Home Builders Association
Homebuilders also have amazing conventions and classes complete with high-powered
speakers such as the Vice President of the United States. Property managers can see the
latest products from all over the world; learn the upcoming colors, trends, and designs for
the future.
Facilities Manager
This is anyone who operates a house, manages a hospital, convention center, or is head of
an airport, hotel etc. They need to make sure the needs of the facility are met. (electrical,
machinery, cleanliness, staffing etc.) Can be very complicated, can be financially a great
field. Good management of a business can make your business a better investment in the
future.
Next pages are slide 9 and 10
The Economics of Property Management
Economics in Property Management is keeping abreast of what is happening around the
world, including the trends. We are seeing more people moving to the Pacific Northwest
due to the expenses where they were previously living. This is true of individuals as well
as businesses.
The economic and real estate cycles fall under four categories: seasonal, cyclical, long
term, and random.
Seasonal
The weather affects more than just the climate; it affects when people decide to purchase
or rent a home or apartment. It even affects the decision to start a business. In apartment
living, seasonal challenges include rental to college students who normally are attending
school only 9 months a year, people wanting to rent in resort towns only during the
summer months, and construction slowdowns during the winter months. If you live in an
area that is affected by a seasonal cycle, you as a Property Manager need to research how
you can deal with the trends and slow times of the year. Often you can negotiate with
customers so it will be favorable for both you and your customer. An example is offering
renting for a years lease so you have equal income for the entire year. A lot of college
housing will offer lower rent for annual leases.
Cyclical
This is the normal cycle that moves over a period of time that can affect the income of the
property. Factors can include the supply and demand, interest rates, growth of the
economy, etc. Basic areas such as heat will be higher in the winter months. There are
cycles where people tend to move and cycles when people tend to purchase certain
goods.
The four distinct phases are: expansion, which is an up cycle (business is good);
recession, which is the peak of a cycle, contraction that is the down cycle, and revival,
which is the bottom of a cycle (desperation and the government decides to do something).
Real estate cycles normally lag behind the business cycle because people need to earn
money before they have money to spend. The movement of money can show trends in
the economy. When production is up that means people are spending money. You
should make use of information such as the unemployment department reports. They can
give you statistics on people applying for unemployment, if unemployment is dropping,
and other specifics for your area, it might be a good time to advertise.
Next pages are slides 11 and 12
The Economics of Property Management
Long Term Movement Cycle
Economists think in terms of years. One factor we need to think of on a continual basis is
how the family makeup is changing. The size of the family is shrinking. Only 20 to 30
years have past and families are getting smaller and more adults are living alone. Factors
such as worn out schools, stagnant population growth, and cities such as Beaverton not
wanting to build new schools while other counties such as Clark county in Washington
do. This is growing factor can impact the property you are managing.
Random Cycles
These cycles are caused by events. For example the 1989 earthquake in San Francisco
created a false economy as intense reconstruction efforts occurred in the months
following the quake. Many businesses moved to our area following this event. Needing
to get to a more “stable” footing. Another example was the gas shortage of the 70’s
where the price of gas and lack of gas affected our pocket books and our attitudes. The oil
industry in America took off. Developers in Dallas where building commercial buildings
and apartments right and left. When OPEC came to its senses and lowered prices, Dallas
went into a tailspin. 8 years later, the vacancy level in some commercial buildings was as
high as 70%. False random cycles are dangerous to development and property
management.
One of the more stable areas of development was considering transportation. After the
gas shortage, America began the concept of mass transit. Developers for the future began
locating apartments, shopping malls, etc. next to a “line”. This has been an area of
emphasis ever since.
Another random aspect is rent control. If we cannot raise the rent then we can’t afford to
fix up units and that means plumbers, electricians etc. are not working as much. Less
money in the economy, goods are not purchased, renters may turn to units more up-todate and so on.
Next pages are slides 13 and 14
Economics of Real Estate
Real Estate is effected by: Supply and demand, the level of occupancy, rents,
unemployment, and the family make up.
The supply and value of money: This is determined both by the top of the cycle and the
bottom of the cycle. Currently now that the economy is dead, the interest rates are low
and the banks are very willing for customers to finance a home. To keep track of the
money, look at what the Federal Reserve is doing. Greenspan can make a few comments
and the interest and stock markets can be affected within seconds.
The level of occupancy. When the economy is good you will see new construction.
More and more people are moving to the Pacific Northwest. When the units are full we
can raise the rent and expand unit development. When units are empty it indicates the
market is soft. For examples there are differences in different parts of Portland. Some
areas units are short. Other areas there are large vacancies. Knowing your area and the
market is very important. Developers that keep track of the trends of where people want
to live can benefit.
Implementing and finding the owner’s goals and objectives
When working as a property manager, it is key to know with the owner’s goals, economic
markets, and cycles to determine the best method of managing property. It is important
for the property manager to understand the real estate market, real estate cycle, and the
effects of money on real estate. This is a never-ending undertaking.
Next pages are slides 15, 16, and 17
Role of the Property Manager
A license is required to be a Property Manager. This can be a real estate principal
broker’s license or a real estate property manager’s license. The State will check to make
sure you are able to enter into a lawful contract, be of legal age, mentally competent,
honest, and trustworthy (a background check/fingerprint card is necessary). Educational
requirements include completion of approved courses in real estate law and in property
management must be completed. Each course must be followed with the passing of the
State competency exam. For renewal of this two-year license you must take 30 hours of
continuing education.
The license entitles the person to only participate in real estate property management
activities. A licensed real estate broker may function in behalf of a principal broker and
entitled to engage in other real estate activities. These other activities would include
activities of property management.
Next page is slide 18
License Exemption – Those exempt from licensing
If someone advertised property for rent they do not need a license. They may not be
involved in any of the negotiating. Rental referral agencies do not need a license as long
as all they do is refer.
A full-time employee of a broker or property manager can only engage in specific
property management activities such as checking tenant referrals, arranging maintenance,
and collection of rent. They must be under the supervision of a broker or property
manager.
Another exemption is management or rental of overnight resort type accommodations for
less than 30 consecutive days. This includes maid service, front desk, or other non real
estate activities. If someone is a full time employee of a single owner such as the
manager of an apartment complex they do not need a license. This also includes travel
agents or innkeepers.
Next page is slide 19
Property Management Today - The classic definition is to maximize income and to
produce an economic life of the investment itself. The owner wants to control expenses.
Some expenses you can’t cut such as taxes, utilities, and insurance (unless you negotiate).
Property management is misunderstood. The perception is that you are a rent collector.
You are actually a supervisor or overseer of policies. You need ingenuity. You are
dealing with people and you never know what they will do next! Try to figure out what
the individual’s needs are as everyone has a different point of view.
Property owner’s goals - Often the property owner does not know what his/her goals
are. Sometime their goal may be emotional. To understand the owner’s goals you need
to take time and learn the skills of asking questions of the owner to determine his goals.
Many are looking for additional tax write offs. Often historical structures are attractive
because owners can get up to a 25% tax credit for updating as long as they retain 75% of
original walls. This is sought after in areas of downtown Portland. Revitalization credits,
tax abatement is among the many programs available.
Property Owners are mainly interested in a Long Term Investment
1. Possible Write Offs on an immediate basis
2. Steady Income on a long term basis
Developer’s goals - Their goals and methods are totally different than property owner’s
goals. They will do anything short term to reach their goal.
Real estate is complicated due to legal issues such as changes in EPA requirements,
nuclear free enterprise zone, and wetlands. The good news for Property Managers is that
it takes more expertise to manage. So the more skills, education, and experience you have
the better equipped you are. We now live in a global society where other countries look
for long-term investment in the marketplace; whereas here in America we tend to look for
short-term investments. Part of an Asset Managers job is to keep an eye on the
International investors.